Funny how you can move so quickly on this issue of corporate inversions but not those of American expats. So long then
While they may not be breaking U.S. laws, many of these companies are navigating a loophole in America’s broken and dysfunctional tax code. And while their shareholders may secure a temporary win, workers, taxpayers and this country all lose. America’s tax base erodes at a cost of hundreds of millions of dollars in revenue, increasing the burden on other companies and individuals. America also loses good jobs, talent, investment, and the ability to compete on a global stage.
Legal or not, this loophole must be plugged. Current law requires that U.S. companies reincorporating overseas must ensure that at least 20% of their stock is owned by their new, foreign partner. As chairman of the Senate Finance Committee, I am committed to raising this floor to at least 50% for all inversions taking place from May 8, 2014, on. I don’t approach retroactivity in legislation lightly, but corporations must understand that they won’t profit from abandoning the U.S. (NOTE: Senator what you are proposing is a massive treaty override that Canada and other US Treaty partners should fight tooth and nail).
I see it’s behind a pay wall right now, but I can see the indiscriminate use of the “o”, as in offshore, word.
Yeh, and its peachy keen for American Businesses to lie to workers, shareholders and governments in other countries by buying up businesses based on grand promises then after the deal is sealed break every last promise.
I have been writing my MP and other Ministers to STOP trusting the Americans because they can not be trusted. They will lie, cheat and steal and all you will get is maybe a plane flight on AF1.
Just look at US Steel in Hamilton Ont. They took Canadian subsidies from our government then closed the place and ran. who’s the succer here??
@NativeCanadian, I used to work there, when it was Stelco.
I was born in Hamilton, my dad worked there as well…..
Voting with the feet is a legitimate option (that is what built America if one recollects .. Immigration). When Tyrants make the environment oppressive sensible people do not resort to war but vote with their feet … and civil disobedience.
Other recent examples are Caterpillar and Kellogg in London Ontario, Ford in St. Thomas, Heinz in Leamington, Smucker in Dunnville and Hershey is Smith Falls who ditched Canada for Indiana and Mexico.
“The first time someone shows you who they are, believe them.” (Maya Angelou).
The United States and their companies have shown us repeatedly who they are. Believe them.
For Capitalism to work, capital must be able to find the place, in the world, where it can get the best return for the amount invested. What has destroyed the U.S. tax base is that politicians have set up a tax policy that dooms a good return on capital. The tipping point has been exceeded, where every increase in taxes produced less revenue, so they keep try to do the same thing again and again hoping for a different result. If it doesn’t work and all capitalist knows it doesn’t work, why do we keep doing it. The answer is that we have a crop of politicians, who were taught by our Marxist Professors, who have gained control of our educational system and who hate Capitalists, but who are making the big bucks because of the wealth Capitalism produces.
The answer is of course to scrap our tax system and pass the FairTax, which will do the opposite of what the current system does. It doesn’t care where in the world your capital goes, but it would come here because the owners of the capital would see the U.S. is where they could gain the most on their investment.
The current Marxist government, in all four branches, has to be replaced. Oh, you didn’t know we had 4 branches. The constitution says we have 3, but a fourth has grown up since Marxists were first elected around 1913. The ”Permanent” employees actually run the country, with the permission of our elected officials and they are by their ”nature and beliefs”, Marxists.
If we are to survive as a civilized country, we must restore Capitalism and attract world class companies to furnish jobs and income from private industry, for our under used work force instead of running our companies off shore and seeking campaign contributions by throwing crumbs to taxpayers.
I picked this up from another blog where the article was copied.
In pursuit of lower tax rates, American multinationals are merging with smaller foreign companies and moving their headquarters overseas. About 50 U.S. companies have leveraged this “inversion” tactic in the past 30 years—and more than 20 have done so in the past two years. And just recently we have seen Pfizer PFE -0.38% make a bid for AstraZeneca AZN.LN -2.39% that would move its tax domicile to the United Kingdom.
While they may not be breaking U.S. laws, many of these companies are navigating a loophole in America’s broken and dysfunctional tax code. And while their shareholders may secure a temporary win, workers, taxpayers and this country all lose. America’s tax base erodes at a cost of hundreds of millions of dollars in revenue, increasing the burden on other companies and individuals. America also loses good jobs, talent, investment, and the ability to compete on a global stage.
Legal or not, this loophole must be plugged. Current law requires that U.S. companies reincorporating overseas must ensure that at least 20% of their stock is owned by their new, foreign partner. As chairman of the Senate Finance Committee, I am committed to raising this floor to at least 50% for all inversions taking place from May 8, 2014, on. I don’t approach retroactivity in legislation lightly, but corporations must understand that they won’t profit from abandoning the U.S.
