The Biggest Tax Scam Ever: How Corporate America Parks Profits Overseas, Avoiding Billions in Taxes

[unhappycamper]

http://www.commondreams.org/news/2014/08/29/biggest-tax-scam-ever-how-corporate-america-parks-profits-overseas-avoiding-billions

?itok=fPNQsNKO

Rolling Stone's Tim Dickinson explains how U.S. corporations are engaging in the "biggest tax scam ever."

The Biggest Tax Scam Ever: How Corporate America Parks Profits Overseas, Avoiding Billions in Taxes
Democracy Now!
Friday, August 29, 2014

As Burger King heads north for Canada’s lower corporate tax rate, we speak to Rolling Stone contributing editor Tim Dickinson about his new article, "The Biggest Tax Scam Ever." Dickinson reports on how top U.S. companies are avoiding hundreds of billions of dollars by parking their profits abroad — and still receiving more congressionally approved incentives. Dickinson writes: "Top offenders include giants from high-tech (Microsoft, $76 billion); Big Pharma (Pfizer, $69 billion); Big Oil (Exxon­Mobil, $47 billion); investment banks (Goldman Sachs, $22 billion); Big Tobacco (Philip Morris, $20 billion); discount retailers (Wal-Mart, $19 billion); fast-food chains (McDonald’s, $16 billion) – even heavy machinery (Caterpillar, $17 billion). General Electric has $110 billion stashed offshore, and enjoys an effective tax rate of 4 percent – 31 points lower than its statutory obligation to the IRS."

"The inversion trend is just the tip of a very destructive iceberg that’s seen the hollowing out of our corporate tax base. And so, the inversions, you know, is just basically a legal scam that lets a company technically offshore itself for a lower tax rate. And it goes sort of hat in hand with companies shipping massive quantities of corporate profits overseas through sort of elaborate accounting schemes. And while it’s overseas, it sits there tax-free, accumulates tax-free kind of like a 401(k) does. And so, right now there’s about $2 trillion in corporate profits that are stockpiled overseas, on which the U.S. government is technically owed something like half a trillion dollars. So, at the same time that we’re cutting food stamps, that we’re cutting home heating aid to the elderly, you know, there’s literally a jackpot of half a trillion dollars that politicians on both sides of the aisle just won’t go after, because there’s just an imbalance of power there. The corporate power has grown much greater than state power in this case."—Tim Dickinson

[cantbeserious]

1. The Oligarchs, Corporations And Banks Own And Control The Politicians That Own And Control Us

Our owners have decided that only the peons should pay taxes.

[Rassah]

2. There's actually no real way to seriously tax corps...

I think the main reason they are parking profits abroad is because they want spending cash on expansions or something. There is already a great system for not having to pay any taxes here in US. It's called bonds. If you are a corporation that is making tons of money in a low tax economy, you take those profits and pass them out to your stock holding investors in the form of dividends. If the taxes go up, you issue bonds (borrow money) with high interest payments, and then give out the exact same profits to your bond holding investors in the form on interest on bond payments. That interest is tax deductible, so if the proportion of bonds sold (borrowing) and interest on bonds is calculated right, your profits after deductions (bond interest payments) will be exactly the same.

Back in business school we actually had this exact scenario as a question on our exam: You have a hypothetical corporation with a certain amount of outstanding stock and profit, in a country with a certain percent corporate stock (the exam gave actual figures). The corporation's income and expenses are structured in such a way that its profits are zero. The government of the country increases the corporate tax rate to a new higher tax rate. The market rate on corporate bonds is X (whatever interest rate bonds generally get on the market). Calculate the amount of bonds that this corporation will have to sell at the market rate to bring its corporate profit back down to zero (after adding payments on bond interest as corporate expenses, counted against income).

So, in the end, the only thing that raising or lowering a corporate tax rate does is determine how safe or risky corporations are overall (more bonds sold = more outstanding debt = more risk for the corporation should the economy turn sour).