At the ACA event in Toronto someone asked whether the State of Vermont and its residents were somehow more “pro Canada” than the rest of the United States. I just laughed. Hell no.
Perhaps though Senator Sanders(and former Mayor of Burlington, VT) might enjoy if the one and only natural gas pipeline that services Vermont(running from Montreal to Burlington, VT) were to be “shut off” on the Canadian side on the coldest day of next winter. Senator Sanders might start discovering some new definitions of patriotism.
I strongly endorse efforts to combat tax evasion, whether by individuals or corporations. Most especially corporations, because they have been the most egregious offenders. From what I see of Sen. Sanders efforts, I expect that I would fully and enthusiastically support them.
Hmm, actually, I think I agree with Bernie Sanders on this one. From the way the article describes it, the companies are changing “citizenship,” but not residence. I.e., their operations and directors still reside in the US, but only their mail address has been changed to another country. One could say that these companies are using the CBT loophole to avoid taxes!
Change to RBT, and close that loophole!
@NorthernShrike
Senators Sanders is basically saying if an American company wants to move its headquarters from Burlington, VT to Ottawa or Montreal and became a Canadian company they are engaging in tax evasion. Do your really believe that is tax evasion? Isn’t that “we” are accused of doing.
Canadian companies can and quite often do bid on and receive US government contracts. Should a former American company that moves its headquarters to Montreal and becomes a Canadian company not be able to receive US government contracts. Should the Harper government sit by and say o’h the US government has to right to choose which foreign companies it gives business to?
Senator Sanders mentions foreign companies receiving US Medicare and Medicaid funding as a “bad” thing. Well McGill University Hospital gets US Medicaid and Medicare funding when sick patients in Northern VT and Upstate NY need to be airlifted for treatment in Montreal. Is Senator Sanders proposing US Medicaid and Medicare no longer re-imburse McGill for this treatment?
In fact Senator Sanders should really propose to cutoff US NIH funding to CAM-H Hospital in Toronto where a prominent anti FATCA and anti CBT activist is a prominent member of the staff.
@Tim:
I think there is a difference between a legitimate move, and an on-paper one. The companies in the article have not actually moved anything except for their mail addresses. All of their people, equipment and operations remain where they were before. If they actually picked up and moved all people and equipment to another jurisdiction, then there would be no argument that they should pay taxes to their new jurisdiction instead of the old one. So this is not equivalent to what flesh-and-blood individuals do, or can do.
I think this can be interpreted as companies abusing the “CBT loophole,” as it pertains to businesses. RBT would solve the problem — the company would pay taxes not where it is a “citizen,” but where it actually “lives” (physical presence of management and operations). A multi-national would pay in each jurisdiction where it has a physical presence in some pro-rated fashion.
Bernie could actually be persuaded to be on our side, come to think of it.
Saunders and his ilk are a modern version of slave owners. They believe that they OWN the right to control all that they survey and that you do not own the product of your hands, the product of your intellect or the resulting cash or other material objects that you receive or purchase …. all these things belong to the State in the mind of people like Mr Saunders and must therefore be controlled by his cabal. Mr Saunders considers that you may only have what HE decides you must have to spend as pocket money. Mr Saunders’ attitude is plainly not congruent with the attitude of the Founders of the United States nor with that country’s Constitution.
Mr Saunders and his politburo need to learn that NOTHING can be sustainably maintained by force … the will of people and the desire for freedom from enslavement (with or without iron shackles) will triumph in the end … and to misquote and mash up a line from a lovely Indian movie (The Best Exotic Marigold Hotel) “Freedom will always triumph in the end and so if Freedom has not yet Triumphed then it is not yet the end.”
Peace
@foo … the move is legitimate wherever the company continues to do business … if the headquarters address is now in Dublin or London or Georgetown, Grand Cayman … that is the headquarters address …. the (US) company has merged with an Irish or Brit or Caymanian one … why should the requirement be that the (non US) Company with which the US Company has merged become a US one? Why should a wife automatically lose her citizenship / domicile and adopt that of her husband? This is a matter for negotiation between the parties concerned is it not? This is pillow talk and not the business of a Mr Saunders or of any other Government dictator.
