HB 2016-1029 - Corporate Tax Reform Bill of 2016

[NeverAgain]

[quote]Corporate Tax Reform Bill of 2016

Introduction:

Atlasia’s system of business taxation is in need of reform. We have a relatively narrow corporate tax base compared to other countries—a tax base reduced by loopholes, tax expenditures, and tax planning. The resulting system distorts choices, such as where to produce, what to invest in, how to finance a business, and what business form to use. And it does too little to encourage job creation and investment in the United States while allowing firms to benefit from incentives to locate production and shift profits overseas. The system is also too complicated, especially for Atlasia’s small businesses.

These five sections will not only help expand our tax base, but also help small businesses (and even large ones) thrive.

Section One: Eliminating Ineffective Loopholes and Subsides

i. We will address current depreciation schedules due to their consistent overstatement of economic assets. In an increasingly global economy, accelerated depreciation may be a less effective way to increase investment and job creation than reinvesting the savings from moving towards economic depreciation into reducing tax rates. We will reduce Accelerated Depreciation Schedules by 33% for Businesses worth over 100M.

ii. Reducing the bias toward debt financing in investment. Our reforms should take additional steps to reduce the tax preference for debt-financed investment, such as “haircutting” corporate interest deductions by about 10%. Limiting interest deductibility would finance
lower tax rates and do more to encourage investment in the United States than many other ways
to pay for rate reductions.

iii. Ending dozens of unfair business tax loopholes and tax expenditures that create a heightened tax rate:

• Ending "Last In First Out Accounting" - Under the “last-in, first out” method of
accounting for inventories, it is assumed that the cost of the items of inventory that are sold is equal to the cost of the items of inventory that were most recently purchased or produced. This assumption overstates the cost of goods sold and understates the value of inventories. Under this reform, we would end this system, bringing us in line with international standards and simplifying the tax system.

• Ending Tax Code Preferences For Oil and Gas Companies - The tax code currently subsidizes oil and gas production through tax expenditures that provide preferences for these industries over others. These reforms would repeal more than a dozen tax preferences available for fossil fuels.

• Reform treatment of insurance industries and their products -  Under this bill, we will reform the treatment of insurance companies and products to improve information reporting, simplify tax treatment, and close loopholes, including one in which corporations shelter income using life insurance contracts on their officers, directors, or employees.

• Reform the treatment of measurement and character of gains - This bill would reform the treatment of capital gains, including modifying rules for like-kind exchanges, which allow investors in certain assets to avoid realizing a capital gain, and thus to defer payment of tax, through a transaction structured as an exchange rather than a sale.


Section Two: Strengthening American Innovation

i. Expand, simplify, and make permanent the Research and Experimentation Tax Credit. The R+E Tax Credit is used for investment in new research and innovation, but is only renewed off-and-on annually. Making this permanent and increasing its range would help idealistic young people and small businesses bring their ideas into reality. We will also expand it for all start-ups and make it entirely refundable.

ii. Consolidate, enhance, and permanently extend key tax incentives to encourage investment clean energy and the tax credits for the production of renewable electricity and investment in renewable energy technologies. These reforms would provide a strong, consistent incentive to encourage investments in renewable energy sources, like wind and solar. The production tax credit and investment tax credit for renewable electricity generation are extended off and on, but permanent tax incentives for clean energy investment are needed to meet the challenge of climate change and address the harmful consequences of pollution. In addition, the structure of the renewable production tax credit has required many firms to invest in inefficient tax planning through tax equity structures so that they can benefit even when they do not have a tax liability in a given year because of a lack of taxable income. This framework would eliminate the need for these strategies by making the production tax credit refundable. In addition to these reforms to support clean energy, we will eliminate tax subsidies for oil and gas as described above.

iii. Effectively cut the top corporate tax rate on manufacturing income to 20 percent by reforming the domestic production activities deduction. The manufacturing sector plays an outsized role in the U.S. economy and is particularly important for future job creation, innovation, and
economic growth. For this reason, this bill will reform the current domestic production activities deduction. It would focus the deduction more on manufacturing activity and expand the deduction to 10.7 percent, effectively cutting the top corporate tax rate for manufacturing income to 20 percent.

