Keeping Up With The Speed of Change: Where Can You Be Taxed?


       When a person has an income, they typically pay taxes on it. The more they make, the higher rate of tax they pay. This has been the accepted pattern of life. When it comes to a business, people generally expect that pattern to continue. However, this is not always the case. For example, the Tax Cuts and Jobs Act (TCJA) changed the corporate tax code so that all businesses will be taxed at the flat rate of 21%. Another reason is that it has been proven that some companies have made billions but paid little or no taxes on that income.

          This is because the companies and their subsidiaries were placed all around the world. As a result of this, they were taxed based on where they were located. This is scheme is not new but is now being implemented in a very sophisticated way. Reporting income in low tax countries has become an even more tempting option with the growing digital economy. Governments around the world are banding together to fight back and get their share of profits that different firms are collecting.

          The first step in 2016 was to get companies to justify their income by showing the employees they have working in the countries they filed taxes in. After that, certain countries passed laws to tax digital companies based on where their users are, instead of where they file their earnings. Those actions have received a lot of attention, even as the TCJA has encouraged many companies to bring their foreign earnings back to the US. At this point groups like the Organization for Economic Cooperation and Development (OECD) and the nations that support them are working toward creating a global solution to make country specific taxation a thing of the past when it comes to multi-national corporations. Until then, firms may be taxed in many places, and yet pay very little.

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