Obama Takes on Big Bidness

[BJMoose]

Specifically, he's going after "loopholes" that allow American corporations to dodge American taxes by means of off-shore subsidiaries. (Profit-laundering, as I call it.)

So. What real effect will this have on business? And how successful will Obama be?

[Zeener Diode]

I wish him good luck. He's shown a propensity for tackling big corporations--- much like Teddy Roosevelt vs The Trusts--- and so far the response has been supportive as "the little guy" cheers him on while he "fires" Rick Wagoner of GM and calls AIG to the carpet.

Chasing down lost tax revenue isn't going to be easy. These outfits have been funneling money offshore since before The Great Depression and no one has stopped them. On the contrary, the last four presidents have all but endorsed this activity on the basis that it makes good economic sense by keeping corporations strong, and in turn they will provide jobs and keep the gears of capitalism turning.

But now we're in a serious recession and Obama is looking at ways to bring that revenue back into the states. (Other nations are doing same, with mixed results). But there are many places to hide money offshore, and these sovereign nations are not ready to sacrifice their cash cows. Sanctions could be imposed to make them relent, but this has the tendency to backfire, especially in the public forum.

[Lounsbury]

Originally Posted by BJMoose

Specifically, he's going after "loopholes" that allow American corporations to dodge American taxes by means of off-shore subsidiaries. (Profit-laundering, as I call it.)

So. What real effect will this have on business? And how successful will Obama be?

Ah you mean the fine US idiocy of World Wide Taxation?

Queer, no other proper nation does that. Everyone else, that includes "Old Europe" - those well known slaves of 'big bidness' tax on a territorial basis.

If the proposal goes through as it seems to be sketched, you will further ruin your international competitiveness and render youselves even more parochial and uncompetitive than you already are.

[BJMoose]

Haven't the faintest idea what were talking about, do ya.

Here's how it works: A company sets up a subsidiary in a "tax friendly" country; then, through various accounting tricks (the term differential pricing comes to mind), money is shuffled around in such a way that the parent company appears to make little or no profit, while the subsidiary does. Think of it as profit laundering. Or a shell game.

[Lounsbury]

Originally Posted by BJMoose

Haven't the faintest idea what were talking about, do ya.

Here's how it works: A company sets up a subsidiary in a "tax friendly" country; then, through various accounting tricks (the term differential pricing comes to mind), money is shuffled around in such a way that the parent company appears to make little or no profit, while the subsidiary does. Think of it as profit laundering. Or a shell game.

Oh, I rather do have an idea. Somewhat better I would suspect than your stereotype I would say.

Now what you're referring to above is transfer pricing. There are, in most of the world, perfectly reasonable rules about that.

That hardly gets to the US's queer and unique (insofar as Japan recently changed to territorial taxation) game of taking the global revenues of American firms. Thus creating your problem.

[BJMoose]

Your snarkiness was masking your erudition.

So, how would this make us less competitive internationally?

[Lounsbury]

Originally Posted by BJMoose

Your snarkiness was masking your erudition.

So, how would this make us less competitive internationally?

How?

Well, I should think it is rather obvious that World Wide taxation with the rather higher implied tax rates, and massively more complex filing (as the corporation not only has to meet local tax rules, but also translate that into the US' notoriously complex system, and USD) imposition is self-evident from the start.

Further, it would seem these proposals, if what I read is an accurate representation, hit all overseas investment and impose 3rd world style repatriation / taxation disadvantages without respect to whether there is genuine domiciliation of activities or rather less defensible domiciliation in non-operational jurisdictions (e.g. British Virgin Islands w mere post-box operations). That would strike me as a stunningly obvious handicap to American firms that compete and invest globally, insofar as no other proper country does such. Of course, insofar as the US seems determined to track 3rd world hellhole standards in areas such as human rights for detainees, it would seem natural that you'd like to benchmark economic policy off of the same.

Good luck with that.

I should add that it is your imperial style taxation that drives this problem - and for the "profit laundering" - which is simply two issues - real domiciliation and effective transfer pricing, there are better solutions. Indeed, it would seem the entire rest of the OECD has opted for them. But you all are very special of course.

[bashere]

Originally Posted by collounsbury

Of course, insofar as the US seems determined to track 3rd world hellhole standards in areas such as human rights for detainees, it would seem natural that you'd like to benchmark economic policy off of the same.

Good luck with that.

I don't think that's fair. I'm pretty sure the 3rd world economic policies predate the 3rd world hellhole standards in such areas as human rights abuses of detainees.