GAO Reports Bailout and Tech Firms Love Tax Havens 347
theodp writes "Most of America's largest publicly traded corporations and Federal contractors — including those receiving billions of dollars from US taxpayers to finance their recovery — have set up offshore operations that could help them avoid paying US taxes, according to a GAO study released yesterday. Of the 100 largest public companies, 83 do business in tax-haven hot-spots like the Cayman Islands, Bermuda, and the British Virgin Islands. The report found that Citigroup, a recipient of $45B in bailout funds so far, has set up 427 subsidiaries in tax-haven countries, including 91 in Luxembourg, 90 in the Cayman Islands, and 35 in the British Virgin Islands. Household names on the lists from the tech sector include Apple (1 tax haven subsidiary), Cisco (38), Dell (29), HP (14), Intel (6), IBM (10), Microsoft (8), Motorola (4), and Oracle (77)."
Off with her head! (Score:4, Insightful)
Isn't the way this worded presuming guilt before innocence? Is doing business in a tax-haven country an automatic fail?
Tax policy (Score:4, Insightful)
Maybe if the US tax policy wasn't insanely out of line with the rest of the world, we wouldn't have this problem. Can you blame these companies for getting away?
Other countries charge income tax based on income earned in that country. The US charges income tax for income earned in any country. Where would you set up your company?
The FairTax [fairtax.org] would instantly make the US the world's tax haven.
How does this make sense? (Score:3, Insightful)
We give them money, then they are supposed to give it back?
Is this so Hank Paulson and some IRS agent can siphon some off to keep their jobs?
US Corp. Tax Load VS Other Countries is... (Score:5, Insightful)
2nd highest in the industrialized world behind only Japan, as I recall the most recent article.
California has the highest or 2nd highest corp. (and other) taxes and has a net outflow of population compared to inflow.
You don't think taxes has something to do with economic decisions?
Think again.
This isn't surprising... (Score:5, Insightful)
Theoretically, their duty is to maximize return on investment for their stockholders, which means doing everything they can legally to minimize their tax liability. So if a tax shelter is legal, expect them to use it. (If it's not legal, expect them to try to pretend it's legal.)
Now, though, because in some cases their partial owner is the U.S. government, there is a conflict of interest between the interests of the government shareholder and the private shareholders.
Respond Appropriately (Score:3, Insightful)
Judge Learned Hand said it best (Score:5, Insightful)
"there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible".
People and companies respond to incentives -- it is really surprising that the bizarre tax structure in the US pushes companies to form subsidiaries? Apparently it is, to either clueless or grandstanding politicians.
Yes. (Score:5, Insightful)
I really get frustrated when doublespeak is acceptable. It's like the question, "Are prisoners in Guantanamo being tortured?" If they weren't being tortured, they would be in New York state, sitting in the same jail cells we use for other suspected murderers. The fact that anyone is asking the question is mind-boggling.
Similarly, any company that sets up in a small country that they do no business in is obviously up to something. Otherwise they wouldn't be there.
American business is a game, where the winners are those who best exploit their workers, the tax code, government contracts, and the environment. The most important bit is not getting caught, and having a lot of lawyers if you do.
(I'd like to defuse any rebuttal by saying "Wal-Mart.")
Hell yes I can blame them. (Score:5, Insightful)
They are receiving US GOVERNMENT funds taken from US TAXPAYERS and they're stashing them in foreign tax havens.
This is solely for the benefit of their executives. It will not help rebuild the US economy.
There needs to be a new law passed TODAY (drag Congress back in) that makes that practice illegal.
If you want "bailout" funds, you cannot use a foreign tax haven.
If you use a foreign tax haven, you cannot receive "bailout" funds.
Why should the US taxpayers finance some CEO's retirement villa in Monte Carlo while the economy drags?
Re:Yes. (Score:4, Insightful)
Wal-mart is a funny example. They do a lot of things right(warehousing, distribution, workers safety) but they also screw their employees badly and are destructive to small town economies.
As for these companies that just got big bailouts, well, I really wish the feds would just take all the money back and we can all roll on the floor laughing at them for it.
Calling captain obvious: greed alert (Score:1, Insightful)
The reason we got here: greed. We did nothing to address the underlying reason for the economic crisis, so is it surprising that greed continues?
