It is interesting to note that KPMG is working for the IRS as a consultant. Do you want them to prepare your tax return? They work for the IRS.
The IRS also sees something sinister in moving goods and funds from one country to another:
Transfer pricing is a booming field of global tax law. It involves multinational corporations that are constantly moving goods, services and assets from one subsidiary to another in different countries and how they account for these “transfers.”
“Moving goods, services and assets” is also called, “international trade”.
U.S. IRS forms ‘SWAT team’ for tax dodger crackdown
I don’t see any problem with this. Google has avoided reporting millions in profits by shifting its earnings between subsidiaires in different countries. G.E. views its tax department as a profit center. And companies like Apple have billions located offshore. International trade is one thing but tax evasion, through creative accounting, is whole different matter.
Hi Recalcitrant: You don’t see a problem with working with corporations to avoid taxes and then working for the IRS to show them how corporations are avoiding taxes? Doesn’t that put KPMG into a position of conflict of interest? I am just putting out the warning that KPMG now appears to me to be a double agent, as it were.
The US Congress and the IRS are going to get an awakening when a big US corporation decides to relocate their HQs abroad (how about Toronto or the Far East?) in an attempt to isolate the U.S. market from rest of the world. With FATCA, an aggressive IRS, Dodd-Frank, Sabanes Oxley, high corporate tax rate, citizenship-based taxation, the Volker Rule, and other new laws and regulations coming down the line, does the US believe it’s becoming more competitive or less? The answer is less.
The US is not that good to put up with all the regulatory bu**sh*t vs a more business friendly climate in other countries.
Any company that is doing more business outside of the US than inside would be better off switching it’s HQ abroad to a more friendly business climate making the US a stand alone market to serve.
The US and BHO have to realise that it has to move from income taxes to consumption taxes (like VAT) to balance the federal budget – but the idiots in Congress live in “fantasyland” as usual.
@petros- that can be a problem but then that is a problem that has always existed. I am more concerned about the corporations that constantly manage to manipulate their books for the purpose of avoiding taxes. When tax evasion becomes just as profitable as making and selling something then there is a problem.
@ recalcitrant yes but the solution isn’t a crackdown, but lowering corporate tax rates to be competitive. But of course, no one in the US feels they can lower rates because of the deficit. So the real problem is that the United States government is too indebted and so are all the states, municipalities and the people themselves. So let’s start with everyone in the United States–government on down, living within their means. — and above all, don’t expect me and other Canadians to pay taxes. That’s an insult.
@Petros re who does my taxes, I prefer to have them done by an independent firm in the country where I live. I don’t care how much I might save having someone in the US do them, taxing us alone is already too much of a drain on the economies we call home, do we have to give them our jobs too?
John said: “The US Congress and the IRS are going to get an awakening when a big US corporation decides to relocate their HQs abroad (how about Toronto or the Far East?) in an attempt to isolate the U.S. market from rest of the world.”
The head of GE said that his replacement will most likely be a non-American. As more and more non-Americans take over major US corporations, they’re not going to put up with the insane IRS tax code. With markets in other countries growing, they’ll pack up and move their headquarters and treat the US as just another market.
A country like the US that refuses to play fair will eventually be isolated.
@omghesstillanamerican- I am hoping that FATCA will hasten the coming of that day but I am not all that optimistic after seeing how willing people around the world were to buy up Treasuries during the debt ceiling crisis.
I would love to see the U.S. dollar dethroned as the world’s currency and a basket of currencies introduced to take its place. The U.S. is way to smug and it has abused its position for too long.
GE CEO Immelt ‘Appalled’ By Obamanomics
Considering the small size of Canada’s population compared to the US can you imagine what a huge boost it would be to our economy if both
a) some foreign banks chose to move their New York operations to Canada to disassociate themselves from the US regulations
b) some major corporations decided to move their headquarters to Canada with it’s 15% tax rate compared to the United States’ 35% (or 28% if Obama is generous enough to lower it)
Canada’s got everything going for it these days. Everything the US is doing wrong could benefit us in the end.
It would be great if that happened. But I don’t hold out alot of hope that it will. For reasons that I have trouble understanding, they keep ‘bouncing back’ from the abyss. Look at their stock market today compared to the TSX. The Canadian market has been terrible in the last year and every Canadian financial person I read, predicts more of the same for our market. I have been at 2 seminars in the last two months by two different investment companies. In both cases, they were all very high on the U.S. markets and quite concerned about Canada’s stock markets. Of course, Canada’s market being ‘resourced base’ is much more dependent on the world economy.
