Battle Lines Being Drawn As Obama Plans To Curb Tax Avoidance 1505
theodp writes "Barack Obama has squared up for a major battle with big business, announcing a crackdown on offshore tax avoidance and evasion by US multinationals that's designed to raise $210B and make it easier for companies to create 'good jobs here at home'. Obama cited a building in the Cayman Islands where more than 18,000 US companies are housed: 'Either this is the biggest building in the world or it is the biggest tax scam in the world,' he said. 'I think the American people know which it is.' The administration says that more than a third of US foreign profits in 2003 came from Bermuda, the Netherlands and Ireland, and noted US companies paid an effective tax rate of just 2.3% on the $700bn they earned in foreign profits in 2004. Among tech companies affected by the crackdown, Microsoft joined 200 companies who signed a letter complaining that the proposed tax changes would put them at a disadvantage with their rivals, Cisco moaned that the measures 'would adversely impact our ability to invest and grow our business in the US,' and Google declined to comment for the time being."
Am I cynical? (Score:5, Informative)
Am I cynical to think that these businesses will just raise the cost of their goods to cover the additional tax, thus making consumers the ones to pick up this $210 billion tab? I somehow doubt that publicly traded companies are excited to see the earnings hit show up in their quarterly statements.
Re:w00t! (Score:5, Informative)
You know the EU-Commissioner for financial regulation is Irish, he was the architect of the Irish tax evasion wonder for high tech companies.
When you buy software from Microsoft in Europe it comes from MIOL (Microsoft Ireland Operations Limited). Ireland is a gigantic tax evasion scam for American software companies which drain European markets including government customers without contributions to our social welfare states.
As one Hungarian said to Ballmer: Give us our money back!
The Netherlands tax haven?? (Score:4, Informative)
We pay over 30% corporate tax. [wikipedia.org] and compulsory health insurance for our personnel.
Re:two ways to solve the tax "scam" (Score:3, Informative)
Re:w00t! (Score:1, Informative)
No he paid the taxes that were properly due in his country and simply expected Microsoft to do the same. How odd.
Re:Go Obama (Score:1, Informative)
he seems like he is honestly trying to run the government in a fiscally responsible way.
From this article: http://news.bbc.co.uk/2/hi/business/7910335.stm
"He has predicted the budget deficit for the current year will be $1.75tn, which is 12.3% of annual output and the biggest since World War II. "
Re:Am I cynical? (Score:5, Informative)
They'll try. They'll be faced with the other side of the equation, though: as prices go up, demand drops. So they'll have to decide how much they can afford to lose in sales.
To me it only seems fair. As a private citizen I don't get out of paying taxes just because my income was outside the US. I have to file and pay taxes on that income, the only thing I get is a credit against US taxes due for the amount of taxes I paid on that income in that foreign country. The corporations are mad because they had a sweet deal going: don't pay US taxes on foreign income, and make a deal to avoid paying foreign taxes on that same income because they're a US company bringing all those jobs to the foreign country. And now Obama's looking to ruin their nice little sweetheart deal.
Re:two ways to solve the tax "scam" (Score:3, Informative)
Yes, when people talk about cutting wasteful spending, we are referring to fire departments and roads. Which is why we hated the recent stimulus bill. It spent so much on roads and fire departments.
Sarcasm aside, even according to recovery.gov, twice as much was spent on schools than on roads. I didn't see fire departments listed.
Sorry, the fire department thing kinda irked me, because in California there's a special election that's pretty much all about more school spending, but ads for Vote-Yes-On-1X always mention "policemen" and "firefighters." Instead of "think of the children" it's "think of the firefighters."
By the way. Those that want lower taxes are not "anti-tax." We're anti "oops we spent too much, raise taxes" instead of "oops we spent too much, cut spending," anti unfair taxing (I may just be stupid, simple, and old fashioned, but flat taxing sounds fair to me), etc.
Re:two ways to solve the tax "scam" (Score:5, Informative)
Usually when the government lowers taxes they see an increase in tax revenue because of increased spending since taxes are lower
No. This is the often-marketed Supply Side tax cut effect that is, as shown here, incorrect.
The correct statement is that a cut in taxes does not reduce tax revenues dollar for dollar. This is also over the long-term, like 30+ years. For instance, the Kennedy era tax cuts eventually reduced tax revenue by 70% of expected receipt.
While I do not have direct citations back this up, it has been the recent trend that the sellers of Supply Side Tax cuts to the Republican party have had to claw back the extreme claims. I think Bruce Bartlett has spent recent history setting the record straight. You can also find more information among Krugman's public articles.
Re:Not a tax scam (Score:4, Informative)
Geithner did not make a mistake, he's a tax cheat.
Re:The Netherlands tax haven?? (Score:1, Informative)
True for domestic companies, but not for international companies.
