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Taxation of Multinational Companies Student Name Course Instructor Institution City and State Date Multinational corporations may be seen as different from domestic firms in that they operate in multiple economic cultural and political environments and are hence subject to different tax regulations. In the US, the federal government taxes the worldwide income of multinational firms registered in the country the same rates as those to domestic firms, the maximum being 35%. The firms may, however, seek a waiver for taxes paid in other countries for income earned outside the US. This has to be up to the company’s federal tax liability for the earnings made (Blouin, 2012, p. 16). Many companies are now finding it crucial to engage in tax planning to lower the amount of tax due. Tax payments for income from foreign subsidiaries can only be paid if such incomes are repatriated to the US. Failure to repatriate such incomes will, therefore, lead to lower tax payments. The major reason for tax avoidance is high corporation tax rates. This can be seen from the fact that many companies are continuously shifting their income to low-tax countries. The US is, for example, one of the most affected countries in this situation due to its high tax rates and non-favorable policies for multinationals. Although other countries in the OECD economies have been working to reduce their tax rates, the US has not made any changes in its tax rate since 1993 (Hasset and Mathur, 2011, p. 1). The 35% rate is, therefore, one of the highest in the region. Most of the other countries including the UK, Italy, Germany, Japan, France, and Canada use a regional system that excuses the firms from
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