The UK’s new tax does try to address a real problem with the implementation of corporate taxes in the modern economy. However, a new international process led by the OECD already exists to deal with the issue. This effort recently issued a series of major reports and is scheduled to make final recommendations next year. The British government should delay implementation of its new tax so that it can act within a multilateral context designed to deal with the larger issues involved.
Boost R&D by Easing Repatriation Rules
A policy compromise that lets companies repatriate funds at a low tax rate, provided they spent at least half of these funds on research and development, would accomplish the mutual goals of freeing up foreign earnings and boosting research, while not contributing to the federal debt-to-GDP ratio.
Preempting International Harmony: The New British Tax on Overseas Profits
In today’s world, companies are moving away from fixed assets and becoming much more mobile in both their corporate structure and physical location. As companies outsource more of their activities, it will become increasingly easy for them to move the most valuable parts of their production process to low-tax jurisdictions. As a result, it will be increasingly difficult to tax corporate profits, especially when the concept of profits is becoming more difficult to define. For this reason, governments would be wiser to shift the burden of taxes more toward less mobile sources of revenue (such as consumption and property) and/or activity associated with social harms (such as greenhouse emissions and use of tobacco). The greater visibility of these taxes is actually a benefit for making better policy.
New Evidence from Canada: Tax Policy Does Affect Research Spending
In “Do Tax Credits Affect R&D Expenditures for Small Firms? Evidence from Canada,” the authors find that firms that qualified for a larger tax credit did spend more on R&D in the following years compared to firms of similar income whose tax situation did not change.
Choosing Growth Over Protectionism
Brazil narrowly chose to reelect President Dilma Rousseff, and now she has an important choice to make about the future of Brazil’s economy: whether to take the necessary action to get Brazil’s economy back on track. Here’s an easy place to start: eliminate all tariffs and discriminatory taxes on information and communications technology (ICT) products and services.
Keep the Internet Tax-Free
Hungary’s recently proposed tax on Internet access was absurd – akin to assessing fees on reading books. But the proposal, even if discarded (though the government has hinted that it may bring the tax back in another form), remains worrisome, because it is part of a disturbing trend. A large number of countries have introduced taxes and tariffs that hamper the adoption and use of information and communications technology (ICT). This is the modern-day equivalent of eating the grain you were saving to plant next year.
The Folly of Taxing New Media
As part of the Canadian Radio-television and Telecommunications Commission (CRTC) review of its TV and broadcast regulations, several stakeholders have raised the idea of requiring over-the-top (OTT) video providers — such as YouTube and Netflix — to finance Canadian content. What these concerned parties do not realize is that by choosing to exact fees from online providers, the CTRC would only succeed in reducing innovation and consumer choice, while trying to enforce the unenforceable.
Congress Should Make the R&D Tax Credit Permanent
Congress has an opportunity now to permanently extend the research and development (R&D) tax credit, an essential tool for promoting innovation, competitiveness and economic growth. While neither the timing nor the substance of the proposed legislation is perfect, Congress and the president should take action this year. Although it would be preferable to treat this business provision on its own, political realities dictate that Congress should take the best deal that it can and make the credit permanent now.