Taxes Matter IV
A new podcast from the Tax Foundation finds:
Taxes are a major concern to businesses when they make decisions such as where to locate, repatriation of profits, and how they organize, among others, according to Mihir Desai, associate professor of finance at Harvard Business School.
“Taxes are, in fact, a first order of concern for firms when they make a variety of decisions,” he said. Foreign direct investment “is much more about a global production process where cost factors, especially taxes, are central.”
Professor Desai’s comments come from the Tax Foundation’s most recent Tax Policy Podcast, which is available here. He discussed corporate taxes, his research on how they affect companies and productivity, and ways to reform the corporate tax structure to promote efficient use of business capital.
Taxes discourage companies from “harvesting” big gains, he explained. “That’s really quite costly to all of us, in the sense that they aren’t making efficient investment decisions that they would have made otherwise.”
He said the corporate tax system needs reform in order to remove disincentives to realizing capital gains and should use a global perspective in considering the effective rate of taxation on companies.
“It’s impossible to think about corporate taxes without thinking about the international provisions. And those international provisions are highly complex, highly burdensome, and actually may put American firms at a disadvantage when they compete to buy assets around the world. ”