US may be forced to introduce VAT

Global Financial Strategy

Friday 18 February 2011 - by Nicola York

The US has the second highest corporation tax in the world, second only to Japan leading to commentators to suggest that a consumption tax should be introduced to relieve the burden on businesses.

Head of VAT at global accounting services TMF Group Richard Asquith says the introduction of a consumption tax such as VAT would lift the burden off businesses.

He says: "It would place an indebted US on an equal fiscal footing with competitor investment destinations such as Europe, India and China.

"Corporate US may not like too many federal spend cuts because of its close reliance on lucrative government contracts, and reform of the tax system may bring losses of much cherished tax loopholes. So the consumer may seem a safer target."

Japan is due to cut its rate below the US in April which will make the US the most expensive place for businesses. Asquith says that billions of dollars earned abroad by US corporates are being held offshore to avoid these taxes which is hampering the US tax take.

However, Asquith says: "But can the politicians sell it to the people? An austere choice."

The TMF Group is the leading independent global provider of management and accounting outsourced services.