Home Economy U.S. tax competitiveness remains steady this year ahead of big changes afoot for 2023

U.S. tax competitiveness remains steady this year ahead of big changes afoot for 2023

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On Monday, the Washington-based tax foundation Annual International Tax Competitiveness Index 2022 ReleasedThey found that the United States remained stable at 22nd among the world’s top 38 economies.

The annual report ranks global tax laws, and U.S. policymakers, especially Republicans, are likely to regain some power in Washington after next month’s midterm elections, so they’ll be watching closely.

However, this ranking could be volatile as parts of President Biden’s Inflation Control Act come into effect in 2023 and the world’s major economies scramble to implement a landmark global minimum tax deal. .

“Although not entirely certain, other OECD countries may also implement changes, so if the US does not deal with expired provisions and complexities, it will have to deal with new policies from controlling inflation. The U.S. ranking is likely to decline in the years to come if the “law carries over to U.S. tax law,” said Daniel Bunn, executive vice president of the Tax Foundation and author of the report, on Monday. told Yahoo Finance upon the release of the report.

President Joe Biden signed into law the historic Inflation Reduction Act of 2022 at a ceremony held at the White House on Aug. 16. (REUTERS/Leah Millis)

The report looks at 40 different variables around the world, from businesses to individuals, property and sales taxes, and advocates for countries that raise revenue in a way that is sufficient for governments and does not impede economic sectors.

“The structure of a country’s tax law is a factor that determines its economic performance,” the report begins, adding that “a poorly structured tax system is costly, distorts economic decision-making, and harms the domestic economy. It can affect,” he said.

The US again lagged behind business-friendly regions such as New Zealand and Switzerland this year, but outperformed other global powers such as the UK and Italy. US adversaries such as China and Russia are not tracked by the OECD and do not appear in the rankings.

where America ended up

Estonia tops the rankings for the ninth year in a row. A small northern European country, among other things, is allowed in its report for tax laws that only tax corporate profits and, looking at personal income tax, tax none on personal dividends. In the eyes of Foundation researchers, the structure is perfect for promoting economic growth while allowing the government to raise enough money to function.

Given the structure of the ranking, the number one country is seen as one that is designed to foster economic development while at the same time raising enough money for the government to operate.

At the bottom of the ranking, at number 38, is France. The country was criticized in Monday’s report for many features of its tax law, but primarily a wealth tax on real estate. Many economists see wealth taxes as a drag on economic growth, and to top it off, they are very difficult to enforce evenly.

The Eiffel Tower seen at sunset on October 15, 2022 in Paris, France.  REUTERS/Stephane Mahe

The Eiffel Tower is seen at sunset in Paris. France ranks as the least tax competitive among developed economies in a recent report. (Reuters/Stéphane Mahé)

Roughly in the middle is again the United States. This year’s standings are the same as the 2020 and his 2021 US standings. In fact, the US ranks 22nd for corporate tax policy, 21st for personal tax, 3rd for sales tax, 29th for property tax, and 35th for cross-border tax regulation.

Ranking is not just a measure of tax rate. The report also takes into account taxes imposed in an economically destructive way. For example, under the consumption tax system, the consumption tax system is applied only to some products and not to other products, based on the idea that even if the consumption tax is evenly applied, consumer behavior will not change. If so, the country will be in chaos.

Changes planned for 2023

The rankings released this week are about the tax situation in 2022. But with the Inflation Reduction Act and other changes coming out of Washington DC, things will surely change next year.

new law, Signed by President Biden in August Introduces a new minimum corporate tax rate of 15% for companies with more than $1 billion in book profits. The new law also adds a new 1% excise duty on share buybacks.

Both provisions will come into effect on January 1, 2023.

Bunn is concerned that the new minimum corporate tax could make the US less competitive, and that key provisions of the 2017 Tax Cuts and Jobs Act will expire, making the US less competitive. increase.

The provision allows companies to fully cover the cost of the equipment, which will begin to be phased out in 2023. used to call it ‘Most Important Temporary Tax Rule’ But the Biden administration and Democratic lawmakers have shown little interest in updating it.

Additionally, the United States and other countries recently agreed to a new global minimum tax rate treaty aimed at ensuring that companies pay a minimum tax rate of 15% wherever they do business. Proponents of the ambitious agreement aim to have it come into force in 2023, and many countries are rushing to comply with the new rules.

Ben Werschkul is the Washington correspondent for Yahoo Finance.

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