High Corporate Tax Cost US Companies $510 Bln, Pushed 4700 Offshore: Report

A globally competitive U.S. corporate income tax rate of 20 percent would have kept 4,700 companies in the United States from 2004 to 2016, a study conducted by a Washington lobby group, which represents large US companies, has found.

An economic outlook survey carried out by the Business Roundtable on cross-border mergers and acquisitions (M&A) also found that a 20 percent rate would have led to U.S. companies acquiring $1,205 billion in cross-border assets during 2004-2016.

Instead, the outdated tax code contributed to the United States losing $510 billion in business assets to foreign companies.

The analysis, conducted by the accounting firm EY, further reported that the rate of foreign acquisitions of U.S. companies has accelerated over the past three years.

From 2004 through 2013, 18 percent of cross-border M&A transactions were carried out by U.S. companies. From 2014 through 2016, the U.S. acquisition rate decreased to 16 percent

The study, “Buying and Selling: Cross-border mergers and acquisitions and the U.S. corporate income tax,” expanded on a 2015 EY analysis of how the U.S. tax code affects M&A. It examines the M&A market, considering the effects of different statutory corporate tax rates on more than 97,000 global M&A transactions across 68 countries.

Another key finding is that the high corporate income tax hinders foreign direct investment (FDI) into the United States. With a 20 percent U.S. corporate income tax rate, inward FDI would have been an estimated $195 billion more in 2004-2016.

“The U.S. tax system continues to represent a serious disadvantage to U.S.-based companies and this country’s economy,” said Mark A. Weinberger, Global Chairman and CEO of EY.

The United States is losing business headquarters along with good-paying jobs, assets and innovation because of its outdated, anti-competitive tax code, according to him.

The report suggests that large US companies remain upbeat on hiring and capital spending, due in part to continued confidence that Washington will enact tax reform.

President Donald Trump last month had unveiled a big tax package that aims to simplify the complex U.S. tax code and cut taxes for the middle class and businesses.

Trump called for bipartisan support from members of Congress when they come back from recess to pass a comprehensive measure to overhaul the tax code, the details of which are expected to be released later this month.

Trump has pushed to reduce the corporate rate to 15 per cent from 35 per cent.


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