As the U.S. restructures its economy in the aftermath of the pandemic, officials are considering several tax policies says, William D King. These are to boost revenues, reduce inequality, and limit avoidance and evasion. These proposed tax reforms address a variety of issues in our tax legislation, including transfers and gifts, individual income, multinational company revenue, and also tax enforcement. Here, in this article, we will discuss taxing multinational companies in 2021.
Taxation of Multinational Corporations as explained by William D King
Current tax legislation generates insufficient corporate tax revenue and also gives an incentive for multinational businesses to properly avoid paying U.S. taxes on their profits. Changes made by Public Law 115-97, often known as the Tax Cuts and Jobs Act, passed in 2017, cut the corporate tax rate to 21% while leaving intact loopholes in the tax law that allow businesses to transfer earnings to other nations. These measures would yield an estimated $1.4 trillion in tax revenue from 2021 to 2030, based on pre-pandemic economic predictions. The increase in corporation taxation from 21% to 28% would generate significant income while maintaining the city’s attractiveness as a place for investment.
Taxation on earnings
This proposal would make numerous adjustments to raise taxes on earnings that businesses have attempted to transfer abroad under existing law. The plan would shift to a minimum tax on foreign earnings, imposing the global intangible low-taxed income (GILTI) minimum tax on a per-country basis at a rate of 21%. GILTI is currently taxed on a worldwide basis under existing legislation. That means global corporations can reduce their tax load by combining streams of low-taxed foreign earnings. With streams of higher-taxed foreign earnings that provide offsetting tax credits. With the total external amount after which taxed at a 50% discount. Compared to how corporate income earned in the United States is being taxed.
Repeal of present legal provisions
Furthermore, the plan would repeal the present legal provision. That enables the first 10% return on overseas assets to be free of tax. As a consequence, profit shifting would become less, but revenue would increase significantly. As an alternative to the per-country basis, William D King believes in raising the GILTI tax rate to the same level as the local corporation tax rate.
The third plan eliminates the deduction of western intangible income. Which previously served as a tax break for earnings from merchandise exports. Under present legislation, this deduction, in combination with the GILTI. Incentivizes offshore while doing little to encourage multinational corporations to relocate assets to the United States.
Overall, these measures would boost taxes on the wealthiest individuals, leading to a more efficient and progressive tax system. Using pre-pandemic economic predictions, their approach is expected to collect more than $4 trillion between 2020 and 2029. Including $1 trillion in additional income through increased tax compliance. Given the growing income disparity, it got worse by the COVID-19 epidemic and other unmet needs. Authorities must identify methods to generate more money equitably and efficiently.