How Corporations Are Affected by Change and Enforcement of Tax Regulations - Dissertation Example

The effect of taxation policies in business decisions is more critical and viable at a time when corporate taxation is contributing chiefly to the national exchequer. Day by day, the role of taxation policies in business decisions is increasing, which increases its encumbrances. Higher corporate taxes may ax the corporate development and hamper the expansion of manufacturing capacity, hence, it becomes crucial to this research into the chief effects of corporate taxation policies on business enterprises.

(Tyagi and Kumar2003:390).The sudden spurt in corporate tax revenues in low-tax OECD nations may be due to the large scale of inflow of investment and or other mobile corporate profits that are moved away from the high-tax regime so as to evade higher incidence of corporate taxes. For instance, since the early 1980s, Ireland has had a very low rate of corporation tax of 10 % on manufacturing activities. Ireland has derived direct benefit due to its low corporate tax policy as it has attracted massive inward investment in the manufacturing sector and potentially inward inflow of profit from high tax regimes.

This has in turn enhanced corporate tax receipts as a share of tax revenues and as a share of allocation of GDP in spite of continuing low tax rates. Thus, Ireland is the best example to explain why corporate tax revenues in small-sized low corporate tax regimes have increased more than in giant-sized high corporate tax OECD nations. (OECD 2007:33).While the danger of corporate emigration is unlikely to be accomplished overnight due to higher corporate taxes, a new wave of companies shifting their headquarters from the UK has really raised an alarm together with the alarming number of US-based companies relocating their head offices in European nations that offer more advantageous tax regimes, and the contour of tax relocation’s in particular, has been on the increase.

(Cushman & Wakefield LLP 2010).The main objective of this research essay is to look into how corporations are affected by change and enforcement of tax regulations.