WE'RE NUMBER 61!
April 15, 2010
The U.S. corporate income tax is about as bad as can be. This year, American businesses may spend 89 cents preparing their taxes for every dollar they pay in taxes, says the Wall Street Journal.
According to David Keating of the National Taxpayers Union:
- The cost of compliance with the corporate tax is $159.4 billion -- or 89 percent of expected tax collections for fiscal 2009, and 54 percent for 2008.
- That includes the administrative burden, reporting requirements, accounting costs and all the rest.
- In one of those tax facts that have become famous, General Electric's 2007 tax form ran to some 24,000 pages; though GE files electronically, a spokeswoman says that "sounds about right to us."
The National Taxpayers Union estimate is admittedly back of the envelope, extrapolated from the IRS's estimate of the hourly paperwork burden and the average wages of tax accountants, and obviously the 89 percent figure is higher for 2009 because corporate profits were down due to the recession. On the other hand, the tax code gets more complicated every year, and it isn't uncommon even in better times for complying with the tax to cost companies 50 percent of what they pay.
In its 2010 "Doing Business" survey, the World Bank (with PriceWaterhouseCoopers) ranks the United States 61st out of 183 countries in the ease of paying business taxes. That puts America behind the Maldives, Qatar and Hong Kong -- gold, silver and bronze -- but also the likes of Saudi Arabia (No. 7) and Kiribati (No. 10).
Between 2008 and 2009, 45 of the world's economies made it easier for businesses to pay taxes, says the Journal:
- A 2010 KPMG-International study ranks the United States eighth out of 10 major countries in overall business conditions, including labor, transportation and tax costs.
- Perhaps Congress can take some comfort in the fact that we beat out Congo, Uzbekistan and Venezuela in the World Bank survey.
The rest of the world is reducing its corporate tax rate for competitive reasons, and the Organization for Economic Co-operation and Development (OECD) average is 26.5 percent. But Congress insists on sticking to a 35 percent statutory corporate rate, the second highest in the Western world, while adding so many loopholes that the compliance costs take countless hours and dollars to fulfill, says the Journal.
Source: Editorial, "We're Number 61! In terms of ease of paying taxes," Wall Street Journal, April 15, 2010.
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