
A Tidal Wave of Corporate Migrants Seeking (Tax) Shelter - hvo
http://www.nytimes.com/2016/01/26/business/dealbook/a-tidal-wave-of-corporate-migrants-seeking-tax-shelter.html
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anonymousDan
The big problem is really the changes made to the US tax code during the
Clinton era and continued by Bush and Obama. In particular, the ability of US
companies to defer taxation on profits made abroad until they are repatriated.
Effectively, these profits sit in limbo since they aren't taxable by the
country in which they are 'made' (e.g Ireland) because they belong to a US
company. Companies then apply pressure on politicians to announce tax
amnesties that enable them to repatriate the profits with negligible tax.

Blaming all of the above on other countries by casting them as tax havens is a
complete charade. The US could fix this problem today on its own if it wanted
to. It just needs to get its house in order and e.g. get rid of the deferral
rules. The best article I've read on the subject was here:
[http://www.rollingstone.com/politics/news/the-biggest-tax-
sc...](http://www.rollingstone.com/politics/news/the-biggest-tax-scam-
ever-20140827)

Edit: Another good article on this is here:
[http://www.irisheconomy.ie/index.php/2016/01/22/upsetting-
th...](http://www.irisheconomy.ie/index.php/2016/01/22/upsetting-the-
applecart/#more-18193)

It's a little bit more technical as it's written by an Irish economist for an
audience of economists, but it's interesting in that it gives a good overview
of the situation from an Irish perspective.

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3pt14159
My understanding was that they _do_ pay tax in the country that the profits
are earned (unless of course the country has a 0% corporate tax rate), but
that they don't pay tax in the parent company until they repatriate.

If that is the case then I'm fine with it. I'm obviously not fine with tax
holidays / amnesties; but I consider that a different matter.

~~~
tomp
Because of different service and intellectual property agreements between
different subsidiaries of the company, the subsidiaries almost never generate
substancial (accounting) profit.

IMO, that's perfectly fair. E.g. Apple isn't generating profit in the UK; it's
generating _sales_ in the UK (which are taxed as all sales are), but most of
its _profit_ was generated in the US (design, research, strategy, innovation,
...). I think it's a huge problem that the US doesn't force companies to pay
tax on profits.

~~~
3pt14159
That isn't exactly _profit_. As long as things are sold at realistic prices
(ie, bulk iPhones are sold to the subsidiary at the same price they would be
sold to a domestic buyer) then it should all be fine. It generally works out
for multinationals headquartered in Canada, but granted there are far fewer
tax loopholes here.

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pnut
From the article, Johnson Controls is now a foreign-owned company, and
consequently: 1\. Cannot lobby the US government any more 2\. Is not eligible
for future bailouts 3\. Could rightly be slapped with $150M/year of import
duties to make a statement.

I have no problem with countries rewarding corporations for having substantive
physical presence within their borders, and for putting external competitors
at a financial disadvantage.

The US is a big place with an expensive military and social welfare program,
and millions upon millions of sweet, delicious consumers. The US already runs
a deficit, meaning there is insufficient tax revenue.

Corporations can make their own choices about whether the cost of doing
business is worth it or not, but nobody who is transacting money should be
exempt from making tax contributions to society, and certainly not at the
scale corporations are.

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Pxtl
The article identifies the problem, but the conclusion appears to be that we
should win the race to the bottom by going straight down. If the USA adopts
Ireland's tax code, what happens when another country goes even lower?

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Hermel
Another solution is to move from taxing profits to taxing consumption, i.e.
through VAT, and then enforce it even for virtual services. That way, Apple's
US tax would for example be proportional its US sales, which sounds fair.

~~~
Retric
That pushes people to buy goods and services overseas. AKA, why buy a US yacht
and pay an extra 20%.

The real solution IMO is to tax US companies for world wide profits and have
punitive taxes on foreign companies to keep US companies from pretending to
move offshore.

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ryandrake
If I as a US Citizen were to work overseas, I would owe US tax on the wages I
make outside the country. Why doesn't the same logic apply for a company that
makes profits overseas? This is a rhetorical question, obviously, we all know
why the system is stacked in favor of corporations.