The Netherlands: A Tax Haven for multinationals [somo.nl]
I block the Politics section for a reason (Score:5, Informative)
I block the Politics section for a reason
But Slashdot seems more and more obsessed with ramming the Politics section down everyone's throats.
First I had to block the Your Rights Online section because it morphed into Your Rights COMMA On-Line.
Then Science, because Slashdot turned it into a Creationists/Stem Cell debate section
Now, 3 stories in the last few weeks have leaked out of Politics (where they rightly belong) and on to the front page/News
Dear Self-Important Editors:
You (yeah you) created sections and the ability to block sections for a reason.
Maybe you should show some self-restraint and put you Damn Fucking soap boxes back in their proper sections.
I and many others have no desire to be subjected to stories, the main point of which seems to be running screeds on how "Jews control the GOP" or how "Ron Paul was right".
Your inability to observe the standards of conduct you yourself created shows an utter lack of class.
Re:two ways to solve the tax "scam" (Score:4, Informative)
Paying farmers not to grow food also means some land will be left in a more natural state that can help ease flooding problems.
It may seem counter-intuitive, but giving them some money for not using all their land does have its reasons.
As more fields are sloped and tiled, and new land is converted to farmable land, there's less and less to slow the water from the spring melt down.
Combine that with developers developing former flood plains for McMansions...
A simpler tax system with no tax dodges. (Score:2, Informative)
Set up the tax system for business based on two things. Tax how much of their company they have in the U.S. (the portion of their company that is in the U.S. uses our infrastructure and government to its benefit), and tax how much profit they make from the U.S. (you are making money off our people and country so we get to tax that). Do that, and that's the end of any tax loop holes. If they aren't in our country or make money from our country we don't care.
Re:Where is the crossing line for lowering tax rat (Score:5, Informative)
One: The Congressional Budget Office issued a report to that effect in 2005 (when the US federal government was entirely Republican-run). http://www.cbo.gov/ftpdocs/69xx/doc6908/12-01-10PercentTaxCut.pdf [cbo.gov]
Two: Nobel prize laureate James Tobin, for another. In 1992 he wrote that "[t]he 'Laffer Curve' idea that tax cuts would actually increase revenues turned out to deserve the ridicule with which sober economists had greeted it in 1981."
And three, economist Paul Pecorino calculated in 1995 that peak revenue was generated at a tax rate of around 65%, much higher than current tax rates in the US.
Re:Not a tax scam (Score:5, Informative)
And guess who winds up paying for the taxes companies pay? Yep, the people that buy the products. Taxing a company is still taxing the people, just adding another layer onto taxation.
That's not to say corporate income shouldn't be taxed; that may be the most efficient means to collect the needed revenue. But let's not kid ourselves by thinking that taxing companies means the "evil rich" will be paying taxes instead of "the common people".
Comment removed (Score:5, Informative)
Re:Where is the crossing line for lowering tax rat (Score:5, Informative)
I think you probably couldn't name 3.
Most studies of hard economics relating to tax policy point out that we're substantially below the "optimal rate". Most estimations put that between 40% and 50%.
Papers that draw this conclusion, or at least have suggestions in this direction include:
Mirrlees, 1978
Seade, 1977
Tuomala, 1990
Sandmo, 1977
Wilson, 1993
Ballard and Fullerton, 1992
Dhalby, 1998
Stern, 1976
Piketty, 1997
Roberts, 2000
Atkinson, 1990
Kanbur, 1994
However, most are also very clear in stating that optimizing revenue is NOT necessarily the best rate. It is important to weigh social needs and competitiveness with alternative locales, population happiness, etc.
Most of the world has adopted top marginal rates just below 50%. The US was in that category until the 1980s. Upon reducing that rate, the US began leading all industrialized countries in terms of deficit-to-GDP ratios. While most economists point out that this is likely a combined result of increased spending, rather than tax cuts)... however, tax cuts that occur below the 35% range have never really been shown to increase revenue... In fact, most models suggest the opposite.
If you can cite ANY papers that have specifically defined models that account for opportunity costs, economic elasticity and a cohesive mathematical model, please point them out as I'm not aware of anything in that camp isn't ideological punditry from the Cato Institute or the Heritage Foundation or other similar politically motivated organizations.
Thanks!
Re:Not a tax scam (Score:4, Informative)
How is that any different?
Fine I'll get everybody on your block to vote that you are not making efficient use of your house.
That land will now be redistributed more efficiently.
There is effectively no difference between very high levels of taxation and a system of pure wealth redistribution.
Re:two ways to solve the tax "scam" (Score:3, Informative)
Except that you're laundering all of that money through a notoriously inefficient, pork-laden, sinkhole that kills its efficient allocation.
