Slashdot Mirror
GAO Reports Bailout and Tech Firms Love Tax Havens
theodp writes "Most of America's largest publicly traded corporations and Federal contractors — including those receiving billions of dollars from US taxpayers to finance their recovery — have set up offshore operations that could help them avoid paying US taxes, according to a GAO study released yesterday. Of the 100 largest public companies, 83 do business in tax-haven hot-spots like the Cayman Islands, Bermuda, and the British Virgin Islands. The report found that Citigroup, a recipient of $45B in bailout funds so far, has set up 427 subsidiaries in tax-haven countries, including 91 in Luxembourg, 90 in the Cayman Islands, and 35 in the British Virgin Islands. Household names on the lists from the tech sector include Apple (1 tax haven subsidiary), Cisco (38), Dell (29), HP (14), Intel (6), IBM (10), Microsoft (8), Motorola (4), and Oracle (77)."
Isn't the way this worded presuming guilt before innocence? Is doing business in a tax-haven country an automatic fail?
Shai Schticks:"You don't make peace with friends, you make peace with enemies"
Maybe if the US tax policy wasn't insanely out of line with the rest of the world, we wouldn't have this problem. Can you blame these companies for getting away?
Other countries charge income tax based on income earned in that country. The US charges income tax for income earned in any country. Where would you set up your company?
The FairTax would instantly make the US the world's tax haven.
I was against the bailout to begin with, but this is silly.
We give them money, then they are supposed to give it back?
Is this so Hank Paulson and some IRS agent can siphon some off to keep their jobs?
2nd highest in the industrialized world behind only Japan, as I recall the most recent article.
California has the highest or 2nd highest corp. (and other) taxes and has a net outflow of population compared to inflow.
You don't think taxes has something to do with economic decisions?
Think again.
Theoretically, their duty is to maximize return on investment for their stockholders, which means doing everything they can legally to minimize their tax liability. So if a tax shelter is legal, expect them to use it. (If it's not legal, expect them to try to pretend it's legal.)
Now, though, because in some cases their partial owner is the U.S. government, there is a conflict of interest between the interests of the government shareholder and the private shareholders.
--- Thousands are enslaved every day.
If the government is willing to give your tax dollars to companies that cheat the US, then the only appropriate response is to refuse to pay your taxes, and get as many people as possible to do the same.
I came here for a good argument
"there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible".
People and companies respond to incentives -- it is really surprising that the bizarre tax structure in the US pushes companies to form subsidiaries? Apparently it is, to either clueless or grandstanding politicians.
It's Linux, damnit! Pay no attention to renaming attempts by self-aggrandizing blowhards.
I really get frustrated when doublespeak is acceptable. It's like the question, "Are prisoners in Guantanamo being tortured?" If they weren't being tortured, they would be in New York state, sitting in the same jail cells we use for other suspected murderers. The fact that anyone is asking the question is mind-boggling.
Similarly, any company that sets up in a small country that they do no business in is obviously up to something. Otherwise they wouldn't be there.
American business is a game, where the winners are those who best exploit their workers, the tax code, government contracts, and the environment. The most important bit is not getting caught, and having a lot of lawyers if you do.
(I'd like to defuse any rebuttal by saying "Wal-Mart.")
They are receiving US GOVERNMENT funds taken from US TAXPAYERS and they're stashing them in foreign tax havens.
This is solely for the benefit of their executives. It will not help rebuild the US economy.
There needs to be a new law passed TODAY (drag Congress back in) that makes that practice illegal.
If you want "bailout" funds, you cannot use a foreign tax haven.
If you use a foreign tax haven, you cannot receive "bailout" funds.
Why should the US taxpayers finance some CEO's retirement villa in Monte Carlo while the economy drags?
The reason we got here: greed. We did nothing to address the underlying reason for the economic crisis, so is it surprising that greed continues?
Most of the major companies mentioned are not receiving any "rescue" from the government, and would not want or need any. Additionally, just because a business has set up a subsidiary in another country does not at all indicate that it is trying to avoid taxes. There are many reasons to set up subsidiaries, including requirements of the local governments. These are LEGAL subsidiaries, whether the purpose is for tax reasons or otherwise. The corporate tax rate is so high in the U.S. that some of these businesses (and others) feel compelled to take LEGAL action to lower their taxes to workable levels.
That they did nothing but deregulate for 10 years. The only reason some Republican politicians made political theater out of the bailout is because it was an easy way to appeal to pissed off citizens during an election year. Conservative economic policies have reigned supreme for a decade, and this mess is what we have to show for it. Don't feign surprise when blame is placed at the feet of the party that controlled the policies that lead to the mess.
Corporations and the power-elite have ripped the US taxpayers off to the tune of trillions of dollars over the past eight years alone. They always have, of course, but it has grown so rampant and egregious that we must put a stop to it once and for all. That means cracking down on offshoring and outsourcing by companies that come to the US taxpayer begging for hand-outs. It means life-sentences or worse for the white-collar criminals like Bernie Madoff who are responsible. It means revocation of corporate charters for companies that do wrong, to curb the complicity of Boards of Directors and middle-management in white-collar crime; there must be more cases like Arthur Andersen being put out of business by the government.
