US corporations rejoice: you've been granted a $ 40 billion tax break in an effort to help revive the economy.
Of course, that's only if you choose to play along, and there is a $ 7 billion premium on playing.
Story here.
Much has been said in the financial news over American companies which have expatriated their international sales divisions to tax havens, in order to save on corporate taxation. Perhaps the most famous and popular of these havens is Bermuda, where US companies do more than $ 100 billion a year in tax-free business. A famous case occured last year when tool behemoth Stanley came close to expatriating to Bermuda in order to save an estimated $ 30 million a year in taxes, a move which was ultimately voted against by the board of directors.
Part of the House Ways and Means Committee's tax bill for the coming year includes an "amnesty" on taxes for American companies who have made money in the last year -- estimated at around $ 135 billion. Essentially, the Congress would sincerely like these companies to bring this dough home, and instead of the usual 35% tax imposed on foreign profits repatriated, they are offering businesses a scant 5.25% tax.
The thing is, they're paying no tax on it now. So really, they aren't saving a dime -- they're paying out some $ 7 billion and change for the privilege of keeping their money in Chase Manhattan instead of Barclays.
Additionally, I for one take exception to the use of the term "amnesty" in the legislation. A semantic point to be sure, but "amnesty" insinuates that the companies have done something wrong and are being given a chance to come clean with the American public, or the workers, or the Congress, or whomever. It is in fact not only legal but essential to a US company which does business internationally to maintain foreign sales offices, and due to provisions in the current tax code which exempt foreign direct B2B payments from taxation companies have no tax liability on this income until and unless they bring the funds into the country.
Supporters of the bill claim that it will help the shaky US economy. In fact, Rep. Kevin Brady, who drafted the bill, says "If you bring back five times as much cash as we spend on our entire highway construction plan, you can't help but create jobs."
Opponents of the bill naturally are unconvinced, but also make the mistake of seeing this as a $ 40 billion gift to corporations, rather than a $ 7 billion appropriation from them.
What gets to me though, is Rep. Brady's assertion that for corporations to bring money in, this will create jobs. In and of itself this is highly implausible. While some companies might in fact be able to use repatried funds to pay down debt, improve production facilities, and engage in other activities conducive to creating a more active job market, this does not automatically mean that jobs will simply pop up. A company with a sales division in Bermuda did not lay off workers in Minnesota because it had a few million sitting in trust. In fact, it kept what workers it had because of the money offshore, which is only there due to foreign sales and therefore was a key part of creating jobs for those workers from the outset, regardless of the flag under which the cash is being stored.
I posit that Mr. Brady's comments have little to do with job creation, and rather a lot to do with playing one of Congress' favourite shell games: Blame the Corporations.
In this particular round of Orwellian revisionist fun, a corporation who does not repatriate funds and pay a 5.25% forfeit is not "doing it's part" to stimulate job growth. Congress has already tried once (unsuccessfully, fortunately) to pass legislation making it next-to-impossible for US corporations to maintain foreign sales entities to better compete in global markets -- yet the ability for a US corporation to compete effectively in the global marketplace is exactly the sort of thing which fosters job stability in the US.
So given the basic outline of this shell game, who is in fact doing more for the American worker -- a corporation who takes advantage of a completely legal ability to aggressively promote it's goods and services abroad from a tax-advantaged domicile, or an aspiring bureaucratic despot (Brady 'serves' on to two of the most powerful Congressional committees, Ways & Means and Social Security/SRM) engaging in petty blackmail of that corporation, by publicly appealing to "team spirit" at the low low price of only a few billion dollars?
Phaedrus
Of course, that's only if you choose to play along, and there is a $ 7 billion premium on playing.
Story here.
Much has been said in the financial news over American companies which have expatriated their international sales divisions to tax havens, in order to save on corporate taxation. Perhaps the most famous and popular of these havens is Bermuda, where US companies do more than $ 100 billion a year in tax-free business. A famous case occured last year when tool behemoth Stanley came close to expatriating to Bermuda in order to save an estimated $ 30 million a year in taxes, a move which was ultimately voted against by the board of directors.
Part of the House Ways and Means Committee's tax bill for the coming year includes an "amnesty" on taxes for American companies who have made money in the last year -- estimated at around $ 135 billion. Essentially, the Congress would sincerely like these companies to bring this dough home, and instead of the usual 35% tax imposed on foreign profits repatriated, they are offering businesses a scant 5.25% tax.
The thing is, they're paying no tax on it now. So really, they aren't saving a dime -- they're paying out some $ 7 billion and change for the privilege of keeping their money in Chase Manhattan instead of Barclays.
Additionally, I for one take exception to the use of the term "amnesty" in the legislation. A semantic point to be sure, but "amnesty" insinuates that the companies have done something wrong and are being given a chance to come clean with the American public, or the workers, or the Congress, or whomever. It is in fact not only legal but essential to a US company which does business internationally to maintain foreign sales offices, and due to provisions in the current tax code which exempt foreign direct B2B payments from taxation companies have no tax liability on this income until and unless they bring the funds into the country.
Supporters of the bill claim that it will help the shaky US economy. In fact, Rep. Kevin Brady, who drafted the bill, says "If you bring back five times as much cash as we spend on our entire highway construction plan, you can't help but create jobs."
Opponents of the bill naturally are unconvinced, but also make the mistake of seeing this as a $ 40 billion gift to corporations, rather than a $ 7 billion appropriation from them.
What gets to me though, is Rep. Brady's assertion that for corporations to bring money in, this will create jobs. In and of itself this is highly implausible. While some companies might in fact be able to use repatried funds to pay down debt, improve production facilities, and engage in other activities conducive to creating a more active job market, this does not automatically mean that jobs will simply pop up. A company with a sales division in Bermuda did not lay off workers in Minnesota because it had a few million sitting in trust. In fact, it kept what workers it had because of the money offshore, which is only there due to foreign sales and therefore was a key part of creating jobs for those workers from the outset, regardless of the flag under which the cash is being stored.
I posit that Mr. Brady's comments have little to do with job creation, and rather a lot to do with playing one of Congress' favourite shell games: Blame the Corporations.
In this particular round of Orwellian revisionist fun, a corporation who does not repatriate funds and pay a 5.25% forfeit is not "doing it's part" to stimulate job growth. Congress has already tried once (unsuccessfully, fortunately) to pass legislation making it next-to-impossible for US corporations to maintain foreign sales entities to better compete in global markets -- yet the ability for a US corporation to compete effectively in the global marketplace is exactly the sort of thing which fosters job stability in the US.
So given the basic outline of this shell game, who is in fact doing more for the American worker -- a corporation who takes advantage of a completely legal ability to aggressively promote it's goods and services abroad from a tax-advantaged domicile, or an aspiring bureaucratic despot (Brady 'serves' on to two of the most powerful Congressional committees, Ways & Means and Social Security/SRM) engaging in petty blackmail of that corporation, by publicly appealing to "team spirit" at the low low price of only a few billion dollars?
Phaedrus
