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Lobbying for Federal Policy Change
EA Electronic Arts is a leading global interactive entertainment software company (Company Information, 2012). EA Electronic Arts develops, publishes, and distributes gaming software for Internet-connected consoles, personal computers, mobile phones, tablets, and social networks. They have a voluntary rating system to enable appropriate decision making for consumers and online privacy practices.
Federal fiscal policies affect EA Electronic Arts in respects to being a multinational organization responsible for foreign taxes on repatriated revenue from other countries and in respects to investments and investment credits it is allowed on a federal income tax return. The federal taxation rate is 39.2% for 2013 (Masters, 2012). U.S. have the highest tax rates in the world and coupled with complex tax subsidies and loopholes create a double flawed system. Multinational corporations are taxed on repatriated profits, after being taxed in other countries, which create burdens in business with compliance and planning costs.
This leaves EA Electronic Arts at a competitive disadvantage...
With other countries taxing only on domestic revenue, it invites EA Electronic Arts to leave foreign profits in other countries to lower the tax burden and leave more income in those countries for expansion and research and development efforts. The way the U.S. taxes affects EA's efforts in altering incentives that may distort economic behavior that is harmful for growth and the different tax regimes interact to distort appropriate allocation of international investment.
The high tax burdens limits immigration of skilled workers and the bureaucratic hurdles and inconsistencies handicaps EA when competing abroad. It distorts economic activity that disrupts resource allocation and efficiency results. Countries with less tax burdens will receive more of the investment dollars from EA, which in turn, will shrink capital away from workers and reduce wages in the higher tax regime of the U.S. EA would also be forced to re-characterize revenue to fall in the lower tax country or engage in internal transfer pricing strategies to reduce its tax burden.
Increasing the tax burden on EA…
Bibliography
Company Information. (2012). Retrieved from EA: http://www.ea.com/about
Masters, J. (2012, Apr 5). U.S. Corporate Tax Reform. Retrieved from Council on Foreign Relations: http://www.cfr.org/united-states/U.S.-corporate-tax-reform.p27860
Weil, D. (2008). Fiscal Policy. Retrieved from Library of Economics and Liberty: http://www.econlib.org/library/Enc/FiscalPolicy.html
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