"Efficient allocation" is not the problem with the GP's theory. If the GP is correct, none of us need to work! We can all sit back while the govt. just spends money (don't ask him where the govt get the money and what the consequences are).
Evey effing moron is now a Keynesian - nothing too surprising there.
I gotta call bullshit on corporate threats (Score:3, Informative)
They claim it will cause higher prices and more unemployment? GET REAL. The spoiled brat answer to having to pay their fair share of taxes is to make less money so they can pay less taxes? When they are done with their threats of throwing a tantrum, the real world suggests they will continue trying to maximize their profits and increasing their bonuses. Companies still believe in the notion that if they aren't growing, then they are dying. Ignoring the fact that they exist on a finite world and the fact that nearly everything has a saturation point, they aren't about to willingly make less money because they suddenly have to budget taxes into their plans.
Re:And of course we can expect the legislation to. (Score:1, Informative)
Re:Easy solution for multinationals: move HQ (Score:3, Informative)
It's "toe the line."
Like, there's a line drawn on the ground, and you need to stand with your toes right on it. The line is "where I want you to be," and toeing it is compliance.
Re:Not a tax scam (Score:5, Informative)
Re:Uhhhh.... (Score:3, Informative)
Re:two ways to solve the tax "scam" (Score:3, Informative)
No it cant be done, wars are expensive, not just in terms of raw dollars but in production, resources, morale and human lives. Morale and human lives will cost more in terms of dollars then war material, compare the cost of a modern fighter jet to the cost of training a pilot. 1 dead soldier costs more then most career soldiers will cost in a lifetime of army service.
The problem you have here is security, you need to make sure that your lines of supply are secure, this causes the cost to rise exponentially. For example the fuel used in the Iraq war must be shipped from the US rather then contracting this out to a local supplier. When the US was paying US$9 per gallon the military was paying over US$100 per gallon. The reason for this is that it would cost more to ensure that the local supplier was meeting demand and ensuring that the fuel was not tampered with.
This will never happen as it would require giving US state secrets to private companies who could sell that technology to foreign powers. Remember that the military already subcontracts production of many of these things. Many of the frigates used in the US Navy were built in Australia, jet and diesel engines or components are bought off the shelf, many vehicles are "militarised" of established civilian vehicles. But all this is pointless as the need for security will always override savings in the military.
Re:*WOOSH* (Score:1, Informative)
Bullshit. The complexity of the tax code is of specific benefit to large corporations. They can trivially afford people who's sole purpose is exploiting them to their fullest extent. Complexity of the tax code is only a burden on small business and personal income tax, who coincidentally are the least likely to be able to offset their tax savings with an accounting department. Consider that the simplest possible tax, a flat tax, would result in corporations paying far more than they do now even with the added expense of a few accountants that they currently pay.
If you are still unconvinced, I invite you to sit down and read a tax code book and see just how many pages are applicable to tax savings for small business and personal income tax as compared to corporate income tax.
Re:two ways to solve the tax "scam" (Score:3, Informative)
See Venezuela for an example.
Ok so I did:
http://en.wikipedia.org/wiki/Venezuela#Economy [wikipedia.org]
Their gdp is going up, unemployment is going down, inflation is going down.
Maybe I'm not drinking the right brand of kool aid?
Re:Not a tax scam (Score:4, Informative)
Re:Corporations (Score:3, Informative)
Fascism simply means "government control over private companies". Does that ring any bells? Chrysler. AIG. Hundreds of banks who received bailout, and are now controlled by the treasury secretary.
Re:Not a tax scam (Score:5, Informative)
I think a number of your assumptions are incorrect ...
The money used to pay off expenses, pay employees, buy/rent offices and equipment is not taxed (there might be payroll and income tax on each employee, there may be state taxes of various sorts but the federal government will not treat these expenditures as taxable income).
Similarly, investments in expansion are likewise not taxed (as long as these are essentially along the lines of the above)
It is only income the companies hoard or distribute as dividends that is taxed.
The funds distributed as dividends are not subject to double taxation. Indeed, as per the Jobs and Growth Tax Relief Reconciliation Act of 2003, dividends are taxed as capital gains not as income so it's not even 'single dipping', never mind 'double dipping'.
Re:Not a tax scam (Score:2, Informative)
there's no corporate income tax for revenues that are made outside of Delaware.
That's not entirely true. Delaware Corporations who do not conduct business in Delaware are not required to file a Delaware Corporate Income Tax Return. However, if you are a Delaware corporation (which I am), you are still subject to gross receipts tax.
As a single-member LLC which provides consulting services, I am required to pay a quarterly GRT of 0.384% of all gross receipts over $240,000 USD. Needless to say, I haven't yet paid a dime in GRT. However, I am assessed a flat annual franchise tax of $250 and $85/yr for a business license.