If the US is seeing an outflow of Corporate Headquarters (and believe me that once the change of address is in place it is only a matter of time before the actual headquarters functions start to move) then it is up to the US to ask itself NOT how best to shackle its Corporations / People but rather what needs to be changed to reverse the trend by making the US more attractive. This is the clearest possible demonstration of what the US is doing wrong on so many fronts … FATCA included. There are real enemies out there …. so stop alienating those who have been your friends ! The US does not need more enemies … it needs to treasure its friends.
Mr Saunders has earned his place on the Wall of Shame.
@Tim
I live in Britain. The corporate tax rate used to be low and was deliberately set low to attract corporate registrations and their taxes. This is not a policy that people here are particularly proud of. There is even some fear about how much new U.S. owners would interested in developing their newly purchased bit of the British industrial base if they interested primarily in the tax incentives. This policy is more of a desperate measure than anything else. American companies have bought up British companies before, and that has been controversial in Britain, but the inverting has only become a trend since the new tax regime came in.
Yes, U.S. persons abroad are accused of having moved for taxes, but it is a strange allegation given that 90% of us end up owing no U.S. tax due to being so heavily taxed where we live. I guess that this means that we are not just tax cheats but really thick ones at that 🙂 I doubt that 90% of U.S. corporations that “move abroad” without ever moving abroad pay more tax.
One last observation …. I say above that America needs to stop alienating its friends … and I really do think that this is so …. it is of no good to hug up someone who is an Enemy just to say “I mean you no ill will” … and in so doing reject the friend that you have had all your life who that Enemy has been busy tormenting and knifing in the back to get at you. I am not specifically referring to the Iran and Israel situation but the analogy applies.
@nervousinvestor:
I’ll confess up front that I know little, and care less, about corporate taxation. But, if I try to draw a parallel to individual taxation, which I care very much about, then I would expect corporations (if they are to be treated as “persons” under the law) to face similar taxation to what I think is fair for individuals. I think an individual should pay taxes to the jurisdiction where he/she lives and works, to support the local infrastructure, social services, regulatory environment, etc. That is, I support RBT, not CBT, which assigns taxation to some theoretical, foreign jurisdiction that simply happens to have issued that individual’s passport.
If I extend this argument to corporations, then I expect corporations to pay taxes where they actually employ people, build widgets, and generally benefit from maintenance of infrastructure, social services and regulatory environment. They should not be able to claim that they owe taxes only to the country where their mailbox is located. Otherwise, should I be able to claim that I do not owe taxes to my local government, and instead owe taxes to the foreign government that happens to have issued my passport? I didn’t think that way of thinking is what IBS is all about.
Still one final point. Gosh I am on a rampage this morning. I must be feeling improved !
As I understand the thing (and I am willing to be corrected) …. part of the problem is that the US set up an arrangement to allow US Corps to set up subsidiaries around the world to promote non US sales and thus to encourage US Exports of goods, services and so on …. part of the deal was that profits earned abroad and taxed abroad would not be subject to US tax until brought back to the US but would be available abroad to develop further business. The other more general problem is that through taxation and regulation, the US is making it uncompetitive for such Corporations to be US Residents.
The Inversion (merger of a US Corporation with a NON US Corporation – usually in the same industry) means that those Overseas Earnings now become usable for real expansion without the further cost of US Taxation on those past profits earned around the world. I predict that if the US does not make itself more attractive that a) the future headquarters and R&D work will be located elsewhere than the US, b) because of FATCA, the senior employees of those (now non US) Headquarters will NOT be “US Persons” in the not so distant future, c) the US “market” will remain just that a market to be served from elsewhere, d) Mr Saunders and his ilk will try to forcibly stop this and there will be substantial litigation in the WTO which will result in major penalties assessed on the US and e) these Merged Corporations will de-list their shares from the US Exchanges and they will be re-listed elsewhere …… Start ups will Start up elsewhere.
