PARKING
OFFSHORE PROFITS
HURT THE DOMESTIC ECONOMY
By: SARTRE
Conducting commerce internationally is not a crime. However, the lack of
reinvesting domestically provides an inevitable drag on a viable internal economy.
Publically traded companies operate under a set of rules that confuse the average
investor. Most privately owned businesses are well aware that paying taxes on profits is
the price paid to transact trade. Transnational corporations park extraordinary sums of
money offshore to avoid a tax rate that most ordinary businesses pay routinely. Such
discrepancies act as negative incentives that plague a feeble employment record.
Bloomberg makes the following points in the article, Repatriation
Bill to Tax Overseas Profit at 8.75 Percent.
"Corporate repatriation legislation proposed by Senators Kay Hagan and John McCain
would let U.S. businesses bring home offshore profits at an 8.75 percent tax rate.
The rate on repatriated profits would drop to 5.25 percent if a company’s payroll
expanded during 2012, according to a summary of the bill released by Hagan’s office.
The current top corporate rate is 35 percent.
Independent studies showed that when a tax holiday was last offered, in 2004, the lower
tax rate for returning profits spurred little hiring or domestic investment. Most of the
money was used to buy back stock. Democrats have said they are concerned that could happen
again with a tax holiday.
Under the Hagan-McCain proposal, if a company repatriates profits and then reduces its
staff, it would be required to add $75,000 to its gross income for every position
eliminated."
The apparent question is why these domestically chartered companies
are not paying a uniformed tax. The U.S. has long taxed the individual on worldwide
income. Why enable foreign branches avoidance loopholes to keep huge caches of liquidity
overseas? Forbes provides this analysis in, Bringing
Overseas Corporate Profits Back To US Not Necessarily A Job Booster .
"All of Western Europe allows for its multinationals to repatriate billions of
dollars back home without paying the statutory corporate income tax rate. They enjoy a
much lower rate, in the single digits in countries like Japan and UK, where corporate tax
rates are similar to that in the U.S., with American companies falling in the middle of
the two. In theory, the tax break avoids double taxation on corporate profits filed in
other countries, but the trouble with that is that a portion of those profits are being
booked in tax havens that have no income tax.
In many cases, these corporations have already accrued profits tax-free using
techniques that shift reported income to tax havens anyway, like Google, to avoid an
enormous amount of tax."
Both of the Bloomberg and Forbes accounts see little expansion in domestic jobs just
because a conglomerate might get a tax break to bring the money home. While all taxation
is punitive and a caustic burden on commerce, the sophisticated tax dodging available to
accounting departments of mega-corporations offer some strange strategies. |
America
is GE’s tax haven author David Cay Johnston provides an example of a different
experience.
"GE’s disclosures show that over the last decade it paid much lower tax rates
in America than offshore, just the opposite of the Washington political mantra. Even more
puzzling, the U.S. corporate giant chooses to take more of its profits in other lands
despite the higher tax rates there.
Given that GE has a roughly 1,000-person tax department dedicated to paying as little
as possible in taxes, what the disclosures show is that something other than tax policy is
driving GE’s business decisions.
The law gives companies a great deal of latitude in deciding how to arrange where they
report profits from multinational transactions. GE won’t elaborate on why it takes so
much of its profit in higher tax jurisdictions offshore."
Therefore, tax rates alone may not be the determining factor where
corporatists decide where to apply their trade. Remember General
Electric paid no federal taxes in 2010. So why not use company profits to expand in
our own country. Well, the answer has been registered over the last few decades that
definitively prove that creating viable domestic employment opportunities is a very low
priority in the business plans of these globalists.
Even the fable king of the corporate cult plays tax games. How
Apple's Phantom Taxes Hide Billions in Profit illustrates stashing money offshore is a
trend here to stay.
"On Tuesday, Apple is set to report financial results for the second quarter.
Analysts are expecting net income of $9.8 billion. But whatever figure Apple reports won't
reflect its true profit, because the company hides some of it with an unusual tax
maneuver.
And just like other corporations, Apple leaves cash overseas. If it brought it home to
the U.S., it would have to pay federal income taxes on the money (though it would get a
credit for foreign taxes already paid). In Apple's case, those overseas accounts have
grown to a staggering $74 billion - equal to the market value of Citigroup Inc."
Off-shoring business activity, a cannon of operation for the internationalist
multinational, is deleterious to the domestic economy. Keeping after tax profits in
foreign banks virtually guarantees that future expansion or acquisitions will be seeded in
overseas jurisdictions.
Now many proponents of globalism will defend this practice. However, the harsh reality
is that the American market is systematically being dismantled. The motivation behind
stripping away an independent industrial based economy is to make domestic consumption
reliant upon foreign supplies. This fact is indisputable and, arguably sinister.
Rational protective tariffs are demonized as anti free trade. Yet all that the
destructive free trade scheme has produced is widespread poverty within our own borders.
Creating the incentive to abandon the domestic manufacturing domicile is tragic. The
importing of products or services priced to reflect slave labor costs or deferred before
tax capital, is suicidal.
Accumulating huge profits offshore on sales within foreign lands may be more palatable.
But allowing domestically incorporated companies to conduct trade under the auspices of
U.S. law should demand a legitimate price to be paid for that protection. The trade game,
as it currently plays out, is a license to steal from the domestic consumer, while the
corporate lobbyist bribe officials and game the system for favorable tax considerations.
Repatriation of profits stored in offshore banks is secondary to re-establishing
domestic employment. The link between selling the products and services within a market
where they are made, requires a balance and synergism that does not currently exist. This
standard certainly applies to the rebuilding of American industry. The tax and duty laws
need to correct the methodical destruction of the domestic economy.
Licensing regulations tied to employment requirements are a positive technique to
compel transnational companies to fulfill their civic responsibility for the opportunity
to operate in the United States. International trade can be beneficial, but a sound
domestic economy secures survivability.
"Published originally at EtherZone.com :
republication allowed with this notice and hyperlink intact."
SARTRE
is the pen name of a reformed, former political operative. This pundit's formal
instruction in History, Philosophy and Political Science served as training for activism,
on the staff of several politicians and in many campaigns. He is a past columnist for
Ether Zone.
SARTRE can be reached at: BATR@batr.org
We invite you to visit
his website at:BREAKING ALL
THE RULES
Published in
the July 30, 2012 issue of
Ether Zone.
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