Another major reason Delaware is popular with businesses (aside from the low taxes and minimal disclosure laws) is that Delaware exempts holding companies based in Delaware from taxation on their subsidiaries.
Re:Corporations (Score:3, Informative)
Loathe as I am to bring Wikipedia into the conversation, their definition begins: "Fascism is a radical and authoritarian nationalist political ideology. Fascism is also a corporatist economic ideology."
So corporatism, while necessary to Fascism, is listed as only a secondary characteristic.
Re:Not a tax scam (Score:3, Informative)
First, they don't pay Zero taxes. They are missing paying taxes on profits made in foreign countries. All their US born profits are taxed like normal.
The next item of importance is that they employ many people who pay taxes plus you have property taxes, permits for operations, and "other" taxes on state and local levels that are raised because of their presence here.
Finally, It's already against the law to hide revenue by moving it off shore for the purpose of avoiding tax liabilities. What this means is that all US generated monies will be taxed before it's allowed to leave the country. The major difference is going to be all the jobs lost. Suppose a company makes a 10 million a year profit in their US division and in order to do that, they pay salaries to 1000 people totaling plus bonuses, health care and so on. Lets assume those 1000 people earn an average salary of $80,000 a year. That's roughly $80,000,000 (80 mill) a year in total salaries that will likely have an effective tax at around 15-20% on the federal income tax alone (not including SS or employers portions of employment taxes). But those 1000 people will also be paying property taxes, purchasing things that keep other businesses open, and so on and so on.
So on the surface, you would be losing the federal income tax on the 10 million US profits plus the income taxes on the 80 mill total for employee salaries, then figure the SS taxes, gas taxes for transportation, local taxes and fees and so on. Plus, those 1000 people would now be unemployed or displace other workers to create almost the same scenario that would end up costing the government money for support services. It won't be a pretty picture and it looks better as it is..
Re:Not a tax scam (Score:3, Informative)
If you had owed money after the audit, you still probably would not have been criminally prosecuted, unless the deficiency was willful. If you honestly believed you filled out your tax returns properly, you haven't done anything criminal, yet. However, willful ignorance on tax returns is not a defense.
Re:starting with Reagan-- (Score:3, Informative)
Second, not only did taxes paid by the rich increase as a percent of total taxes paid [photobucket.com], income distribution shifted from the rich to the poor [photobucket.com] under George W. Bush.
Sorry, but the facts just don't jibe with your diatribe. Your racist class warfare claims to the contrary.
Oh, and Obama's solution to paying off the debt? More than doubling the debt that took 230+ years to accumulate, and do it in under a decade. Nothing like tripling the deficit [photobucket.com] his first year out, and planning for ever-increasing deficits after next year (all of which are greater than ANY deficit under George W. Bush).
Re:two ways to solve the tax "scam" (Score:2, Informative)
You realize that the IRS accounting rules for taxation are completely different than the Account Standards Board's requirements for corporate reporting right?
The IRS rules are codified in the laws written by the US Congress, about 70,000+ pages of legalese that may or may not have anything to do with proper accounting of assets and earnings. While the Financial Accounting Standards Board has a set of accounting rules that are aimed at showing the true state of the company's economic health.
In fact, a company will have more than two sets of books, as European and Asian countries have their OWN accounting boards with their OWN set of accounting rules and their OWN tax laws with their OWN reporting requirements. And each of these books may show different levels of profitability.
Re:two ways to solve the tax "scam" (Score:2, Informative)
A small percentage of a lot of money moving around produces a lot more revenue than a large percentage of a receeding economy that you're busy trying to inefficiently nationalize into oblivion. See Venezuela for an example.
Do you mean the Venezuela where unemployment dropped from 17% to 7%? Where poverty dropped from 55% to 40% and absolute poverty halved in the last 10 years? The Venezuela that still has an estimated growth of 2% in 2009, despite the crisis? (all the numbers are from the german Wikipedia)
Re:Not a tax scam (Score:3, Informative)
So.. you weren't allowed to vote in the 2008 election? Seems to me that Americans today do in fact get taxed, while being represented (provided they actually voted).
If they leave then we can start new businesses. (Score:4, Informative)
You act as if our economy depends on these big businesses which are too big to fail when in reality more jobs are created by small businesses.
Re:Not a tax scam (Score:5, Informative)
You sound like someone who has a single job, no family and doesn't own anything. Of course then taxes are easy. Start a side business, add in a family, various retirement accounts, non-retirement stock accounts (ETFs end up being different beasts all together), home ownership, etc... and you'll see that taxes are way too complicated.
Re:Not a tax scam (Score:3, Informative)
No, he merely asked why should we care where a business keeps its nominal headquarters if we don't benefit from it being here.
However, now that you mentioned it: yes, corporations exist to benefit the society around them. That's why we the people have special laws allowing for incorporation in the first place.
Nope, exactly as it should be.