Section Three: Strengthening the International Tax System

i. Reduce large corporations' ability to move and avoid the Atlasian tax system. A minimum tax on foreign earnings would ensure that no matter what tax planning techniques an Atlasian corporation engages in, and no matter where it reports its profits, it would still face a tax rate of at least 19 percent. Unlike the current system, there would be no “deferral” of tax—the minimum tax would apply to profits in the year they are earned. The minimum tax would stop our tax system from generously rewarding companies for moving profits offshore. In addition, other elements of the plan would make it harder to shift profits overseas by limiting interest stripping, transfer pricing abuses, and inversions.

ii. Reduce the incentive to shift production overseas. The current system encourages companies to shift production overseas to take advantage of indefinite tax deferral on the resulting earnings— and to establish a legal toehold in a foreign country to enable even more earnings to be shifted there on paper. The minimum tax would also reduce these incentives by ensuring that the earnings of Atlas multinationals’ foreign subsidiaries are taxed on a current basis at a rate of at least 19 percent.

iii. Increase the competitiveness of Atlasian Corporations Atlasian multinationals often have legitimate non-tax reasons to locate production overseas, either to serve local markets or because of specific competitive advantages to overseas production. Other countries with territorial systems effectively do not tax firms on their overseas production, and so those firms incur no taxes when earnings are distributed to the parent company in its home country (that is, upon “repatriation”). In addition, foreign resident companies that produce locally face only that country’s corporate tax rate. In contrast, Atlasian companies face relative high explicit or implicit repatriation taxes, and therefore may operate at a tax disadvantage. In order to balance the two goals above with the desire not to disadvantage American multinationals vis-à-vis their competitors, the plan sets the global minimum tax rate lower than the full 28 percent rate proposed for reform—and offers a deduction for income from active business investment.

[NeverAgain]

Part Two!

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Sponsor: NeverAgain

[NeverAgain]

I open this up for a 48 hour debate period.

[LLR]

This is a necessary bill, and it has my full support.

[Blair]

This is exactly what we need in Atlasia- real, concrete policy. I know it can take a long time to get policy written up so I hope there's lots of debate on this bill

[Pragmatic Conservative]

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Section Six: The Creation of new Accounting Standards

i. Adoption of IFRS for publicly traded companies and prohibition against use of Atlasia GAAP
Currently many of our major trading partners have adopted the use of IFRS. It is time for Atlasia too adopt IFRS as well. IFRS also closes many of the tax loopholes that business currently take advantage of. 


ii. Creation of new financial accounting  standards by the Atlasia Financial Accounting Standards Board. Privately traded companies may use these new standards as an alternative to IFRS.  This will give the option for privately to use an alternative IFRS. While IFRS is regarded as the "gold standard" in accounting standards, the Atlasia government understands it may not be financially feasible for some privately traded companies to use IFRS. 


Section Seven: When this bill shall take effect.

i.Sections 1-5 shall take effect for the 2018 fiscal year. Section 6 shall take effect for the 2021 Fiscal year. 

Sponsor: NeverAgain

I would like to first off thank this member for bringing up what is a truly important bill to the table. I have proposed an amendment  that will have Publicly traded Atlasia companies switching to the more internationally used IFRS. This amendment will also will have the Atlasia Financial Accounting Standards Board create a new set of standards that privately traded companies will have the option to use instead of IFRS. These new standards will further cut many loopholes that business can take advantage of and ensures that Atlasia businesses are following the same standards as many of Atlasia top trading partners (these countries include the EU member nations, Russia, Canada, Australia.)     

[Terry the Fat Shark]

I honestly don't see any major problems within this bill.

[Clyde1998]

I'm happy with this. Will the proposed changes have a significant increase/decrease in the revenue generated and if so by how much?

We could potentially look at introducing a tax on revenue produced within Atlasia in order to reduce tax evasion among larger companies.

[NeverAgain]

I'm happy with this. Will the proposed changes have a significant increase/decrease in the revenue generated and if so by how much?

We could potentially look at introducing a tax on revenue produced within Atlasia in order to reduce tax evasion among larger companies.

I attempted to make this revenue neutral. If I had to take a guess it would cost around $10B.

[Clyde1998]

I'm happy with this. Will the proposed changes have a significant increase/decrease in the revenue generated and if so by how much?

We could potentially look at introducing a tax on revenue produced within Atlasia in order to reduce tax evasion among larger companies.

I attempted to make this revenue neutral. If I had to take a guess it would cost around $10B.

That's okay. This would likely be offset by the increase in revenue received by the reduction of evasion anyway.

[Pragmatic Conservative]

Neveragain is my ammendment friendly?

[NeverAgain]

Neveragain is my ammendment friendly?

Oh, of course.

[Clark Kent]

I also have no real objections. This actually seems to be a general lowering of taxes, unless I'm missing something.

[NeverAgain]

As all questions have been answered we will vote on the final bill with 1184AZ's friendly amendment included.

48-HOUR PRINCIPLE VOTE:

Aye [ ]
Nay [ ]
Abstain[ ]

[Pragmatic Conservative]

Aye.

[NeverAgain]

Aye [ X ]

[Clyde1998]

Aye

[LLR]

Aye

[Classic Conservative]

Abstain

[Terry the Fat Shark]

AYE

[President of the great nation of 🏳️‍⚧️]

Aye

[NeverAgain]

By a vote of 6-0, 1 abstention, and  1 not voting, this passes. It now will go on to the Senate.