Just a reminder: U.S. Corporate taxes are due this Friday, March 15. It’s not too late to submit your tax payments for 2012, but after tomorrow, it will be.
Last week we shared a few thoughts about corporate taxes in the United States and the unfair burden that small business bears, as well as an idea or two about what changes we’d like to see. This week, we have just a couple of additional thoughts on the subject:
We we mentioned last week, the United States has the highest corporate tax rate in the developed world. Which adds substantially to the cost of running a successful business here.
Compare the U.S. rate to Ireland, where businesses pay just 12.5%.
A small business in the U.S. with a profit of $1 million dollars would save approximately $215,000 every year just by moving to to Ireland. Moving to Bermuda would save $340,000. If that same company made a profit of $10 million, they would save well over $2 million by relocating to Ireland and nearly $3.5 million by moving to Bermuda.
That’s a pretty strong incentive to move a business over seas.
For many online businesses, which can operate as easily from overseas as they can here in the states, it’s hard to argue that keeping a business in the United States is a smart decision. Staying is incredibly expensive.
Which is why Google (and hundreds of other large companies) have moved much of their profit overseas. In fact, by using an accounting trick called the “Irish double”, they’ve saved more than $3 billion in taxes over the past several years by shifting profits to Ireland and Bermuda.
And when there’s that much money on the line, a company would be crazy not to take advantage of these very legal tax loop holes.
This is why, despite having the highest corporate tax rate in the world, U.S. corporate income taxes have fallen from roughly 30% of all tax revenue in the 1950s, to less than 7% of all tax revenue today.
Our tax system is broken and desperately needs a fix.
A few more facts about how taxes affect small business in the U.S.:
• 59% of small business owners believe taxes pose a major risk to their business well-being.
• 56% say that the administrative burden is worse than the financial burden.
• More than half of all small businesses pay more than $5000 for tax compliance.
• There are nearly 4 million words in the U.S. tax code. By comparison, Shakespeare wrote 37 plays and 154 sonnets consisting of 884,647 words.
• The tax code is 10x longer than the Bible.
Photo credit: DonkeyHotey via photopin cc
