Respectfully submitted by Lawrence E. Rafferty (rafflaw)- Weekend Contributor
We have read in recent weeks and months about the continued movement of corporate profits by US corporations to their overseas subsidiaries in order to avoid paying taxes here on those profits. Walgreens almost went that route recently but they decided to not do what is called an “inversion” to avoid taxes. At least for now.
You may be wondering what the picture is all about. The building in the attached photo is one of the main buildings on the Microsoft campus in Redmond, Washington. And Microsoft has also been busy working on their taxes.
Microsoft, made news recently, by admitting that they have stashed $92 Billion dollars overseas in an attempt to avoid paying $29 Billions in taxes! While Microsoft has not officially “inverted” its profits, they have done the next best thing.
Many large US corporations have complained that they have to move profits overseas because they cannot be competitive in the world market without a lower tax base. Just how true is that claim?
“At the New York Times’ Dealbook Andrew Ross Sorkin looks at this issue in “Tax Burden in U.S. Not as Heavy as It Looks, Report Says.” Sorkin looks at a paper, “‘Competitiveness’ Has Nothing To Do With it,” by Edward D. Kleinbard. Kleinbard is a professor at the University of Southern California and used to be chief of staff to the Congressional Joint Committee on Taxation. Sorkin quotes Kleinbard:
“Despite the claims of corporate apologists, international business ‘competitiveness’ has nothing to do with the reasons for these deals,” he [Kleinbard] writes. “Whether one measures effective marginal or overall tax rates, sophisticated U.S. multinational firms are burdened by tax rates that are the envy of their international peers.”
Our tax rates are “the envy of their international peers?” Sorkin explains:
Professor Kleinbard contends that most United States multinational companies don’t pay anywhere near 35 percent. Companies paid, on average, 12.6 percent, according to the Government Accountability Office, which last measured it in 2010, by deliberately stashing piles of cash abroad.” Crooks and Liars
If the large corporations are really only paying, on the average, 12.6% on their profits, why would they be claiming that can’t be competitive? The only reason I can come up with is good old-fashioned Greed. Of course, it can be argued that these corporations only answer to what their shareholders demand, better performance on their stock earnings. Do you believe that argument?
Just how does a large multinational corporation like Microsoft go about moving their profits overseas?
“Because Microsoft has not declared itself a subsidiary of a foreign company, the firm has not technically engaged in an inversion. However, according to a 2012 U.S. Senate investigation, the company has in recent years used its offshore subsidiaries to substantially reduce its tax bills.
That probe uncovered details of how those subsidiaries are used. In its report, the Senate’s Permanent Subcommittee on Investigations described what it called Microsoft’s “complex web of interrelated foreign entities to facilitate international sales and reduce U.S. and foreign tax.” The panel’s report noted that “despite the [company’s] research largely occurring in the United States and generating U.S. tax credits, profit rights to the intellectual property are largely located in foreign tax havens.” The report discovered that through those tax havens, “Microsoft was able to shift offshore nearly $21 billion (in a 3-year period), or almost half of its U.S. retail sales net revenue, saving up to $4.5 billion in taxes on goods sold in the United States, or just over $4 million in U.S. taxes each day.”
U.S. Sen. Carl Levin, D-Mich., said at the time: “Microsoft U.S. avoids U.S. taxes on 47 cents of each dollar of sales revenue it receives from selling its own products right here in this country. The product is developed here. It is sold here, to customers here. And yet Microsoft pays no taxes here on nearly half the income.” ‘ Reader Supported News
Whether you are talking about an inversion which requires the US corporation to claim that its base of operations is actually no longer in the United States, or deferral tactics like the ones used by Microsoft, the bottom line is that many large US multinational corporations have avoided paying billions in taxes. While Microsoft has stashed $92 billion overseas, they are not the worst offender.
“Apple and General Electric, which also employ offshore subsidiaries, are the only U.S.-based companies that have more money offshore than Microsoft, according to data compiled by Citizens for Tax Justice. In all, a May report by CTJ found that “American Fortune 500 corporations are likely saving about $550 billion by holding nearly $2 trillion of ‘permanently reinvested’ profits offshore.” The report also found that “28 these corporations reveal that they have paid an income tax rate of 10 percent or less to the governments of the countries where these profits are officially held, indicating that most of these profits are likely in offshore tax havens.” Reader Supported News
It seems that it is fair game for US corporations to hide from their duty as “citizens” of the United States by using legal tactics that actually harm the Treasury of the United States, while at the same time taking advantage of the infrastructure created by the state and Federal entities. I wonder if non-corporate citizens can use the same inversion tactic to avoid paying income taxes?
Maybe we should all incorporate and sell out to a foreign “corporation” and invert our income to the home country of that foreign “owner’. Sounds crazy, but maybe that is the next step. Maybe we can start a whole new cottage industry of foreign “corporations” designed to house individual Americans income to elude the taxman here in the United States. On second thought, maybe not! However, just how much do these corporate inversions and deferrals cost the rest of us taxpayers?
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Moving profits of course suggests ‘transfer pricing’ which itself is currently illegal. I’m not going to say it doesn’t happen, it can even happen on an interstate basis. The theory is utilize transfer pricing between different business units such that profits tend to gravitate towards low tax jurisdictions.
https://twitter.com/mtaibbi/statuses/499630804252000257
Obama: “My attitude is I don’t care if it’s legal; it’s wrong!” Well that’s comforting.
