Wednesday, August 14, 2013

The Corporate Tax Shell Game

I support statehood for Puerto Rico and multinational lobbyists are our greatest enemies. You see, Puerto Rico, although it is a territory of the US, and we are all US citizens by birth for almost 100 years, is a favorite offshore tax haven for corporate welfare. I believe that is so, because they can launder their money into American dollars, of course.

Lobbyists have been able to get the IRS to code Puerto Rico as a foreign country, to serve for these corporate money laundering purposes. This is at the expense of preventing Puerto Rico from becoming a state, so as to have the rights of all fellow Americans. ... This is also at the expense of thousands of Americans who lose their jobs in the other 50 states.

I have been fighting Corporate Welfare since the 80's. I had success in convincing Congress to eliminate Section 936, with the help then of Sen Pryor. It was a tough fight, but good people were backing me, and we eliminated that code.

But then they metamorphed into something with a different code. Like you rightfully say, this powerful lobbying, ruthless, heartless, greedy establishment is going wipe out the world by ruining everyone's economy. 

August 14, 2013
The Financial Times (h/t Richard Murphy) reports on a new/old trend in tax avoidance by U.S. corporations: so-called "tax inversions" or "expatriations." In an inversion, a U.S. company reorganizes to make a foreign subsidiary the parent company, with the goal of taking advantage of lower tax rates and non-taxation of foreign profits. Currently, American corporations are taxed on their worldwide income, whereas many other countries only tax domestic profits (but combine this provision with anti-abuse rules to prevent profit stripping).
The FT reports that most of the new inversions are taking place in the context of a foreign acquisition. Two U.S. pharmaceutical companies, Perrigo and Activis, have bought Irish drug makers and are shifting their headquarters to Ireland, where the corporate income tax is only 12.5 percent. Other companies are relocating to the Netherlands or the United Kingdom after acquiring firms based there. I use the term "relocation" advisedly, because in fact these maneuvers will leave their U.S. operations unchanged. 
There is no doubt that these inversions are legal, at least under current law. However, as Sen. Charles Grassley, R-Iowa, said in 2002 during an earlier rash of inversions, "These expatriations aren't illegal. But they're sure immoral." What we see is companies that want to benefit from everything the United States has to offer – markets, highways, educated workers, a legal structure and so on – but pay even less taxes than they do already.