Legal and understandable - (Score:4, Insightful)
Re:Yes. (Score:4, Insightful)
Err, no. The main reason they are held in Guantanemo was for a jurisdictional dodge about holding them at all. One that didn't work out, as it turns out; the courts didn't buy the idea that they were beyond the reach of US courts just because they weren't within the boundaries of the United States.
Nothing in this report says the companies do no business in the "tax haven" countries. Apple originally set up in Ireland to make Powerbooks, as I recall. They don't do manufacturing there any more but it's still their European headquarters. Coke and Pepsi almost certainly sell sugar water in all those tax haven jurisdictions. Intel does manufacturing in Costa Rica.
Multinationals are, well, multinational. It's hardly a surprise when they do business in companies the IRS or GAO isn't fond of, whether that's why they do it (which it probably is, in many cases) or not.
Anyway, one of the definitions for the countries on this list was "...jurisdictions that have a high level of nonresident financial activity, and may have characteristics including low or no taxes, light and flexible regulation, and a high level of client confidentiality. " Horrors. Why would a country ever want to do that?
Re:US Corp. Tax Load VS Other Countries is... (Score:2, Insightful)
Our stated corporate tax rates are relatively high. However, we have so many loopholes, deductions, credits, etc. no one actually pays the rate listed in a table somewhere.
Real taxes paid by corporations is actually pretty low by world standards. No, you won't get a cite because I'm lazy.
That being said, business doesn't pay taxes. Taxes are just another cost passed along to the consumer.
Re:Hell yes I can blame them. (Score:1, Insightful)
This is the way for skating out of SOX responsibilities much in the same manner going to China, Mexico, India, etc. is in regards to skating out from EPA and OSHA responsibilities. U.S. government needs to re-evaluate how trade is done, tax it when it is costly to U.S. interests (no more free license to pollute or disregard worker rights by offshoring), and only allow free trade with markets that operate under equal or more stringent environmental, worker, and economic regulation.
Write your congressman about this and complain! The current implementation of U.S. trade agreements are broken.
Re:Tax policy (Score:5, Insightful)
Taxes are the price we pay for civilization.
The reason places like Luxembourg, Cayman Islands, etc. can get away with charging low (or no) corporate tax is that those places are small and relatively lightly populated. Therefore, the government there doesn't have a whole lot of needs, and can get away with a light budget. The solution to this inequality, as others have suggested, is to close loopholes and make sure that corporations are paying their fair share of taxes, not to reduce the size of our government to that of Luxembourg.
Re:This isn't surprising... (Score:4, Insightful)
Theoretically, their duty is to maximize return on investment for their stockholders, which means doing everything they can legally to minimize their tax liability.
I've heard that line ever since the Regan administration. It's a line corporate execs use to excuse excess and over-stepping. Fiduciary duty to investors does not require anyone to cheat the government and broader base of taxpayers by setting up operations in tax shelter countries and burying revenue to avoid paying US taxes.
It's time we crushed that truism and stop accepting it as some sort of financial gospel that will excuse corporate misbehavior. The "free market" we have in place now rewards a few people at the top and screws everyone else down the line. Time for accountability and responsibility to come back in style and that starts with the people at the top of the artificial person we call a corporation.
Re:This isn't surprising... (Score:4, Insightful)
Which is, of course, why the waiting list for the Prius is currently at four months and growing, and yet there's no waiting list for a Chevy Silverado, etc?
Re:Tax policy (Score:5, Insightful)
> Maybe if the US tax policy wasn't insanely out of line with the rest of the world, we wouldn't have this problem.
Rest of the world? The economical rest of the world is having the same problem. It isn't like they said, Tax Havens like Canada, France, UK, Germany or Japan.
Simple tragedy of the commons. Tax havens are small nations, which profit over-proportionally from shift of profit to their nations. A lower tax in small nations results in an increase in tax-income due to accounting of companies in larger economic nations. Hardly a sustainable approach for larger economies.
> Can you blame these companies for getting away?
Well, those companies make profits in nations, which provide them infrastructure, educated people as working force and affluent people as customers. Then they transfer the profits to a different nation due to lower taxes, thereby reducing their contribution to the same society, which provided for their profits.
I'd say that is hardly laudable.
