Multinationals Ask WH to Allow 'Repatriation' of Cash into U.S.

[sixmile]

Tax dodgers trying to scam money back into the country to 'fix the economy'. If this were a person, they would be fined and jailed...

http://www.bloomberg.com/news/2010-12-29/dodging-repatriation-tax-lets-u-s-companies-bring-home-cash.html
'At the White House on Dec. 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens.

The money -- including hundreds of billions in profits that U.S. companies attribute to overseas subsidiaries to avoid taxes -- is supposed to be taxed at up to 35 percent when it’s brought home, or “repatriated.” Executives including John T. Chambers of Cisco Systems Inc. say a tax break would return a flood of cash and boost the economy.

What nobody’s saying publicly is that U.S. multinationals are already finding legal ways to avoid that tax. Over the years, they’ve brought cash home, tax-free, employing strategies with nicknames worthy of 1970s conspiracy thrillers -- including “the Killer B” and “the Deadly D.”

Merck & Co Inc., the second-largest drugmaker in the U.S., last year brought more than $9 billion from abroad without paying any U.S. tax to help finance its acquisition of Schering-Plough Corp., securities filings show. Merck is also appealing a federal judge’s 2009 finding that Schering-Plough owed taxes on $690 million it had earlier brought home from overseas tax-free.

The largest drugmaker, Pfizer Inc., imported more than $30 billion from offshore in connection with its acquisition of Wyeth last year, while taking steps to minimize the tax hit on its publicly reported profit.'

snip

'“The fact that they have these cash hoards suggests that investment is not being constrained by lack of cash,” Slemrod said.

U.S. multinationals boost earnings by shifting income out of the country via transfer pricing, a system that allows them to allocate costs to subsidiaries in high-tax countries and profits to tax havens. Google Inc., for example, cut its taxes by $3.1 billion in the last three years by moving most of the income it attributed overseas ultimately to Bermuda, Bloomberg News reported in October.'

more at link

Happy New Year!

[louis-t]

1. Yet the IRS would throw me in the hoosegow

over the $2,000 I owe them.

[sixmile]

2. It's endemic of our capitalist system

Wall Street breaks every law to make 'investors' money. It's the shaky spine that's sure to break.

[ProdigalJunkMail]

3. except what the companies have done is totally legal

under the current system...they are trying to get it back into the US tax free (or reduced) so they can spend it here.

sP

[sixmile]

4. It's easy when you make the rules!

Or control the governing bodies who make, interpret and enforce them.

[ProdigalJunkMail]

5. if that were entirely true then the money would have been kept

here at a low tax rate rather than socked away over seas...

sP

[sixmile]

6. They're trying hard to do just that.

Ask Grover Norquist or any other phony tax complainer.

[Igel]

11. Backwards.

It was earned overseas and taxed in the jurisdiction in which it was earned.

Under current law, the easiest way to bring that money into the US ("repatriate" doesn't imply "expatriation") is to treat it as new, untaxed income. Meaning that it was taxed in France or Kenya or Mexico under whatever laws they have, and then the amount brought to the US taxed as though it were never taxed.

Most countries have the total income tax not exceed their country's income tax. So if you pay tax one country and then shift the funds, you only pay additional income tax if the destination country's tax rate is higher. And you only pay the difference. The US is a bit of a rogue in this regard, but if foreign corporations repatriate money earned in the US they're not double taxed.

Anyway, the result is that companies keep the income abroad and don't bring it home. They can find uses for it abroad--shift money from France to Brazil, from S. Korea to Mexico. But if they want to bring it home there are hoops to jump through to avoid double taxation (as opposed to additional taxation).

There was a big spike in corporate financing in the early 2000s (maybe 2000). What they're requesting has been done before, and it resulted in a huge influx of money from abroad. Shifted the trade deficit significantly for a few months as billions "came home".

It's also worth mentioning that current corporate tax policy has also been personal tax policy. If I'm an American working in Moscow, I have to file a US tax return and pay US tax in addition to the tax I pay in Russia. This puts expatriates in a bit of a bind: Many don't file tax returns, running the risk of fines and penalties when they return. Many find ways to reduce their relationship to the US, taking foreign citizenship, for instance. It's hardest for those working abroad and still supporting families or relatives in the US.

[ProdigalJunkMail]

12. well, when I said 'kept' it here

i meant that in the sense of 'earned' it here. spent the money here to earn the money here but i can see where the logic kinda falls short on that.

i will try harder in the near future to make sense...

sP

[Hello_Kitty]

8. Only for tax evasion.

Failure to pay just gets you a fine and possibly liens or wage garnishment.

[FiveGoodMen]

7. Corporations demand to supersede governments.

[gratuitous]

9. Sure thing, fellas!

Heck, it's not like we need the money or anything. You stole it and spirited it out of the country fair and square back in the day. Now you want to bring it back so you can snap up some of the bargains created by your looting of the Treasury in the first place? No problemo!

[jwirr]

10. NO