It would be easy to point a finger at these runaway corporations alone and simply question their morality or patriotism, but that would be ignoring our own failure to bring the tax code into the 21st century. An uncompetitive tax code strains our economy, and we should not be surprised when corporations fight to get out from under antiquated tax rules.
Congress has a responsibility to reverse the tide—now.
Comprehensive tax reform will entice leading companies to invest further in the U.S. and reduce the ability, as well as the need, to manipulate the system. I’m committed to making this happen and including changes in the inversion rules as part of a tax overhaul. Tax reform is a heavy lift and won’t be done overnight, but it has been done before and it can be done again. Enlarge Image
The U.S. is stuck with a 35% corporate tax rate—one of the highest in the world—and a painfully complicated and outdated tax code. Few companies pay the full 35%, but some come close and others pay next to nothing. Effective tax rates vary wildly by industry; the entire system flunks the fairness test.
The last overhaul of the U.S. tax code was in 1986. Meanwhile, other countries have modernized their tax policies to encourage investment, and today the average corporate tax rate among the 34 member countries of the Organization for Economic Cooperation and Development has fallen to 25%.
A corporate tax rate that creates a favorable investment climate and reduces the incentive to game the system is critical to successful reform. The bipartisan tax-reform bill I introduced in the Senate with Republican Judd Gregg in 2010, and reintroduced with Republican Dan Coats and Democrat Mark Begich in the last Congress called for a single flat corporate rate of 24%. Where the rate ends up depends almost entirely on the American business community’s willingness to pitch in by closing loopholes. I continue to believe that reducing the current corporate tax rate by approximately one-third will bring the U.S. in line with other developed countries that long ago recognized the need to evolve their policies to compete globally while growing their domestic economies.
The window of opportunity to enact comprehensive tax reform that both the business community and individual taxpayers desperately need is short. Recognizing the unique dynamics that come with a presidential election, there is just over a year to get the job done. But with the cooperation of my colleagues on both sides of the aisle, we can.
Over the next few months, I will be working closely with members of the Senate Finance Committee to delve into the areas necessary for modernizing our tax code. That includes taking a serious look at addressing the growing and emergent challenge of our international tax regime.
While there are many varying viewpoints and approaches to this pressing issue, members of Congress share a common goal of ensuring that the U.S. is on a long-term path to sustained economic growth. House Ways and Means Committee Chairman Dave Camp and former Senate Finance Chairman Max Baucus have played important roles in building a solid foundation for tax reform. Now is the time for us to build on their work and move the country forward.
Mr. Wyden, from Oregon, is chairman of the Senate Finance Committee.
Tax bureaucracies and government regulations no doubt work to kill the productivity of those who contribute the most to the tax base. Take the current situation in Canada regarding the issuance of temporary work permits. Because of the abuses in one business sector, all business sectors are becoming increasing impeded by time-consuming and onerous government rules and regulations that will only serve to drive business away from Canada – especially in the case where the job cannot be filled by a Canadian by virtue of the fact that the person in question is an integral part of the job. These jobs, which employ Canadians and use local services, will simply go to more accommodating countries.
It’s only when politicians grasp the severity of the situation that they are willing to take a cold sober non-partisan look in assessing the way forward. I wish them luck, because I really believe that the future of the US is dependant on it.
Do you think this guy nails it?
http://m.tickld.com/x/wtf-is-wrong-is-wrong-with-americans-this-guy-nails-it
It’s pretty simple. Measures like FATCA, and this new scheme are like the Roach Motel, easy to get, hard to get out.
The US is trying to have it both ways. Suck in money and then tell you it’s hard to take out via sanction taxes (oops withholding), or other ‘exit’ taxes.
Smart investors can’t control the future risk, but they can see down the road for current risk. This measure will be unhelpful for future inward investment. You may trap today’s business, but tomorrow’s business won’t come at all.
Senator don’t you think that foreign investors are savvy enough to see through this scheme?
It’s midterm time, so they are all playing to concerns of the midterm voters. Fortunately, in my daily internet trawl for FATCA stories, I didn’t run into anything linking this story to U.S. citizens abroad. I did; however, run into this snippet (the rest is behind a paywall:
.
“Law360, Washington (May 09, 2014, 4:08 PM ET) — A U.S. Department of the Treasury representative said Friday at the American Bar Association’s 2014 Tax Meeting that the government will ramp up application of the Foreign Account Tax Compliance Act on July 1, and that affected taxpayers should work to comply with FATCA or face governmental action.”
Well, how likely is the average U.S. emigrant is going to have any contact with a member of the ABA’s tax force or anyone at that meeting? Has the U.S. government made any serious attempt as far as anyone knows to get the word out abroad? I have seen nothing and I have been looking. I checked the IRS facebook page (nothing) and the website which had a pressrelease from 11 April 2014 telling overseas filers to file (leaving people four days to fill out an overseas filing if they owed money). I have been trawling for internet stories since January and this is the first explicit warning I have seen to taxpayers from the IRS, which is all a bit late. I have tried to warn people since October and don’t think the IRS really has. .
