Corporate Tax Cuts Not Expected… Yet

Nearly half of the senior corporate executives polled in a recent survey by the KPMG accounting firm stated that they don’t believe corporate tax rates will be reformed …

Nearly half of the senior corporate executives polled in a recent survey by the KPMG accounting firm stated that they don’t believe corporate tax rates will be reformed this year. Most respondents also noted that they don’t expect to be involved in shaping the outcome of the ongoing tax debate. Read more about this in the full article from Blue MauMau.

Corporate executives do not expect major tax cuts for now. Almost half of senior executives polled do not anticipate reform of corporate tax rates until at least after 2012, according to a survey by accounting firm KPMG. Among those anticipating future reform, most respondents predict a relatively modest decline in rates to between 30 and 34 percent.

Moreover, according to the KPMG survey by its Tax Governance Institute of more than 1400 business leaders conducted in March 2011, about one-third of respondents (34 percent) expect that any tax rate reduction would likely be offset by reducing or eliminating the benefit of three key corporate tax provisions — the domestic manufacturing deduction, accelerated depreciation, and the use of foreign tax credits.

Commenting on the survey results, Hank Gutman, KPMG tax principal and director of the Tax Governance Institute and former chief of staff of the U.S. Congressional Joint Committee on Taxation, said:  "As many of the survey respondents believe, it is our view that major tax reform will not happen quickly. If rates are in fact lowered and preferences reduced or eliminated, we will see an outcome with winners and losers.  This will occur because the use of preferences is not uniform across all businesses. Companies need to stay nimble and ensure they are in a position to respond to what develops."

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"The issues today are very complex and much different than the economic and fiscal conditions that contributed to the Tax Reform Act of 1986," Gutman added. "Four major variables are expected to drive the current debate — the government’s fiscal condition, the substantive reform proposals, the economic effects of the proposals, and the politics of enacting legislation — and the discussion is likely to be a lively and complicated one."

According to the survey, 48 percent of respondents predicted no change from the current corporate rate of 35 percent until sometime after 2012. Some 29 percent of respondents predicted that the tax rate would likely drop to between 32 and 34 percent, while another 29 percent said the reduction would be between 30 and 31 percent.

When asked if a possible rate reduction would be offset by reducing or eliminating the benefit of certain tax provisions:

Thirty-four percent said they would expect that the domestic manufacturing deduction, accelerated depreciation, and the use of foreign tax credits would all be reduced or eliminated.

Some 15 percent expect that only the domestic manufacturing deduction and accelerated depreciation would provide the offset.

The survey also revealed that 63 percent of respondents do not plan to be actively involved in efforts to shape the outcome of the corporate tax debate. Of the 19 percent who expect to be active, 11 percent would be involved through a trade group, 10 percent individually, and 9 percent via a combination of a legislative consultant, a trade association, and personal efforts.

This article was republished with permission from Blue MauMau.

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