With all this other c@#p going on, I came out of both seminars ticked off. It wasn’t what I wanted to hear in my ‘ticked off at the U.S.’ frame of mind.
Sorry to sway off topic a bit here but I haven’t seen this brought up on Brock anywhere. We know the taxation of US citizens draws money out of the Canadian economy into the US, but it would be interesting to know what the US tax industry is worth here in Canada in terms of jobs, etc. Without having to pay my lawyer and accountant I may be spending my money in other economies such as Bali or France! Seriously, the US already gets enough, although some might argue spending more on tax preparation in Canada adds insult to injury and if they can save some doing it in the US, why not? Still, I would like to see my US tax accountant go out of business one day…
@omghesstillanamerican- 35% may be the official rate but not many corporations pay that rate. Once various deductions and credits are used the U.S. corporate rate is actually much, much lower. The percentage of taxes that the U.S. gets from its corporations has actually declined over the years to the point that the U.S. is about the lowest G20 country when it comes to derieving revenue from its corporations. Canada gets higher percentage of tax revenue from its corporations than does the U.S.
People need to stop tossing around that 35% rate figure because it isn’t true.
Mr. Levin probably already has a proposal for a bill in his top drawer that would establish an EXIT TAX for corporations that want to move their HQ’s to a foreign country. A form 8854 for corporations if you will. 🙂
Already exists back from the earlier part of the last decade when companies such Tyco, Stanley Works, Weatherford International all re-incorporated to Bermuda while keeping their actual headquarters in the US. However, if you like Tim Hortons and actually have your headquarters in another country such as Canada but still incorporated in the US you can avail yourself of the US Canada Tax Treaty and still do it.
Here are some links describing the issues with renounciating corporate citizenship. Good quotes from various US Senators as to what they think of the process.
The US will be shedding companies in the next few years to other English speaking regions. Canada is poised to take lots of banking jobs and Ireland and the UK simply have more competitive corporate tax rates. The UK just released a new budget today and their corporate tax rate will be falling to 22% in 2014.
As many have noted many large US corporations don’t pay anything in tax, but all of the increasingly hostile legislation coming from the US will result in many companies moving overseas and taking jobs (and some even some revenue!) with them.
The congress every year introducing hundreds of tax rules for powerful special interest groups. They open many legitimate loop holes for companies like GE and Google. Then to make sure they are not misusing the loopholes IRS introduces many new forms and regulations.
But the problem is that, those rules and forms are imposed both on the billion dollar corporations and a owner of a small Subway or KFC franchise owned by a US-person in remote tourist places in India or Africa.
The billion dollar corporations have accounting team to exploit each of the loopholes to avoid taxes, while each of the loopholes only imposes additional obscure reporting. There is a huge export and business opportunity for US-persons by opening fast-food franchises around the world. The US is losing billions of dollars in exports in various areas US products are in demand. For example, dubbing US movies in local languages, financial services or US software. The US is a leader in services and US must find a better way to export services. How can they do that without feet on the ground?
The congress and IRS is oblivious to how a small business owned by an expat can survive such huge regulation burden. Only way he can be safe is by hiring a full time CPA to check every new kind transaction or business decision. The billion dollar corporations can hire a team of experts to legally transfer IP to Ireland to avoid taxes. But owner of a small business need to spend all his profits just to prove that he don’t owe any taxes.
I am a little surprised about the involvement of KPMG in all of this While all of the “big 4” accounting firms have past histories KPMG has been involved in some really sleazy “tax shelter” scams in the past.
I wouldn’t hold out much hope for FATCA to be the catalyst for foreign businesses to isolate the US…I know from firsthand experience that the banking industries of other countries are bending over backwards to implement it. They are only complaining about the timescales in which to do it.
it is not just FATCA, also the Volcker rule and additional regulations that Sen. Levin and friends try to sneak into legislation. Many banks also try to isolate US person to a separate subsudiary for reporting purposes.
Large banks suckling at the teat of bailouts from their respective governments welcome heavy-handed regulation…It is a barrier to entry for smaller, more nimble players to the banking sector. There is a very unhealthy symbiosis between western governments and large banks which means that most new regulation will be treated as an excuse to get bailed out more and spend more money on things your competitors can’t afford.