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1 Will McBride, Results of a Survey Measuring Business Tax Compliance Costs 1 (2024)

handle is hein.taxfoundation/rsoasy0001 and id is 1 raw text is: *1TAX FOUNDATION Results of a Survey Measuring Business Tax Compliance Costs Will McBride Vice President of Federal Tax Policy & Stephen J. Entin Fellow in Economics August 2024 Key Findings • Studies indicate that tax complexity and compliance costs are on the rise, with much of the compli- ance burden attributable to business income taxes. To better understand business tax compliance costs in light of recent tax and regulatory developments, we surveyed 21 large multinational enterpris- es (MNEs). • In total, as of tax year 2022 or 2023, the companies spent $537 million on income tax compliance, an average of $25.6 million per company, including $282 million for foreign income tax compliance, $194 million for federal income tax compliance, and $61 million for state and local income tax compliance. • While the sample size is small and limited to relatively large companies, evidence points to economies of scale in tax compliance costs, meaning smaller companies are disproportionately burdened and disadvantaged by tax complexity. • All companies indicated an increase in income tax complexity since 2017, with a weighted average increase in funds dedicated to compliance costs of 32 percent from 2017 to 2023. Most companies attributed compliance cost growth primarily to increasingly complicated international rules, including the Tax Cuts and Jobs Act (TCJA) reforms. Several companies also cited the new corporate alterna- tive minimum tax enacted as part of the Inflation Reduction Act, as well as the OECD's Pillar Two rules and the TCJA provision requiring research and development amortization. • On average, companies estimated that 43 percent of their federal income tax compliance costs were due to rules relating to foreign-source income. • Lawmakers should consider simplifying reforms, including reducing unnecessary information report- ing, especially for foreign operations, and eliminating one or more layers of minimum tax. More funda- mental reforms should also be considered, such as Estonia's much simpler distributed profits tax. The Tax Foundation is the world's leading nonpartisan tax policy 501 (c)(3) nonprofit. For over 80 years, our mission has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. TAX FOUNDATION 1325 G STREET, NW, SUITE 950, WASHINGTON, DC 20005 202-464-6200 1 taxfoundation.org