A study by EY found that high corporate tax rates may slow the rate of mergers and acquisitions in the United States. This may make it harder for business owners in Colorado to exit their companies or grow them over time. The study also found that taxation of international business income may give foreign companies an advantage when it comes to bidding for companies around the world.
It may also give foreign companies an advantage when it comes to bidding for American companies as well. Between 2014 and 2016, American companies were buyers in 16 percent of merger deals. However, they were acquired in 31 percent of merger deals. From 2004 to 2016, the U.S. lost $510 billion in global mergers and acquisitions, expressed as a net deficit. However, it is believed that a 25 percent corporate tax rate would have resulted in a net gain of $660 billion in assets.
Allowing companies to merge with others may offer several benefits to both a business and a country’s economy. Businesses may be able to enter new markets, develop new technology and have more money to reinvest back into the company. The ability to invest in foreign markets may help the American job market as well. It is estimated that there are 124 jobs added in the United States for every 100 jobs added overseas.
A business acquisition may have consequences for both the buyer and seller. It may be a good idea to consult with an attorney to better understand what those consequences may be. In some cases, there the acquisition could result in tax obligations to the target company’s owners.