onsdag 8 september 2010


President Obama proposes to let companies quickly write off 100 percent of their investments in new plants and equipment. The idea is to give companies an incentive to spend and invest now, rather than later. The administration claims the change would put nearly $200 billion in the hands of businesses over the next two years.

Under the current law, a company gets to deduct 50 percent of the costs upfront, and the remainder over three to 20 years, depending on the nature of the investment.

"This measure would provide tax incentives for businesses to invest in the United States when our economy needs it most," says a White House fact sheet.

Sweden used to give companies the same kind of incentives. That was in the days of high tax rates before 1990. It helped companies with profits in the past to keep those profits untaxed. A high tax rate combined with generous depreciation allowances made it expensive to pay dividends to the shareholder. Although the statutory tax rate was far above 50 percent the effective tax burden was less than 20 percent of economic profit. So the capital was locked in in historically prosperous companies. New companies with new products and new ideas were locked out as they had to raise funds from taxed income. The structure of business society was petrified.

Apart from these negative effects of a system of high tax rates and generous deduction facilities, it made the tax legislation extremely complicaded. Tax consultation industry boomed.

Sweden changed its system fundamentally in 1990. Tax rates were lowered drastically to levels unseen before. Today it is still lower - 26,3 percent. Most of the old system for creating untaxed reserved was scrapped. The effective tax cost raised towards 25 percent and tax revenue increased.

There has been a wave of reductions of company tax rates over the world during the last decades. Not so in the US.

The US company tax system is more complicated than any other company tax system. The tax rate is among the highest in the world. Dont make it still more complicated.

Mr Obama, TEAR DOWN THIS WALL. Simplify the company tax rules, lower the company tax rate. Om better still, abolish company tax altogether. The consultants will not appreciate it. But it makes business profit cheeper.

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