In this US case study assignment help, our assignment writing experts analyzed the two companies and the circumstances that fostered this alliance and include the reasoning behind this joint venture as well as some of the similarities between the two companies.
Worldwide v/s Territorial Taxation System: Foreign Direct Investment (FDI) has become a major tool for companies to boost the economic growth in effective manner. Beside US, the rest of other countries are engaged to cut the corporate tax rate continuously for attracting FDI. There are two approaches such as implementing a territorial system and worldwide system to charge tax over the earnings of corporate. The US corporate combined tax rate is second highest among other OECD countries. Due to high corporate tax, there is less attractiveness for FDI.
US uses worldwide system for imposing tax in which companies income are subjected to tax on dual basis. If a US based corporation is earned profit in the other countries such as in Japan then its earring is subjected to tax liability in both courtiers. Due to this online case study assignment help, many corporations are using tax deferral on foreign source of income. By using this tool, US corporations are enabled to postpone the payment of tax in their home country. This worldwide taxation system is discouraged US corporations to bring the profit back in the home country that is affecting US economic growth significantly. In the territorial taxation system, earnings of organizations are only subjected to tax at the place only where it is earned. If a US based corporation is earned income in the other country like China then its earning is not subjected to tax in US. Due to this, US would not be enabled to obtain tax from US-based companies.
The profit of such companies would not be used by US under the territorial system of taxation . At the same time, this system is also encouraged tax competition among the source country as under this; the level of tax is determined by the source country. Due to this assignment help says that, USA is required to cut the corporate tax rate rather than adopting of territorial taxation system. By cutting corporate tax rate, it will enable to attract the FDI and to bring the profit back within the country. Under territorial system, it would not be enabled to bring foreign earnings back. Due to reduction in corporate tax rate, MNCs would be enabled pay tax over the earnings that may also discourage the use of tax referral system.
Lower Tax Rates Attract Foreign Investment: The foreign investors prefer to invest in the countries with lower tax rates and fewer rules and regulations of government. Countries those maintain higher business taxes are not able to attract FDI. Foreign investors invest in other countries to earn more profit and if the corporate tax is higher in the country then it cannot earn more profit. So, foreign investors prefer the lower tax rate nations to invest and earn more return from their investment. Foreign investors mainly consider the statutory and effective tax rates, while investing in a country. Statutory tax rates are the rates that are required to pay a company according to a law of the country, while effective tax rates are the actual tax rates paid by a foreign company on all consolidated income after taking the consideration of all tax incentives, deduction, and differences across country tax environments. Low statutory tax rates will attract investment from multinational corporations in the country. According to the US and Australian case study assignment help services experts, the US corporate income tax rates is 39.2% that is second highest in the world after Japan. The US tax rate had remained unchanged for 25 years and during these years, country income tax contribution of GDP has been declined continuously.
Corporate income tax contribution in the US fell from 6% of GDP in 1950 to just 2.1% in 2008 that represents the investors are not preferring to invest in the country due to a higher rate of tax. High corporate tax rates can impact on tax revenue contribution in the country. Outside the US, countries with 1% lower tax rate attracted up to 3% more investment from the US. If the US can cut its tax rates then it would effectively attract FDI than higher-tax country.
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