And to those who contend that if we hold companies and white-collar criminals responsible for their actions that capital will simply flee the country, I ask, where are they gonna go? Where can they go that the long arm of the American people cannot reach? Mars? Because the US can make life on earth very uncomfortable for any place else that arouses its ire by sheltering them.
Do what you can, with what you have, where you are.
If these companies didn't minimize their corporate taxes through any (legal) means possible, then they are doing a disservice to their shareholders. I would argue that they are doing a criminal disservice by not minimizing their taxes - they are not maximimizing the return on investment to their shareholders. Assuming that the money saved in taxes doesn't end up all being spent on hookers and blow for the top executives of a company, minimizing taxes helps the business grow. If you think paying taxes is such a great idea, go ahead, volunteer some extra money to the tax department, or avoid taking any of your legal deductions.
Additionally, feeding money into the top is a flawed strategy for the same reason that pushing a rope is a flawed strategy.
Banks issuing loans have updated their decision-making to account for the people who cannot repay their loans. By loaning $X to people with credit rating A and $Y to people with credit rating B, etc., they can maximize their profit. If you give the bank $10MM dollars, they now have more capital, but that does not change the fact that the maximum profit they believe they can achieve is to loan money according to their studies.
The additional money comes into play only when there are more people seeking loans than the bank has money. This is the definition of the credit crunch and why the companies want a "bailout". However, the Fed has lowered the federal funds rate (the rate at which it lends to banks) to a figure so low that the banks can borrow all the money they want with very little penalty. Giving money to banks does not encourage them to lend.
The root of the problem is that very nearly everything is overvalued, especially at the high end of the scale. Without a bailout, the monetary values of things would return to a sane level. This would allow more lower-middle and upper-middle-class people to afford ownership of companies (rescuing stock prices) and luxuries (improving consumer demand.) Or, in layman's terms: Nobody's buying things now because they're too expensive. The common-sense solution is to price them lower, while the current solution is to give people with money more money and hope they start buying things even though they're too expensive.
This would be (somewhat) more interesting if true.
Top end corporate tax rate is currently 35%. Source: wikipedia
Also, see other posts earlier about how no matter what you set the corporate tax rate at, corporations don't pay tax, people do. Increased taxes are simply an increased cost of doing business, and consumers will pay for it with increased prices. The biggest thing that imposing corporate taxes really does is it allows us to play hide the ball on taxes (hide the ball being something that uninformed people simply love). It increases taxes, but the check isn't cut by the people, so they're less likely to get up in arms about it.
Personally, I don't want multi-national corporations to exist, and I certainly wouldn't want them operating in my country.
You happen to be on the good end of the transaction, but for nearly every other country in the world which has nothing comparable to western wealth, they face exploitation and ecological destruction in return for bumping GDP that never filters down to support a middle class. If you were a subsistence farmer, your land is sold out from under you and you have the freedom to either work in a factory for 14 hours a day or starve. If you're a merchant in the city and a Wal-Mart opens up across the street, you have the freedom to shut your doors or go bankrupt. If you're a manufacturing exporter that has to play by the labor rules of your country and an American manufacturer who makes your product opens in a free trade zone, you have the freedom to sell your equipment off and close your doors, or almost assuredly fail against a company with more capital and less rules.
If Dell wants to operate in England or Bangladesh, let it form a corporation according to the rules and customs of that local community. Dell America can loan it as much startup capital as that local community allows, but Dell Bangladesh has to pay it back. This enables Dell to compete in that market, but not to destroy every local player through it's wealth advantage. The gaping hole in this scenario is that the government is usually bought off by Dell during negotiations, sometimes as crass bribery, other times as a loss in tax revenue. This also promotes healthy competition, but that a terrible phrase to a corporation trying to make a profit.
This is why I think a manufacturer should be able to license the sale of their products through a foreign company, but by and large, multinationals wield too much power to be tolerated. You'll notice that there are close to zero Free Trade Zones in wealthy western countries, because they simply wouldn't be allowed by the local community, for the same reasons they are hated in Latin America.
Okay, try this. You're constantly using infrastructure, and like it or not the government has been integral in the production of and modernization of many of the services (Police, fire department, a justice system, which however flawed at least exist) you enjoy as well as the protection of those services you enjoy (For all the ills of the military, and for all the idiocy of war, it is still a necessary evil to have at least a defensive force because the world does not run on rational discussion just yet). Taxes fund and ensure these programs and projects continue. Yes, taxes are also being and have been taken far beyond what they should be and at times are used improperly. But that's what the legal system is for, and while not perfect it's rarely one to sit back and overlook something big like government embezzlement when it's brought to the public.
Or, in a nutshell, the country is better off if everyone has money to spend.
It's not a coincidence that the countries that are hit way less by the current crisis are countries that have strong social networks and less money concentration in a few hands.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.