Corporate Tax Pros Favor Lower Tax Rate and Closing Loopholes
Seventy percent of corporate tax professionals said they favor lowering the U.S. corporate tax rate, even if that means their companies would have to give up tax loopholes, according to a new study.
The study, released Thursday by the Tax & Accounting business of Thomson Reuters, gauged the opinions of corporate tax professionals—from analysts to CEOs—on issues such as U.S. corporate tax reform, tax inversions, recent tax credit expirations and transfer pricing practices. The Thomson Reuters Corporate Tax Department Pulse Survey polled 212 corporate tax department executives, half of whom work at firms with $1 billion or more in revenue.
Only 12 percent of the tax executives surveyed said they were in favor of moving their companies’ headquarters for tax purposes, but 24 percent said their companies are considering a relocation and/or expansion in a new region to capitalize on favorable tax rates. That number jumped to 30 percent among tax pros who worked for companies with $1 billion or more in annual revenue.
When asked if the U.S. corporate tax rate plays a significant role in their companies’ global business plans, a 52 percent majority said yes. The proportion jumped to 59 percent among tax pros who worked for companies with $1 billion or more in annual revenue. Only 15 percent of all survey respondents (and 17 percent of large company respondents) said they expect an increase in tax exposure as a result of pending corporate tax rate legislation.
“At a time when global corporate tax policy is more volatile than ever, this real-world perspective from tax professionals provides valuable insight into corporate strategy,” said Joe Harpaz, managing director for the corporate segment for the Tax & Accounting business of Thomson Reuters, in a statement. “These results show that, despite increased complexity and uncertainty, they continue to find ways to confront that challenge and manage day-to-day operations without causing material impact to their core businesses.”
The survey also found that 36 percent of respondents said the expiration of the R&D tax credit has had a negative financial impact on their companies, while 28 percent indicated the biggest challenge they face in the wake of the R&D tax expiry is earnings reporting.
Approximately one out of four (23 percent) survey respondents said they would consider repatriating offshore income if the tax rate was between zero and 10 percent. Thirty-six percent indicated that up to 5 percent of their company’s cash is held outside the U.S., while 23 percent said that number was as high as 20 percent.
Tax professionals see complexity and workload as the biggest risk to their companies concerning transfer pricing practices (35 percent), followed by the adverse tax impact of legislative changes (17 percent) and reputational issues, such as bad publicity (6 percent).
