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Reforming the U.S. Corporate Tax System to Increase Tax Competitiveness - Essay Example

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The researcher of this study is being carried out to present the current system of taxation, particularly with respect to income taxation of both individuals and corporate entities, analyze the effects thereof, and recommend areas for improvement…
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Reforming the U.S. Corporate Tax System to Increase Tax Competitiveness
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Reforming the U.S. Corporate Tax System to Increase Tax Competitiveness

Center of discussion in this paper is taxation as the means by which the sovereign body raises income through collection from natural or juridical persons to defray the expenses of the government so that the latter could perform its functions. Without taxes, the government cannot exist as it will not be able to deliver the services expected from them by the constituents. Although one of the fundamental powers of the State, the exercise of the power of taxation however should not be abused. Certain principles must guide its application so as to make it as equitable and efficient to all stakeholders as it must be. Since taxation generally depends on income, taxes should be proportionate thereto and should not go beyond the net income; otherwise, the same would constitute as part of the expense already that could deprive the income-earner of the fruits of his labor. However, certain rules and practices in the taxation system of the United States appear to violate the principle of equity. This results to resentment, loss of bigger revenues, lesser capital investments in the country, and ultimately, deprivation of better economic life for the citizenry. There are two (2) kinds of international tax systems: (i) worldwide; and (ii) territorial. The United States system of taxation is classified as worldwide as it imposes taxes on all incomes derived by the United States domestic companies within and outside its territorial jurisdiction. However, the United States allows tax credits of tax payments made by these companies in country where the income or profit was produced. This was made in order to avoid the apparent double taxation of the same income. This tax credit is allowed only up to the extent of the tax rate imposed in the United States. Thus, if the tax paid in a foreign country based on the income derived by a United States domestic company therein is much higher than the tax supposed to be collected by the United States, the difference thereof is not chargeable against the other tax liabilities of said domestic company. This however, is generally fair and the United States has no fault on this aspect. The problem however lies with respect to businesses made by domestic corporations in another country which practices territorial system of taxation. Territorial system of taxation is a form of taxation wherein domestic corporations are taxed only for income derived within the country’s territorial jurisdiction. Hence, income derived by the domestic corporations from outside the country is tax-exempt. Here, the problem lies with the global competitiveness of companies incorporated in the United States which, as mentioned before, practices worldwide system of taxatio ... Read More
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tchamplin added comment 1 month ago
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At first, I thought 11 of pages is too much for such a question. But now I see it could not be done smarter. As the author starts you see the depth of the topic. I’ve read all at once. Great sample
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