Sorry everyone. I didn’t think the article was pay-walled, I was able to get to it fine. I don’t want to copy and paste the whole thing for copyright reasons.
The issue is whether companies have the right to move their headquarters to another country. Should Pfizer be able to move from New York to Montreal or Toronto. My opinion is yes and Canada should defend the right of companies to do so against people like Ron Wyden and Carl Levin.
Notwithstanding the problematic US tax system very few companies are actually willing to move their HQ. More often are not when the are willing to do so it is because the CEO himself or herself isn’t American. I don’t think it is a coincidence that the ceo of Pfizer is British. The company is really got those going in Pharma sector was Valeant which moved from San Diego to Mississauga, ON and later to Laval, QC. to escape the US tax net and abandon America as Wyden puts it. Valeant’s CEO in San Diego just happened to be a Canadian citizen now a billionaire named Mike Pearson(no relation to the former Prime Minister although I think he is a native of London, ON)
@Don
“You may trap today’s business, but tomorrow’s business won’t come at all.”
The same can be said for US emigrants (substituting “come” with “go”).
i agree with Tim. I don’t consider these to be “loopholes” that have to be “plugged”. Those words alone feel like somebody is trying to flee from jail!
This is the consequence of globalisation and America`s bad taxation system just doesn’t hold water to those of other nations. But God forbid, America- the “greatest nation on earth” should have to compare its own tax system with those of other countries and readjust itself. America has to begin to compete tax wise with others who are doing a BETTER job at taxation than they are. And as an aside- I also don’t think America should keep focussing on trying to tax itself out of debt – but rather to get business working in America and bring in revenue that way. Instead, it is making taxation so onerous that having US citizenship has become toxic. Its like everything is upside down.
As someone who is Conservative minded but doesn’t support the Conservative Party of Canada I just love this video from Reason magazine and how American progressives that think their country is the “greatest in the world” must absolutely hate it.
I can see why Pfizer would want to move their corporate headquarters from the US to the UK to take advantage of our lower corporate tax rate (I was actually surprised to learn that it was so much higher than the UK). The downside (for us in the UK) is that I can’t see Pfizer investing in R&D in this country. Based on their past behaviour (e.g., Sandwich) I reckon they’ll asset strip everything and send the proceeds back to the States.
@Tim
I’ll keep that video on file for the next time I hear someone criticize Canada for all it’s social programs, entitlements and blah blah blah.
Did you hear about yesterday’s passenger jet and drone near collision – in FLORIDA? You can’t really improve upon that, can you?
Since the US contines to rely upon direct tacation like income tax nstead of indirect such as VAT in a globalised world, they have the bdget problems they deserve.
You may recall that I put in a note on this blog on just that topic about a week ago. Corporate America has something over 1 trillion dollars stored off-shore from foreign sales and operations. If they bring the money on-shore and invest it in America, Uncle Sam takes 35% in addition to whatever tax they paid abroad when they earned it. So they keep it off shore and the bright ones figure out how to do inversions to get off-shore for future years.
I am only suprised that the rate of inversions is so slow, not that they are occurring. The incentive to fix what is wrong with the US double-taxation scheme by fleeing from it is so powerful as to be irresistable for any proper, profit-seeking business.
As with individuals, the “fix” that Congress dreams up is to erect higher walls around fortress America instead of doing the hard work and facing the hard choices needed to construct a tax system that complements a growing economy rather than detracts from a stagnating one. King Canute has many modern day followers. Apple cannot compete head to head with Samsung forever where 100% of Apple profits worldwide are subject to high and often double taxation vs Samsung who only pays US tax on its US operations. Apple copes for now by damming up its money off-shore.
There is little hope they fix CBT for individuals when they are sawing off their arms and legs with self-destructive corporate tax policies that nobody has the political courage to address because everything “sounds” like a tax cut and can’t be sold politically. If no one will put a patch on the leak in the bottom of the boat because they can’t agree what to call it or whose patch to use, the boat will continue to take on water….
@AnneFrank
If WE know this- how come congress doesn’t know this? Or pretend that they don’t? What is stopping them from sitting down and doing major tax reform?! They must know even more than we amateurs do. Why don’t they ACT on it? It seems so obvious to us. I just don’t get why it isn’t obvious to those who are really educated on these things and working in government.
@Polly: “I have been up to see the Congress and they do not seem to be able to do anything except to eat peanuts and chew tobacco, while my army is starving.” (Robert E. Lee)
Tim, you could change the link in your post to this:
Accounting Today, May 9, 2014: Senators Plan to Close Corporate Inversion Tax Loophole
@Blaze
Geeeezzzzzzzzz…..