International Tax Environment that Confronts Multinational Companies and Investors
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International Tax Environment that Confronts Multinational Companies and Investors
Multinational companies have an obligation to foreign countries they operate in terms of tax, which varies depending on the countries or regions of setup. Foreign tax rates, taxable income and tax rules of the foreign countries are the major factors to consider while venturing in a foreign state (Faulkender, & Smith, 2015). In the United States, for instance, some authorities have rules to tax businesses their total income globally rather than the earnings in their locality. Harsh fiscal policies for foreign companies’ limits direct foreign investments in those countries that impose such laws (Eun & Resnick, 2015). Even as the United States prides itself in stronger economies and political stability favorable for foreign direct investment, some tax policies are hindrance to foreign investors and multinational companies with interests in their markets.
The implication of the tax environment in the United States and the distinct states within it is that foreign firms can choose not to invest, or advance the local markets through the local businesses. As a strong and stable economy, the stringent rules in place would require companies to undergo rigorous compliance process to secure a position in the country (Flanagan, Gitman, & Juchau, 2010). The tax laws and compliance for multinational companies in the US offer incentives to larger investments and other domestic privileges (Faulkender, & Smith, 2015). The country’s policy offering low tax rates for amounts accumulated locally would force investors to retain more cash within the economy and attract money from the venture in other nations.
For a person who would wish to invest in the country, there are compliance measures to meet and higher-level investment favorable. It is important to consider those states that have tax policies favoring investment in their areas by multinational companies (Flanagan, Gitman, & Juchau, 2010). Investing in the US gives higher returns for businesses and investors due to the stable economy and mergers or acquisitions are appropriate ways to invest in the country.