@foo …. I dare say that as time passes …. the HQ / Patent Owning / R&D operating functions will be outside the US. There is likely to be a subsidiary in the US operating sales outlets and buying in goods, patent licenses and so on from the HQ elsewhere. The US Subsidiary will pay US Tax on US Earnings. Just as the Indian subsidiary will pay Indian tax on earnings in India. The difference is that the US will no longer be able to lay claim to taxing profits generated in India or England or Timbuktu. I think that this meets your test of Corporations paying tax where they earn their income … proportionally paying for the central services being used in the earning of those profits …. by that I mean that the US can not lay claim to tax on profits earned elsewhere once the Corp is domiciled elsewhere but will receive tax on profits generated within the US marketplace.
Peace
Sounds good to me.
Peace.
@foo … one very last thing before I bore the society to death. I do not claim to represent IBS so please do not question as you have “I didn’t think that way of thinking is what IBS is all about” …. I am merely one voice in a crowd … one view … one opinion … am not even a US Citizen or Green Card Holder and am trying hard not to be deemed a “US Person” by my local banks … but I see the damage being done to every person in every country (including the boomerang damage that will happen to the US) as FATCA comes on stream (unless of course we and other advocates for the application of common sense can stop it). I believe strongly in Residence Based Taxation and not the evil of CBT. We have that view in common at least.
These companies don’t care about US Government contracts that they only have a possibility of winning. The tax savings outweigh any of those gains.
Like it was said in an earlier article, the US is attempting to ‘handcuff’ companies (not to mention individuals) to the US, and it won’t work. In the end people will vote with their feet.
If anything companies will commit the least amount of resources to the US and treat it as a ‘only to sell into’ market. What’s going to be Bernie’s answer to that? Slap on tariffs, bar them entry into the US market?
Bernie why don’t you find a political party to join? Politically Vermont is a state on to itself.
@All
Corporate Taxation is a VERY complex area that I don’t really want to go into here. One thing to note is Sanders is making NO distinction between companies that simply move their headquarters on “paper” and those who actually move their management staff to a different country(say from Burlington, VT to Montreal). Also some prominent Vermont companies in recent years have been bought by foreign enterprises. Ben and Jerry’s Ice Cream is now owned by Unilever which is a Dutch company. Unilever after purchasing Ben and Jerry’s no longer has to pay US income tax on sales of Ben and Jerry’s Ice Cream made in Canada. I haven’t seen any complaining from Senator Sanders about this though.
@All, Tim makes a good point with the Ben and Jerry example. The USG is using the taxation issue to assert “ownership” of those people and corporations that it views as American. If you are an American, corporate or person, Uncle Sam owns you and expects profit.
The most distinct difference between RBT and CBT is really this concept of belonging to the government in a way that perverts the concept of nationality.
And you can’t force nationality on people – as the never-ending conflicts in the Middle East, Eastern Europe and in the illegal immigrant issue within the US attest too. Nationality is something that people do, or do not self-identify with. Attaching taxation to it makes no sense.
One of the underlying problems is that people in the US don’t really know the history of CBT and why it was used in the first place. It was never about “fair share” and always about ownership and punishment. That fact needs to be brought up just as often in our arguments against CBT as everything else.
Sanders is an idiot. Congress is stuffed with people just like him (sadly our Canadian parliament is too).
YogaGirl, Related to:
A bit of what you just said is related here: http://isaacbrocksociety.ca/2014/07/19/accidental-american-identified-as-a-us-citizen-in-world-headlines/
My 2 cents: the US can and will do whatever it wants to people who are actually conducting economic activity there. It is, quite literally, not my business: I have no permanent establishment and no investments and few clients in that country, and I ain’t gonna waste any tears on those who do have and get burned because of it.
The moment the U.S. start making noises about stepping outside their territory or abrogating treaties is when we should all band together to force them to respect the law and get back inside their borders. I don’t see that this has anything to do with it; like foo said, they’re dealing with the taxation of companies which are actually operating in their country.