The Republicans cared so much (Score:3, Insightful)
Re:Tax policy (Score:1, Insightful)
It's apparent from your post that you're never even read a 10-K and know nothing about corporate taxes.
Here is Intel's:
http://investing.businessweek.com/research/stocks/financials/secfilings.asp?symbol=INTC.O
Note in 2007 they paid 2.2 billion income tax on 9.2 billion profit, with 80% of revenue coming from outside the US.
Re:US Corp. Tax Load VS Other Countries is... (Score:4, Insightful)
Time to End White-Collar Theft (Score:4, Insightful)
Corporations and the power-elite have ripped the US taxpayers off to the tune of trillions of dollars over the past eight years alone. They always have, of course, but it has grown so rampant and egregious that we must put a stop to it once and for all. That means cracking down on offshoring and outsourcing by companies that come to the US taxpayer begging for hand-outs. It means life-sentences or worse for the white-collar criminals like Bernie Madoff who are responsible. It means revocation of corporate charters for companies that do wrong, to curb the complicity of Boards of Directors and middle-management in white-collar crime; there must be more cases like Arthur Andersen being put out of business by the government.
And to those who contend that if we hold companies and white-collar criminals responsible for their actions that capital will simply flee the country, I ask, where are they gonna go? Where can they go that the long arm of the American people cannot reach? Mars? Because the US can make life on earth very uncomfortable for any place else that arouses its ire by sheltering them.
They have a duty to the shareholders (Score:4, Insightful)
Re:It would STILL be better. (Score:5, Insightful)
Additionally, feeding money into the top is a flawed strategy for the same reason that pushing a rope is a flawed strategy.
Banks issuing loans have updated their decision-making to account for the people who cannot repay their loans. By loaning $X to people with credit rating A and $Y to people with credit rating B, etc., they can maximize their profit. If you give the bank $10MM dollars, they now have more capital, but that does not change the fact that the maximum profit they believe they can achieve is to loan money according to their studies.
The additional money comes into play only when there are more people seeking loans than the bank has money. This is the definition of the credit crunch and why the companies want a "bailout". However, the Fed has lowered the federal funds rate (the rate at which it lends to banks) to a figure so low that the banks can borrow all the money they want with very little penalty. Giving money to banks does not encourage them to lend.
The root of the problem is that very nearly everything is overvalued, especially at the high end of the scale. Without a bailout, the monetary values of things would return to a sane level. This would allow more lower-middle and upper-middle-class people to afford ownership of companies (rescuing stock prices) and luxuries (improving consumer demand.) Or, in layman's terms: Nobody's buying things now because they're too expensive. The common-sense solution is to price them lower, while the current solution is to give people with money more money and hope they start buying things even though they're too expensive.
Re:Yes. (Score:5, Insightful)
It is perfectly normal in a time of war to hold prisoners (or "unlawful combatants") outside of the regular prison system. Torture is a completely separate issue.
Um, no, it's not. It's perfectly normal to hold POWs outside the prison system.
It is not normal to make up a category called 'unlawful combatants' and hold them both outside the POW and prison system.
Re:Tax policy (Score:5, Insightful)
I love how crazy people talk about how much percentage of taxes a percentage of people should pay, like that has anything to do with anything. We are taxed on income here, not per person.
Those 1% earned 22% of all income. Hence at the very least they should have paid 22% of all income tax, in a crazy world where everyone pays exactly the same proportion of income tax.
But no, loons like you like to imply they're paying a huge huge huge burden by using '1%' and '40%', instead of twice as much proportionally.
Same with the top 5%, which earned 37% of all income, and hence should have paid at least 37% of all income taxes. So 60% is not some amazing step, that's only about 50% more than they should be paying in a completely 'fair' system.
But I'm sure if it was like that, people like you would be whining that the top 1% paid 22% of all income tax.
Re:Corp Tax take shrinking (Score:2, Insightful)
This would be (somewhat) more interesting if true.
Top end corporate tax rate is currently 35%. Source: wikipedia [wikipedia.org]
Also, see other posts earlier about how no matter what you set the corporate tax rate at, corporations don't pay tax, people do. Increased taxes are simply an increased cost of doing business, and consumers will pay for it with increased prices. The biggest thing that imposing corporate taxes really does is it allows us to play hide the ball on taxes (hide the ball being something that uninformed people simply love). It increases taxes, but the check isn't cut by the people, so they're less likely to get up in arms about it.