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“A Fatal Tendency of Mankind
Self-preservation and self-development are common aspirations among all people. And if everyone enjoyed the unrestricted use of his faculties and the free disposition of the fruits of his labor, social progress would be ceaseless, uninterrupted, and unfailing.
But there is also another tendency that is common among people. When they can, they wish to live and prosper at the expense of others. This is no rash accusation. Nor does it come from a gloomy and uncharitable spirit. The annals of history bear witness to the truth of it: the incessant wars, mass migrations, religious persecutions, universal slavery, dishonesty in commerce, and monopolies. This fatal desire has its origin in the very nature of man — in that primitive, universal, and insuppressible instinct that impels him to satisfy his desires with the least possible pain.” Frederic Bastiat
http://bastiat.org/en/the_law.html#SECTION_G007
What will it take to make Stiglitz’s plan be put into motion?
Is it time to restart Occupy protests in a HUGE way? What is the solution to such an overwhelming system of unfairness?
My Bill Moyers Tweet is hung up in a branch somewhere…
It needs to be set free, perhaps?
Is this a variation on the corporation is a person. My money is a person and it’s living in another country.
Max
Thanks for the links! That is bad news about BK’s.
Is it tax dodging when it’s done legally?
Joseph E. Stiglitz: Let’s Stop Subsidizing Tax Dodgers
https://twitter.com/BillMoyersHQ/statuses/503524676992516096
Burger King in Talks to Buy Tim Hortons in Canada Tax Deal
Tie-Up Would Be Structured as Tax Inversion With a Combined Market Value of About $18 Billion
http://online.wsj.com/news/article_email/burger-king-in-talks-to-buy-tim-hortons-1408924294-lMyQjAxMTA0MDIwNDEyNDQyWj
Paul,
I can see what you mean. The average member of the military actively works to honor the oath but I’m beginning to wonder what other profession can say the same thing. The effect is that we have become a nation that rules by majority and not by the law. Good luck putting that toothpaste back in the tube.
Paul,
A little defensive are we…. If I recall…. Before Nixon died….. He gave his assent to people running…. Like the godfather mentality the GOP tea party bunch revel in…. You all deserve Palin….. She represents all the values that you all espouse…. Teen pregnancy, resigning from office because of corruption….. Daughter uncontrollable…. Must be the trophy head of the GOP…. And mistress of the tea party…..
Ya think McCain has any use for her….
AY – I call McCain’s office periodically to remind him not to run again. The state needs someone it can depend on. As best I can tell the Tea Party and the GOP are not hand-in-glove. They seem to be more hand-at-throat. I am, and have been for many years, part of the largest party in Arizona, the Independents. We outnumber either party. The Democrats are so scared of us that they are electing their state wide offices in party caucus rather then having a primary, which is open to Independents. On the other hand, the Republicans have been vigorous in trying to attract Independent voters for their candidates. Tuesday is primary day here.
@swm
I think you are confusing Yellow Dog Democrats with Blue Dog Democrats. From Wiki:
The term “Blue Dog Democrat” is credited to Texas Democratic Rep. Pete Geren (who later joined the Bush Administration). Geren opined that the members had been “choked blue” by extreme Democrats from the Left.[12] It is related to the political term “Yellow Dog Democrat,” a reference to southern Democrats said to be so loyal they would even vote for a yellow dog if it were labeled Democrat.
The term is also a reference to the “Blue Dog” paintings of Cajun artist George Rodrigue of Lafayette, Louisiana, as the original members of the coalition would regularly meet in the offices of Louisiana representatives Billy Tauzin and Jimmy Hayes, both of whom later joined the Republican Party; both had Rodrigue’s paintings on their walls.[13][14]
An additional explanation for the term cited by members is “when dogs are not let into the house, they stay outside in the cold and turn blue,” a reference to the Blue Dogs’ belief they had been left out of a party that they believed had shifted to the political left.
Squeeky Fromm
Girl Reporter
Some corporations elect not to pay dividends for those reasons, instead retaining the money within the company. These monies held in cash or some types of investment add to the value of the company either by actual or market valuation. It makes the stock attractive to certain investors who have high income taxes and would rather deal with lower capital gains taxes. The attraction can have an effect of boosting the demand for the stock and hence a bit higher income. Plus, it alleviates the cost of paying dividends.
It is not always the strategy of various companies but this is an option.
“People in the military already take an oath. An added Oath Keepers oath is not necessary.”
Annie,
As this blog is proving more and more each day, taking an oath for one’s profession is no guarantee you understand and more importantly agree with the principles behind that oath. Oath Keepers connects the person with the principles in a way that gives the oath greater meaning. We need to make every effort to connect people with an oath, not the opposite.
“Why was the group Oath Keepers formed so soon after Obama became president?”
I’ll try to answer this again.
Why did this nation declare independence in 1776? Why not 1763 or 1775?
“…experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.”
In short, they were formed as a result of an awakening to a 20th and 21st century long train of abuses of government; one that no longer honors the oath of office while being defended by men and women sacrificing their own lives and fortunes to honor theirs.
We exist as an anchor for those principles on which our nation was founded and as an outspoken reminder to those individuals required to take an oath of office that we will not support their dishonor to that oath, regardless of party or affiliation.
Meet Satya Nadella, 46 year old Microsoft CEO
Scott Supak, I have deleted a comment as a violation of our civility rule.
Don’t stay away too long Scott!