When it comes to what the US does inside its borders, I care about precisely two things: my ability to go in to visit my friends & loved ones without getting harassed, and those same friends & loved ones’ right to emigrate and take their limited assets with them, for those few who are willing to make the jump. Big multinationals never cared about either of those rights, and I have no doubt that some of them would be very happy to see them restricted to prevent their workforce from running away abroad (witness Tom Coburn, who supports territorial taxation for corporations and FEIE repeal for humans)
I don’t know — is this true, from the article below. Timmies, that US company:
Walgreen may ditch US for Switzerland The move, known as an inversion, has never been attempted by a major American retailer.
Corporate inversion: Walgreens plans move to Switzerland to escape U.S. taxes
@calgary411
I think they are mistaken. Tim Hortons is a canadian firm. They got into a deal with a firm in the US called Yum which use to be a part of Pepsi but they spun off their fast food section off which includes Taco Bell, Kentucky Fried Chicken… etc when they kicked out Dunkin Donuts. Basically they own alot of the fast food market. Its a franchise situation…. so basically the stores are buying/renting from Tim Hortons and the headquarters are located in Canada… I don’t know the tax situation but it would not be taxed as a US firm in the US
More about Tim Horton’s:
http://www.timhortons.com/ca/en/about/company-facts.php
In 1995, Tim Hortons merged with Wendy’s International, Inc., giving new focus and impetus to the expansion of the Tim Hortons concept in the United States. Tim Hortons locations can presently be found in Michigan, Maine, Connecticut, Ohio, West Virginia, Kentucky, Pennsylvania, Rhode Island, Massachusetts and New York, with responsible expansion continuing in these core markets. The Canadian operation is 95% franchise owned and operated, and plans in the U.S. call for the same key strategy to be implemented as expansion progresses. Currently, there are more than 3,000 restaurants across Canada, and over 600 locations in the United States.
In March 2006, Tim Hortons completed an initial public offering of the company and was fully spun off as a separate company as of September 29, 2006. Tim Hortons trades on the NYSE and TSX (THI).
Is Tim Hortons a U.S. company?
Tim Hortons is no longer owned by Wendy’s and is a stand-alone public company trading on the Toronto Stock Exchange and the New York Stock Exchange. Tim Hortons corporate head office is in Oakville, Ontario, Canada.
@calgary411
Thanks for the info… I find it interesting to read & I didn’t remember the Wendy’s situation. I didn’t even know about the Ben & Jerry being owned by another corp. Tim Hortons in the US is terrible… mass produced products… missing the home made touch like my local Tim Horton in my town
@Calgary411 – Based on your comment, Tim Hortons looks like a Canadian company (though we would need to check the jurisdiction in which it is incorporated – whether Canadian Federal or one of the Provinces). The head office is in Ontario you say. Tim Hortons would therefore pay Canadian Tax on their earnings whilst paying firstly US Tax on their foreign earnings in the states south of the border and then receiving a degree of relief in respect of these foreign taxes when filing their Canadian Tax returns. Since they are quoted on the Toronto and the NY Stock Exchanges, the information as to their locus of incorporation is public and can be found on line and their financial statements may also be viewed. The US would NOT be involved in taxing the earnings in countries other than the US unless Hortons is foolish enough to make their businesses in other countries subsidiaries of their US retail operation. I would guess that their patents and trademarks and so on are the property of the Canadian company. All this would need to be checked however before too strong an argument is made.
@Eric, I must confess that I must agree …. it is when the US steps outside of her boundaries with extra territorial rule making that the fur rises on the back of my neck.
@ Calgary … pick any other Canadian company …. say Hudson Bay ? who might open a series of retail stores in the US …. or Bombardier ? who might seek to export planes and trains and snow blowers around the world… or Blackberry. Their HQ operations and their tax obligation are almost certainly Canadian. Yet they do export stuff around the world and should they have business in the US then the profits on THE US SALES operations would be taxable in the US and then come into consideration in Canada (in accordance with the Tax Treaty).