Re:This isn't surprising... (Score:4, Insightful)
Re:Corporate, torture apologists (Score:3, Insightful)
Personally, I don't want multi-national corporations to exist, and I certainly wouldn't want them operating in my country.
You happen to be on the good end of the transaction, but for nearly every other country in the world which has nothing comparable to western wealth, they face exploitation and ecological destruction in return for bumping GDP that never filters down to support a middle class. If you were a subsistence farmer, your land is sold out from under you and you have the freedom to either work in a factory for 14 hours a day or starve. If you're a merchant in the city and a Wal-Mart opens up across the street, you have the freedom to shut your doors or go bankrupt. If you're a manufacturing exporter that has to play by the labor rules of your country and an American manufacturer who makes your product opens in a free trade zone, you have the freedom to sell your equipment off and close your doors, or almost assuredly fail against a company with more capital and less rules.
If Dell wants to operate in England or Bangladesh, let it form a corporation according to the rules and customs of that local community. Dell America can loan it as much startup capital as that local community allows, but Dell Bangladesh has to pay it back. This enables Dell to compete in that market, but not to destroy every local player through it's wealth advantage. The gaping hole in this scenario is that the government is usually bought off by Dell during negotiations, sometimes as crass bribery, other times as a loss in tax revenue. This also promotes healthy competition, but that a terrible phrase to a corporation trying to make a profit.
This is why I think a manufacturer should be able to license the sale of their products through a foreign company, but by and large, multinationals wield too much power to be tolerated. You'll notice that there are close to zero Free Trade Zones in wealthy western countries, because they simply wouldn't be allowed by the local community, for the same reasons they are hated in Latin America.
Re:Yes. (Score:5, Insightful)
I've on this subject frequently really.
http://slashdot.org/comments.pl?sid=1086449&cid=26406327 [slashdot.org]
1) Large sums of money have been given to a relatively small number of companies. Only a small percentage of the populace directly work for recipients of federal bailout money. Taking the money back wouldn't have a direct effect on most americans for quite some time(6 months or more).
2) Companies that need credit to cover payroll would have been in trouble before the credit crunch anyway, as this is usually a last ditch effort to save a company.
3) I'm a student. I don't foresee getting kicked out of school because of the financial market being in the shitter unless the feds cut off stafford loan subsidization, which is very unlikely to happen under a democratic or even republican administration.
4) Blowing over a trillion bucks to save companies who participated in a delusional pyramid scheme of realty market overvaluations isn't a good way to spend taxpayer money, especially considering the money IS BEING SAT ON. That money should have been given directly to homeowners under a grant program to keep people in their homes.
Right now, thousands of homeowners are evicted every day despite the $750B given to the banks that own the homes. It's a fucking tragedy.
Re:The collection of taxes is not theft! (Score:4, Insightful)
Re:It would STILL be better. (Score:3, Insightful)
Or, in a nutshell, the country is better off if everyone has money to spend.
It's not a coincidence that the countries that are hit way less by the current crisis are countries that have strong social networks and less money concentration in a few hands.
Re:Yes. (Score:3, Insightful)
I don't understand why you try to save them. Is it to save jobs or what?
The money could be used to support the people who got unemployed but more importantly people still have demands for the products the companies used to create so there would be a gap for new companies manufacturing those products. So if for instance all your car companies died I assume there would be new people willing to take their place and create a new industry.
I understand that some knowledge and ideas would get lost if something like that happened in the tech area but I wonder if that's such a huge loss since many of the people in the old companies would probably be active within the new ones.
I don't remember what our swedish prime minister Fredrik Reinfeldt said one the matter but I really hope they stay on the line of "evolution" instead of trying to save failing companies.
Re:Hell yes I can blame them. (Score:4, Insightful)
While its true they sold the bailout as a "loan", they also specifically stated that there was no guarantee taxpayers would get their money back.
Which is idiotic. Common practice is to use collateral to back a loan. The bailout operators refuse to take sufficient stock in companies to assure the collateral value. They also refuse to actually audit any of the companies they are bailing out to determine how much their stock is actually worth.
In other words, its either criminal mismanagement or a more likely, a giant scam. And tacking the the executive compensation terms on there is total PR stunt.