Tag Archives: tax avoidance

October 8, 2014 – Arsenal For Democracy 102

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Topics: Colorado history curriculum fight, new rules on corporate tax avoidance via inversion (offshore reincorporation), Turkey’s role in Syria. People: Bill, Nate. Produced: October 5th, 2014.

Discussion Points:

– How one Colorado county school board is trying to erase and control US history
– Will the new Treasury Department rules stop corporate offshore reincorporation and inversion that avoid taxes?
– What should Turkey’s role in Syria be? Is Turkey abusing its alliances?

Episode 102 (52 min)
AFD 102

Related links
Segment 1

– The Colorado Independent: State Board of Ed member: ‘U.S. ended slavery voluntarily’
– The Colorado Independent: JeffCo students walk out, join in battle over proposed curriculum reform
– The Colorado Independent: The kids are all right: Students are the story in JeffCo curriculum clash
– Al Jazeera America: Colorado students vow civil disobedience over curriculum ‘censorship’

Segment 2

– AFD: Treasury Dept. acts to discourage tax avoidance mergers
– The Globalist: Pfizer: Tax Havens or Bust!

Segment 3

– AFD: Joe Biden made to apologize for publicly saying fact about Turkey
– AFD: ISIS still moving faster than coalition forces on Kobani; will Turkey Enter?
– Wikipedia: Tomb of Suleyman Shah

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Treasury Dept acts to discourage tax avoidance mergers

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Fantastic. The Treasury Department last month began establishing rules to make it significantly harder for U.S. companies to re-locate offshore for tax purposes by taking over foreign companies and registering out-of-country under the smaller entity with access to tax havens or lower corporate taxes. Earlier this year, both on this site and in The Globalist, I criticized Pfizer’s efforts to initiate a tax avoidance merger like that.

This practice, known as an “inversion” (or sometimes “offshore reincorporation”), had rapidly accelerated recently, to the point where the overall number of all such mergers ever attempted by American companies doubled in the past two or so years. While the new rules are just a small step forward — the much bigger problem of European-controlled tax havens, allowing such mergers to make sense in the first place, remains unchanged — it’s a step much more in the right direction than the constant Republican calls to slash corporate taxes to compete with the tax havens, when sensible reforms and regulations are really what’s needed.

There was also another sign that this Treasury Department action was having the intended deterrence effect. A bunch of companies who were in talks or seen as potentially likely to pursue such mergers took a pummeling in the stock market on September 23rd in response to these regulations being announced the day before, since the companies were less likely to make gains than expected.

That’s well deserved punishment, in my opinion, and more still needs to be done. As I argued in my oped in The Globalist in May of this year:

As a matter of fact, U.S. corporations — as profitable as they are — have taken their home nation for a nearly tax free ride for too long. The U.S. tradition of the rule of law that allowed business to flourish cannot be permitted to devolve into a “rule of loopholes” system that just barely stays inside the lines.

Tax avoidance is a cancer on democratic societies. It both undermines confidence in the fairness of the taxation system and erodes the government’s ability to invest in infrastructure and provides services. In the end, that reduces any government’s credibility with its people.

Without the U.S. government’s help, big American corporations would never have been so successful in the first place. We cannot let them get away with chipping away at the country’s tax base even further.

And the corporations should tread lightly for their own good. If such mergers as the one Pfizer proposes are the future of globalization, the American people will continue to feel very abused. Such schemes may eventually produce a backlash strong enough to erase any of the positives.

 
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Oped | Pfizer: Tax Havens or Bust!

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Why cutting U.S. corporate taxes won’t stop a wave of offshore reincorporations.

My new oped, expanding on a post on this site, is now available from The Globalist:

Grand_Cayman_IslandPfizer, founded in the United States in 1849, is trying to buy AstraZeneca, one of its biggest global rivals. Reportedly, and quite bizarrely, the main purpose of this transaction is so it can reincorporate in the United Kingdom — and thus reduce its tax “burden” as well as access “trapped” overseas cash.

The United Kingdom, of course, makes for a much more “competitive” tax environment. After all, it provides corporations and rich individuals with access to half a dozen or so offshore tax evasion center crown dependencies and British Overseas Territories.

(And let’s not forget about that always-subservient financial center, a medieval holdover city-within-a-city in the heart of the modern British capital.)

Of course, we should refer here to the scheme as tax “avoidance,” because a tax maneuver is not “evasion” if it is entirely legal (thanks to a most circumspect exploitation of all the loopholes).

In Pfizer’s case, it is indeed so entirely legal — and potentially lucrative — for the company that Pfizer has already tried to buy a disinterested AstraZeneca once already this year alone. Undeterred, they have made a second massive offer this month.

United Kingdom or United States to blame?

All of these British tax avoidance centers exist in a legal gray area that has its true charms when it comes to sovereignty and expediency. They are outside UK control on paper when convenient — and therefore, with one exception, outside effective EU regulations, too. But they are very much under the UK’s thumb whenever so desired and needed.

Continue reading…

Pfizer: Screw America, we want tax havens!

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I just read NYT DealBook’s new article from Monday on the awful attempted Pfizer takeover of AstraZeneca: “Pfizer Proposes a Marriage With AstraZeneca, Easing Taxes in a Move to Britain”

On Monday, Pfizer proposed a $99 billion acquisition of its British rival AstraZeneca that would allow it to reincorporate in Britain. Doing so would allow Pfizer to escape the United States corporate tax rate and tap into a mountain of cash trapped overseas, saving it billions of dollars each year and making the company more competitive with other global drug makers.

A deal — which would be the biggest in the drug industry in more than a decade — may ultimately not be done. AstraZeneca said on Monday that it had rebuffed Pfizer, after first turning down the company in January.

 
This is disgusting. Pfizer, founded in the United States in 1849, is trying to buy one of its biggest global rivals, solely so it can reincorporate in the United Kingdom… with its half a dozen or so offshore tax evasion center crown dependencies and British Overseas Territories. Excuse me, I should say tax “avoidance,” because it’s not evasion if it’s legal.

(And while they’re at it, they would probably jack up global drug prices further through anti-competitive price-fixing by forming a cartel with AstraZeneca.)

5000-dollar-bill-madison-200Predictably, Congressional Republicans are already telling everyone that the problem is U.S. corporate tax rates aren’t low enough, when in reality, we’re trying to compete with literal tropical islands for tax evaders that are nominally outside of UK control. That’s a losing battle. We need to put pressure on the UK to stop stealing revenue from the rest of the developed world, not lower our already low effective corporate tax rate.

According to The Globalist Research Center and TaxFoundation.org:

In terms of the effective corporate tax rate, the United States is actually below the average of the big industrial countries, at about 26%, [while] the [advanced economies] OECD’s 2012 GDP-weighted average was 32%.

 
And here’s an eye-popping fact from DealBook:

At least 50 American companies have completed mergers that allowed them to reincorporate in another country, and nearly half of those deals have taken place in the last two years.

 
Put another way, that’s almost 25 tax avoidance deals in the past two years. Again, that says little about the U.S. corporate tax structure which hasn’t really changed much — and certainly not adversely to corporate America under a Republican House Majority — and everything about the total lack of civic pride our country’s corporations have right now, even though their revenues to the government are what helped build the country into such a good corporate environment for so long.

We definitely do need tax reform in some respects, but mainly to reduce tax avoidance and loopholes, unnecessary corporate tax credits and subsidies, and code inconsistency that arbitrarily allows some industries pay less than others. What we don’t need to do is to chop our tax code down to stay competitive with Guernsey, Jersey, the Isle of Man, Gibraltar, the Cayman Islands, and the British Virgin Islands.