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what are the likely effects of increase in tax on compnies? - Amirali Marvian - 03-24-2014 10:29 AM
hey guys... im writing an economy essay and i need to write about this question...i have been searching on the net but i have not found anything appropriate...i need a complete answer for this...if any one can answer please do.....thank u so much
- sina - 03-24-2014 10:34 AM
Hey!
The basic use of tax is to control the growth of companies and in return spend the taxes on public services. Taxes are the main sources of money for most Western and Eastern countries. (exclude middle-east and Africa) Now in US corporate taxes are pretty high, 35%, but through lobbing and connection, companies pay something between 15-20%.
So back to your question, if corporate taxes increases, companies are less motivated for innovation. You may expand it yourself.
Another thing to ponder upon or use as evidence in your essay is,why most successful corporates are American, such as Google, Apple, Facebook... It's due to the taxes and the freedom in the market.
By increasing corporate taxes there would be less investment in that particular country, many companies will close down and transfer their headquarters or companies in other regions and countries. For example, corporate taxes in US increase from 35% to 50%, corporates will transfer their headquarters to Canada which will reduce their costs and in return increase their outcome and revenue.
It's simple, really!
If you need further help contact me, I'd love to help.
- jonny - 03-24-2014 10:41 AM
Maybe tax increases can lead to companies establishing their headquarters or accounts in countries that have lower tax rates. It is a incentive to produce elsewhere, where taxes are low. Taxes eat away at profits, therefore, higher taxes lead to less incentives and less motivation for people to innovate. Tax increases will also slow a companies growth.