Ranked #3: Corporate Tax Rate
Respondents to Area Development's 21st Annual Corporate Survey have named Corporate Tax Rate as the third most important factor in the site selection process behind only labor costs and highway accessibility.
Tom Bertino, Strategic Relocation & Expansion Services Practice, KPMG LLP (Apr/May 07)
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large American companies know that it is imperative to continuously
develop new products that are better and cheaper, and to continue to
expand markets for their products outside the United States. Even
smaller companies now look beyond the United States to market their
products, while at the same time trying to expand the domestic market
for their products.
Establishing an international operation can
involve the relatively straightforward process of locating and hiring
just one foreign distributor for a corporation's products in just one
country, or it can involve complex issues ranging from site selection
for foreign manufacturing to establishing a global distribution
network. At either end of the spectrum, there are complex tax and
non-tax issues that need to be addressed.
U.S. businesses might
say that doing business in the United States is costly through a tax
perspective; however, simply establishing foreign operations is not
without tax costs. It is true that there might be certain foreign
jurisdictions that impose little or no income tax; or the foreign
jurisdiction might have tax treaties available to reduce the tax effect
of foreign business operations; or the United States may allow credits
or other mechanisms to avoid double taxation of the same income.
However, income that is attributable to the conduct of a trade or
business within the foreign jurisdiction is typically subject to net
income taxation by that jurisdiction. In addition, the United States
taxes U.S. corporations on their worldwide income.
One of the
biggest mistakes a company can make in the relocation or expansion
process is to ignore the tax consequences of a move. Tax issues should
be addressed at the very beginning of the relocation decision-making
process in order to have the most significant impact on the bottom line.Tom
Bertino is a senior manager in the Strategic Relocation & Expansion
Services practice of KPMG LLP. He is based in Costa Mesa, California.
KPMG LLP, the audit, tax, and advisory firm (www.us.kpmg.com),
is the U.S. member firm of KPMG International. The views and opinions
expressed herein are those of the authors and do not necessarily
represent the views and opinions of KPMG LLP. The information contained
herein is of a general nature and is not intended to address the
circumstances of any particular individual or entity.