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J. Wayne Abbott

AJK, LLC CPA's

12/29/11

Current business conditions have been the topic of much debate in the media and in boardrooms across America. Changes in tax law and increased government regulation have made it increasingly difficult for both domestic and international companies to do business in the U.S.

As a nation, the time is now to assess where America stands in the international business community and to identify factors that are driving our economy.  In order to compete effectively in the global marketplace, changes must be considered and implemented lest we fall further behind.

As the United States tax code has grown more burdensome, more companies have been quick to relocate work overseas. Profits generated by offshore work are also being retained offshore causing many to wonder what is the root cause of these decisions and to question what must be done to restore the business-friendly environment in the U.S.

A recent article, published by the American Institute of Certified Public Accountants, ranked 183 nations on ease of doing business in their country. In the study, conducted by the World Bank, International Finance Corp and PricewaterhouseCoopers, the United States ranked 69th out of 183 countries evaluated based on factors such as full tax burden and compliance costs, which includes time required to complete necessary paperwork.

The authors also noted that since 2006, in countries that have reduced corporate tax rates, the average decrease is around 8.5 percent. On the other hand, with a total tax rate of approximately 46.7 percent (factoring in Social Security and other taxes on top of the 35% corporate rate.), the U.S. is in the lower third, or 131 out of the 183 countries surveyed, with a corporate tax rate higher than such nations as the United Kingdom, Finland, Norway, Switzerland and Ghana. It is important to note that in the aforementioned study, the lower the ranking, the less desirable the business climate.

Of the factors related to rankings in the study, those countries who have taken steps to reduce and/or streamline taxation are among those who have improved overall position. According to the survey 123 of the 183 economies have made at least some tax improvements since 2006. For example, in one year South Korea moved from 49 to 44, after combining several labor-related taxes into one reporting form and one payment. 

My work is dealing with the complexity of the US tax system and I am often asked if changes to streamline the tax regulations would hurt my business. In a word, my answer is no. Our tax system, in both the corporate and individual codes, has become so complex that it is impossible to administer.

What can I do?

Change begins with the people and we must, citizens and business owners alike, begin to hold our elected officials more accountable. Begin a dialogue on cutting taxes and streamlining the tax code. Insist on changes that are for the good of the nation, not solely for the good of lobbyists and special interest groups.
Creating a more welcoming climate for business, both domestic and international, is essential to restoring our competitiveness in the global marketplace.  Doing so will help America to regain its status as the best place in the world to do business.

About the Author:

J. Wayne Abbott

Wayne Abbott is the founding partner of AJK, LLC a regional CPA firm with offices in LaGrange, Columbus and Manchester, GA. He is a Certified Public Accountant and a Certified Information Technology Professional with the American Institute of CPA’s. Wayne focuses on strategic tax and business process planning for Medium to large corporations.

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