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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.

Apr/May 07
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Locating Offshore
Most 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 (, 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.

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