Question

In: Economics

Many global companies have evolved to or are evolving to, a ‘stateless corporation’.  The US and most...

Many global companies have evolved to or are evolving to, a ‘stateless corporation’.  The US and most OECD countries have legal authority to tax a domiciled corporation on its worldwide revenue.  However, as of 2019, most countries tax these corporations based on territorial tax (revenue within that country's borders).  However, the US continues to tax these corporations based on global revenues.  Is this a good choice for the US?  Why or why not?.

Solutions

Expert Solution

Stateless corporation has been involved in many global companies. The global companies are the ones that provide business in other countries. When the companies have success in one outside country, they will try to do the same in more countries, in this way they are going to have presence in several countries. If they have a positive result, it means that the business is a success not just in the original country but also in others with the same product.

The territorial tax is a method that the corporations use to tax the countries that have the firm from the original country. The USA will not have more problems with the additional USA tax because the profits that they are going to earn back from other countries will be applied for those tax. If US works on this way, they will be able to compete with foreign corporations with the same level. Also, to control the erosion of the tax base, the territorial tax system would be enough to hold the cover income that US have with the financial assets.

According to the website Senate RPC Senator Roy Blunt, Chairman, “A territorial system would match most of the world’s developed economies. American businesses should be able to compete with foreign competitors on a level playing field”. A good benefit is that American firms would be more competitive, it would help the firms not expend much money in taxes because incomes will be coming back to the country. The taxes will be transforming in a basic economics for the country, so this would not have a heavy weight on the country’s economy.

A good example of a company from US that really give the country good results being in other countries is Walmart. This company has more than 11.000 stores over the world in 27 different countries. According to CNN Business, “about a quarter of its $500 billion in sales last year came from outside the United States”.

In conclusion, the US will make a good chose if they keep working in this way. They will have much more results then they use to have. US will increase profits, and it will be good for the country’s economic.


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