So, you might be wondering what is common between the large American conglomerate and the Republican presidential candidate. The answer is quite a hot topic of debate nowadays that both keep their revenues offshore to avoid paying a huge sum of taxes. And it’s not just Mitt Romney or Apple doing that; most of the well to do
individuals and multinationals keep their money in some low-tax countries such as Switzerland and Cayman Islands to reduce their tax bills.
Companies and people alike are required to pay taxes on the amount of income they earn or revenues their operations earn in the US. If a company has operations outside the US that brings back money to their US bank account, they are required to pay taxes on that too. However, if companies or people keep their money with banks in other countries or make investments off-shore, they are not required to pay taxes to the US government but to the government of the other country.
Since tax rates in some countries are minimal, this can turn out to be a huge cost-saving method for most people. A common misconception among people is that any money kept in offshore accounts is illegal. There are some laws that allow you to keep your money off shore under certain conditions but there is a very thin lining between legal and illegal rules regarding the matter that can be crossed easily.
With the current onset of presidential elections just lurking around the corner, people are speculating the many changes that are likely to occur in the economic scenario of the country. A look at the economic figures such as government spending and tax revenues clearly indicates a huge deficit. Regardless of the fact that both the candidates do not talk about raising taxes for the middle class directly, it is quite expected that taxes will go up after the elections.
Both the candidates however have explicit reforms regarding the tax structure for people falling in the wealthy income group and big companies. The current president has indicated that there may be a substantial cutback in the subsidies for large, profitable companies. The President has also proposed eliminating deductions provided to many large companies, which will ultimately increase the taxes they pay to the government.
On the other hand, the Republican candidate Mitt Romney has proposed to decrease the corporate rate. He also intends to eliminate taxes on overseas earnings of a company arguing that it will encourage companies to flourish and prosper, which can result in economic stability.
Regarding Romney’s plan of action, many analysts have argued that it can be a successful step in encouraging companies to bring their overseas earnings back into the country instead of keeping them in offshore tax havens. The usefulness and validity of this policy claim still remains a topic of speculation, keeping in mind the huge government deficit and the need to earn more tax revenues.
In the current economic scenario, most people find it difficult to believe that there will be any possible decrease in their tax bills in the future, regardless of the selection of either candidate.