Even though the IRS has been able to curb illegal tax evasion, the government continues to lose tax dollars. There have been multiple cases that have made headlines in the past few months about large companies using tax inversions. It’s common knowledge that companies use tax strategies to minimize their liability, and inversions allow them to reduce what they owe significantly.
Criticism of companies and accusations of tax evasion have done little to dissuade them from taking advantage of inversions. Many believe that fundamental changes to the tax code must be made. There’s no guarantee that a revised tax code will stop legal tax evasion, but removing incentives for these tactics might be an effective start.
Lowering the corporate tax rate is another proposed measure to reduce tax evasion. Companies that exploit tax inversions often cite the high tax rate as their prime motivation. The corporate tax rate currently stands at 35% and is the highest in the world.
There is still debate about what method will ultimately be the most effective in curbing legal tax invasion. No changes have been made as of yet, so determining an effective solution is speculation at best.