This paper gives a general overview of the corporate taxation system in the United States. The work begins with a definition of taxes and tax systems followed by the classification of business entities in the US. The main part describes the relevant legal taxation aspects that corporations face in the US and deals with the critical issue of tax deferral of US multinationals. This assignment will focus on the federal income tax that has the most importance for business decision making. This assignment ends with a final reflection of the topic and a conclusion by the author.
Table of Contents
1. Introduction to Taxation
1.1 The Structure of Taxes
1.2 Types of Taxes
1.3 Business Entities in the US
2. Corporate Tax in the United States
2.1 Federal Income Tax
2.2 Taxable Income
2.3 Income Taxation of Business Entities
2.3.1 Proprietorships
2.3.2 C-Corporations
2.3.3 Partnerships
2.3.4 S-Corporations
2.3.5 Limited Liability Companies (LLC)
3. Critical Appraisal Tax Deferral
4. Conclusion
5. Bibliography
Objectives and Topics
This paper aims to provide a comprehensive analysis of the corporate taxation system within the United States, specifically focusing on how federal income tax structures influence business decision-making and the utilization of tax deferral strategies by multinational corporations.
- Overview of US tax foundations and classification of business entities
- Detailed breakdown of federal corporate income tax rates and brackets
- Analysis of state-level income tax variations and their impact on corporate strategy
- Critical examination of tax deferral mechanisms for foreign earnings
- Evaluation of the global competitiveness of the US tax environment
Excerpt from the Book
3. Critical Appraisal Tax Deferral
Currently, US multinationals have little incentive to bring cash they hoard overseas back to the US. The US tax law allows US companies to delay paying taxes on foreign profits. The companies don’t have to pay taxes on on their foreign profits earned by their subsidiaries for many years.
Apple generates most of its total revenue abroad. On this revenue, Apple is paying taxes at a rate of 1.8%. This explains why U.S. corporations report their largest profits in low-tax countries like Ireland, the Netherlands, Luxembourg, and Bermuda.
That also explains why many US corporations effectively pay low taxes in total, even though the corporate tax rate in the US is one of the highest in the world. US corporates can raise the cost of capital relatively to their foreign-based competitors by deferral. The chart below, compiled by Statista, shows which US multinationals keep huge cash reserves abroad:
Summary of Chapters
1. Introduction to Taxation: Defines the fundamental components of tax systems, explains the doctrine of "legislative grace," and outlines the common business structures found in the US.
2. Corporate Tax in the United States: Examines the progressive nature of the federal income tax, defines taxable income, and details the specific taxation characteristics of various business entities including C-Corporations, S-Corporations, and LLCs.
3. Critical Appraisal Tax Deferral: Analyzes the practice of holding foreign earnings abroad to defer tax liabilities and highlights how this affects the effective tax burden of major US multinationals.
4. Conclusion: Summarizes the competitive position of the US corporate tax system and suggests that the current tax deferral policies may lead to increased international regulatory scrutiny.
5. Bibliography: Lists all academic sources, legal codes, and data reports used throughout the assignment.
Keywords
Corporate Taxation, Federal Income Tax, Business Entities, Tax Deferral, US Multinationals, Taxable Income, Progressive Tax, Tax Liability, Foreign Earnings, Effective Tax Rate, Business Strategy, Legislative Grace
Frequently Asked Questions
What is the primary focus of this assignment?
The assignment provides a general overview of the corporate taxation system in the US, with a specific focus on the federal income tax and its impact on corporate decision-making.
What are the main thematic areas covered in the document?
The main themes include the structural definitions of US taxes, the classification of business entities, the calculation of taxable income, and the implications of tax deferral for multinational corporations.
What is the central research question or goal?
The goal is to analyze how the US corporate tax structure and current deferral laws affect the behavior and tax burdens of American companies operating globally.
Which scientific method or approach is used?
The paper employs a descriptive and analytical approach, utilizing legal definitions (26 U.S. Code), institutional data (OECD, Tax Foundation), and financial statistics to evaluate tax systems.
What topics are discussed in the main body?
The main body covers the structure of federal income tax, the progressive tax rate schedule, the different tax treatments of various business entities (e.g., Proprietorships vs. C-Corporations), and the strategic use of tax deferral on foreign earnings.
How would you characterize this work using keywords?
The work is best characterized by terms such as Corporate Taxation, Tax Deferral, Federal Income Tax, and Global Competitiveness.
How does the "legislative grace" doctrine impact corporate tax?
It establishes that all income is subject to tax unless specific exceptions are explicitly provided for by law, meaning no deductions are allowed by default.
Why do US multinationals hold significant cash reserves abroad?
US tax law allows companies to defer paying taxes on foreign profits earned by subsidiaries, creating an incentive for them to keep cash outside the US to avoid immediate domestic tax liabilities.
- Arbeit zitieren
- Master of Business Administration Andreas Kauerhof (Autor:in), 2016, The Corporate Tax System in the United States, München, GRIN Verlag, https://www.grin.com/document/354489
