10 thoughts on “Cisco CEO says Harper “Gets It” Obama: “Doesn’t Get It””

1. Well, sure. Like many other US tech companies, Cisco racks up huge amounts of cash through price transferring, in the case of Cisco using Dutch and Swiss cover. The result is Cisco’s international earnings are taxed effectively at 5%. They want to repatriate some $63 billion to the US without paying US taxes. Wish I could get away with such shenanigans! No wonder that Congress, in the pocket of wealthy corporations, must predate upon the small and innocent. For details, including numbers, see Bloomberg article:

   http://www.bloomberg.com/news/2011-06-28/biggest-tax-avoiders-win-most-gaming-1-trillion-u-s-tax-break.html

2. Correction: $31.6 billion, not $63 billion. (Am I dislexic?) Here is Bloomberg:

   “All told, Cisco has accumulated $31.6 billion in overseas earnings on which it has paid no U.S. income taxes yet, records show — part of more than $1 trillion in U.S. companies’ offshore profits, according to data compiled by Bloomberg. In total, almost 90 percent of Cisco’s cash sits overseas.”

   Everyone’s entitled to their own opinion. I call it dirty money and prefer Canada not put out the welcome mat to it.

3. @NothernShrike: Dirty money is gained illegally, like through drug trade. Cisco is a legitimate business that makes money through the sales of their products. Their money is not “dirty” and as far as I am concerned, it is welcome in Canada.

4. When the US Corporate tax rate is the highest in the World, the motivation is to make darn sure that the US division shows a loss (or minimum profit). I’ve seen transfer pricing at work, and it would take an army with intimate knowledge to find anything incorrect in the transfer pricing mechanisms.
   In the case of international Corporations, US won’t see any Corporate tax Revenue unless the rate is competitive against other nations where their divisions exist.

5. @NorthernShrike
   It would appear that Canada is eager to use taxpayers dollars in pursuit of Canadian companies up to these shenanigans:

   “Transfer-pricing definitely appears to be a growth industry in CRA audit,” said Rick Bennett, a Vancouver tax lawyer at Borden Ladner Gervais. “The CRA has been upping its resources devoted to audit work in the international context, which includes a lot of different things, but it’s an area that is, with some justification, regarded as one that’s ripe for abuse, and an area they believe they may be able to recover a lot more tax money.”
   From Business in Vancouver:
   corporate-tax-dollar-grab-intensifies

6. So, we are getting down to the conclusion. Cisco uses tax havens like Canada in order to avoid paying US taxes. They should be forced to pay those taxes back to the homeland, instead, by sending an army of accountants up to Canada to investigate their transfer pricing practices.

7. I didn’t want to create a new thread for this, but I thought all of you might like this article if you haven’t already seen it:

   FATCA Law is an International Version of Obamacare’s 1099 Provision, a Nightmare for Cross-Border Economic Activity that Is Undermining Investment in America

   http://danieljmitchell.wordpress.com/2011/06/20/fatca-law-is-an-international-version-of-obamacares-1099-provision-a-nightmare-for-cross-border-economic-activity-that-is-undermining-investment-in-america/

8. @Mark Twain I still don’t understand what sort of ignorance and callousness causes Congresscriters and other dipshit officials to allow corporations to get by with structuring, while screwing individuals and families.

9. Following is a comment I wrote back in May to the article I cited just above (http://danieljmitchell.wordpress.com/2011/06/20/fatca-law-is-an-international-version-of-obamacares-1099-provision-a-nightmare-for-cross-border-economic-activity-that-is-undermining-investment-in-america/)

   The reality is, US policies especially crush middle class USPs (US Persons = Green Card or US Citizenship) Abroad whether they are tax compliant to the US or not. The reporting requirements of FATCA and FBAR (FATCA having apparently been passed as a rider to the HIRE act without much real open Congressional debate on the issue) are causing US Persons abroad, many of whom are dual nationals of their country of residence or a third country, to lose their jobs, be refused even basic bank accounts, and be shunned by prospective non-USP business partners who don’t want to deal with dual-reporting and taxation requirements to the IRS.

   Most working and middle-class “minnows” abroad pay local, regional, and national taxes in the countries where they live, as well as VAT, excise and other taxes and fees. Whether these taxes are lower or higher that what they would pay as “homelanders” (USPs resident in the US) is immaterial. They all pay their fair share where they live according to the local system negotiated through whatever political means extant. They have to deal with the advantages and the drawbacks of their local countries’ system and do not need and often cannot survive with the additional variables imposed by the IRS.

   US extraterritorial taxation policy does not take into account the disparities caused by the shift in exchange rates (thanks perhaps largely to US “quantitative easing”) that pushes people into higher US tax brackets despite no increased local purchasing power, the cost of living in each foreign country, as well as the tax structure in the foreign countries (for example, some countries have a much higher VAT than the US sales tax, but VAT paid outside the US is not eligible for a Foreign Tax Credit in the US).

   US Double Taxation also takes money rightfully earned in a foreign country out of the local economy, where USPs should be free to spend or invest their money. Non-USP family members of USPs are also adversely affected, despite having no allegiance to the US.

   Working and middle-class USPs have recently reached retirement age to discover that they have outstanding US tax liability, or while having no US tax liability due to the (limited) Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC), might owe confiscatory penalties on foreign tax-deferred or tax-exempt retirement plans that were not reported to the US (see FBAR). Many USPs abroad renounce nationality because their pensions would not count as “Earned Income” and they could not survive if they paid US double taxes. Nonetheless, the renouncement process is time consuming and costly.

10. don’t disagree with the dislike of Congress. Transfer pricing is simple. When the tax rate of USA is highest in the World, everyone will do it.
    For large expenditures needed by corps for the US market (although they may have benefits for foreign divisions), charge the expenditures locally US.
    For large expenditures needed primarily for European markets, with tiny benefits for US market, charge the expenditures globally.
    Repeat, repeat—until US profit is zero and the profit shows up in the European division with the lowest tax rate.
    My own $200 million dollar European project was charged globally by the accountants, although its usage in USA was less than 10%.
    To question it, an army of accountants would have needed to have traveled overseas to intimately check the books of the parent Company of a large international Company. And when they checked, they would not have had the info to detect it.
    Had the Corporate tax rate of USA been less, the accountants would have made different decisions.