US presidential candidates are responding to voters’ ire over a complex tax code that shields the wealthiest from tax payments. Reports of corporate inversions – US firms relocating headquarters to take advantage of lower tax rates in countries like Ireland – highlight the negative consequences of globalization for voters already angry about entrenched income inequality, outsourcing and job loss. The US Treasury Department has imposed a series of rules to slow the pace of inversions. Farok J. Contractor, a Rutgers Business School professor who researches foreign direct investment, lists the arguments for and against inversions. “There is an inherent contradiction, as well as jurisdictional disputes, in a world with separate country-by-country taxation while multinationals treat the world as one economic space,” he concludes. Estimates suggest the US tax burden is near the average of OECD economies, but the country’s persistent reputation for high taxes and inefficient government may hurt prospects for foreign investment. – YaleGlobal
