Tags: firms | government | tax breaks

Firms to Govt: No, Thanks to Tax Breaks—Too Confusing

Tuesday, 24 July 2012 08:31 AM

More and more companies are saying no thanks to tax breaks since making the deductions are too time-consuming and confusing, often costing the company more to take advantage of them, The Wall Street Journal reported.

Fears of Internal Revenue Service pushback are prompting more companies to forgo tax breaks as well, particularly small and mid-sized firms.

Compliance costs for U.S. businesses and individuals have been rising, reaching 1 percent of gross domestic product, or about $150 billion last year, The Journal reported, citing data from congressional researchers.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Some tax consultants say eligible businesses obtain only 5 percent of domestic tax breaks they are entitled to claim.

“I usually avoid these targeted tax incentives, because it costs so much just to be compliant that it’s not worth messing with,” John Raine, chief executive officer of Raine Inc., an Indiana firm that manufactures belts and holsters for the military and other customers, told The Journal.

“I can’t run a business based on what area the federal government is trying to juice,” he added.

Republicans and Democrats will likely address reforms to corporate tax codes next year, as many tax breaks by nature are aimed to encourage smaller business to expand but big companies are the ones that can pay accountants and lawyers to take advantage of tax breaks.

Taxes have already become an election-year debate.

Bush-era tax breaks are due to expire at the end of year along with other tax breaks right at the same time cuts to government spending are due to kick in, a combination known as a fiscal cliff that could siphon $500 billion out of the economy and send the country back into recession.

The White House has proposed extending the Bush tax cuts for another year, though not for those bringing in more than $250,000 a year.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Some say all tax breaks in play now should be extended — including those for businesses, as the country cannot afford to hike taxes amid times of fragile recovery.

“Business Roundtable has urged Congress to extend the expiring and already expired individual and business tax provisions through the rest of next year,” John Engler, a former Michigan governor and president of the Business Roundtable, wrote in the Holland Sentinel. “Such an extension would help ease the uncertainty that now discourages companies from investing and hiring.”

"The United States now labors under the highest statutory corporate tax rate in the developed world. Further, the country suffers from an international tax system that has failed to keep pace with the realities of global competition,” he noted.

“A reduction in the corporate tax rate to the average rate of other industrialized countries — about 25 percent — would eliminate a great disadvantage faced by America’s job creators,” Engler added.

The Business Roundtable is an association of CEOs of leading U.S. corporations based in Washington D.C.

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Tuesday, 24 July 2012 08:31 AM
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