~~~
seanmcdirmid
I am a US citizen who works overseas. You get to deduct your foreign tax
obligations on your US tax returns (if you don't go for the standard foreign
income earned deduction). Oh, well, some "taxes" aren't really taxes in the US
sense, like taxes on health insurance, or what about social security
contributions? And then there are weird situations where a US citizen goes on
a business trip in the US and is on the hook for both Chinese and US taxes.

Believe me, US citizens working abroad and US companies doing business abroad
suffer through similar pain when it comes time to file tax returns. Resolving
differences in two completely different systems is very hard.

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bill343
Wouldn't it be better to reign in these oligarchies that are hell bent on
controlling the world and pushing our (The U.S.) standard of living further
down? This myth of free trade is clouding the picture. 38% of all world trade
is inter-firm trade and should not be considered real "trade" anyway,
according to Alfred E. Eckes, former chairman of the U.S. International Trade
Commission.

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forinti
"Ultimately, the only way inversions will stop is when the corporate tax code
changes so it becomes more attractive for American companies to be American
companies."

Or it becomes too expensive for them to not be American companies. After all,
the US is a huge market that everyone wants a piece of.

~~~
gozur88
You already pay taxes for profits in the US market. What they're wrangling
over is paying US taxes for income generated in other markets.

I'm not sure why any corporation would want to be headquartered in the US.

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CaptSpify
Then why are so many companies headquartered here? I'm legitimately asking.

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gozur88
It may just be that they started as fully US companies. You wouldn't
incorporate in Ireland for your two person US garage company. Particularly in,
say, 1950.

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FussyZeus
Why is it corporations only pay taxes in one country anyway? That seems
paradoxical, if they're selling goods in multiple countries then they must be
using the infrastructure of all those countries, and isn't that one of the big
reasons we have taxes in the first place?

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cowsandmilk
> Why is it corporations only pay taxes in one country anyway?

They don't. They pay taxes in pretty much every country where they operate.
Pfizer may move to Ireland, but they'll still pay US taxes on their operations
in the US.

~~~
FussyZeus
Well yeah but clearly the tax savings are enough to justify the expense of the
legal time behind it and the logistics/admin overhead of the move, they
wouldn't be doing it if it left them in the red.

~~~
cowsandmilk
Sort of, these companies generally have not been bringing cash back to the US
any way, so they haven't been paying US taxes on their non-US money anyway.

What moving to Ireland will allow Pfizer to do is pay dividends out of their
non-US cash without paying US taxes.

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cowsandmilk
Why do we care if a company is nominally American or not? It just seems odd.
Nominally being Irish or Swiss does not mean a majority of your employees are
in those countries.

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jbob2000
Who will these companies hire when they move to Ireland? There was a mass
emigration last year where, at its peak, 10,000 people were leaving per week.
It sucks living in a country that is rainy and overcast most of the year, how
can you convince someone from a sunny and warm state to move there?

I just feel like something is missing when I hear things like "X company is
moving 500 jobs to Ireland". Where the hell are they finding these people?
They country has a population of 6.3mil!

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um_ya
Keep in mind, their headquarters is located in Ireland but they can still do
operations in the United States. This is a strategic move to avoid U.S. taxes
on profits made outside the country. The United States is one of the only
countries in the world that taxes outside its boarders. They will save on
foreign profits, but they will still pay taxes on their U.S. income... I find
it ironic that our politicians promise jobs, but aren't willing to reduce
taxes and regulation on businesses. Then, they get upset when businesses want
to leave. What's their solution to fix this? "tax them more for trying to
leave" -__-

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hibikir
But corporate US taxes are on profits, so if the US only taxed inside the
country, you can lower your US taxes by engineering your organization such
that you can claim US operations pay your business unit that resides in a
different country amounts that are similar to your US profits.

So imagine a company that sell 500m of a product in the US and today has costs
of $400, with $100m in profit. If they have to pay the business unit in
Ireland $90m for their voodoo design expertise, then the company still has
100m in profit, but now only 10m will be taxed in the US.

It's not as if consumption taxes lack loopholes themselves: In my own case, I
spend about 20% of my earnings, with the rest going to taxes and savings (I am
aiming for early retirement). So why would I spend my retirement years at a
place wth a high consumption tax? The one way around that would be to start
taxing money transfers across borders, and we all know that isn't happening.

