“The business tax system today is inefficient, overly complex, and too riddled with loopholes,” said Mark Mazur, assistant secretary for tax policy at the U.S. Department of Treasury.
So much so, in fact, that it can’t fulfill its function to be a world-class system, he noted.
Mazur, speaking Tuesday at the 15th Annual NYU/KPMG Tax Lecture Series, noted that the U.S. corporate tax rate, at 34 percent, was at the low end of corporate tax rates among industrialized economies after the Tax Reform Act of 1986.
“While the U.S. rate crept up a little from 34 percent to 35 percent, other rates around the world went down. As a result, the U.S. now is a high-tax country compared to our trading partners,” he said.
This disparity in corporate income tax rates provides incentives for U.S. multinationals to shift income, production and investment abroad, according to Mazur.
“If we want to maintain a vibrant corporate income tax as one of the tools in a portfolio of revenue raising tools, we need reform,” he said.
The Obama administration’s framework for reform aims to provide room for dialogue and focuses on business tax reform, which is broader than corporate tax reform, Mazur indicated. Among suggested reforms are lowering the corporate tax rate to 28 percent; simplification of tax compliance; adjustment of multinational tax rules; an incorporation of the OECD BEPS (Base Erosion and Profit Shifting) initiative; treatment of hybrid entities the same in all jurisdictions; adjustment of inversion rules; adjustment of transfer pricing rules; limitation of stripping transactions; and a transition tax imposed on multinationals for income repatriation.
