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For Steve, the Generalizer

Tex

Well-known member
JUNE 23, 2003

By Robert Kuttner
Robert Kuttner

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ECONOMIC VIEWPOINT
By Robert Kuttner


How Corporate Tax Evaders Get Away with Billions
In a global economy, countries need to coordinate tax enforcement. But Washington is refusing to cooperate with the EU

Worried about escalating budget deficits? Want Congress to extend more tax relief to low-income families? You're not the only one. So why is the Bush Administration leaving $200 billion or more of uncollected taxes on the table? Answer: lax enforcement.


Start with international tax avoidance and evasion. Anywhere from $70 to $100 billion is lost to the U.S. Treasury every year when corporations and individuals fictitiously book in tax havens income that is actually earned in the U.S. or Europe. Legal tax avoidance often blurs into illegal tax evasion, because America has inadequate tax treaties with offshore havens -- reporting may not be truthful, and investigation is often impossible. Last November, departing Internal Revenue Service Commissioner Charles O. Rossotti said that of an estimated 82,100 known cases of offshore tax evasion, the IRS has pursued only 17,000 for lack of resources.

The most flagrant of the offshore schemes is the reincorporation of U.S.-owned and -based corporations in havens such as Bermuda. Tyco International boasted that it saved $400 million in corporate tax payments from this in 2001. Last year, when New Britain (Conn.)-based Stanley Works announced plans (later rescinded) to reincorporate in Bermuda, there was indignation, but Congress never cracked down on corporate sunshine patriots.

A less publicized, but far more costly, evasion involves abuse of the loophole allowing U.S. corporations to "defer" indefinitely taxes on income earned overseas. In theory, since the income is taxed in the country where it's earned, it would not be fair to tax the same income in the U.S. In practice, because of lax reporting requirements and creative accounting, much of the profit earned in Europe gets booked in tax havens and evades taxation entirely.

In a global economy, just as we are harmonizing rules for trade, accounting, and intellectual property, we need to coordinate tax enforcement. Countries could still have different tax systems and rates, just as U.S. states do. But they should act in concert to prevent companies from spuriously booking income to escape taxes.

President John F. Kennedy, lionized by today's supply-siders for his 1963 tax cut, first proposed closing the deferral loophole 40 years ago, when it was a far smaller drain. Kennedy wanted to treat U.S. offshore subsidiaries as U.S. companies for tax purposes. But Congress balked. Let's enact Kennedy's plan now; better late than never. Professor Reuven Avi-Yonah, an international tax expert at the University of Michigan, would also require that companies document that they've paid tax overseas on foreign-source income or pay it in the U.S.

Avi-Yonah points out that if the great powers chose to act, offshore tax havens could be put out of business overnight. The U.S., the European Union, and Japan could enact complementary rules, information-sharing procedures, and enforcement systems. But rather than cooperating with other nations to fight international tax avoidance and evasion, the Bush Administration has thrown cold water on multilateral initiatives.

On June 3, EU authorities issued a directive, reflecting more than a decade of negotiation, requiring banks in EU nations to report interest earnings to the home-country tax authorities of account holders. Ever since the rise of the Eurodollar market in the 1960s, tax cheating on income from assets held outside residents' home countries has been endemic. Collaborative tax enforcement is part of Europe's march to an integrated market and system of commercial law. Tellingly, however, the directive contains a clause specifying that it won't take effect unless the U.S. cooperates. (Without Washington's participation, Europeans intent on tax evasion would move their accounts across the Atlantic.) But the Bush Administration, characteristically, is resisting this and other tax enforcement measures that Europe wants.

It's one thing to believe that low tax rates are good for economic growth. It's quite another to collude in tax evasion. The former is the subject of a fair debate between liberals and conservatives. The latter undermines the rule of law and the transparency that we preach to the rest of the world. Today, corporations can book the same income differently in different countries. International tax planning is part of the same corporate culture of creative accounting that led to the Enron (ENRNQ ) Corp. scandal.

Conservatives and liberals alike ought to favor consistent tax enforcement. For every dollar owed but not collected by the IRS, either taxes must rise or budget deficits must widen, sending interest rates higher and placing a heavy burden on our children to pay down the debt.

You would also think, given worries about terrorists' laundering money, that the Administration would welcome closer international information-sharing among banking and tax authorities. But evidently tax favoritism for corporations and high-bracket individuals trumps even antiterrorism.


Robert Kuttner is co-editor of The American Prospect and author of Everything for Sale
 

Juan

Well-known member
Tex---It's so simple!

Tom builds a boat to sell to Dick for $100 .Harry ( the Gov.)tells him he must pay $10 tax,so then he charges Dick $110. Now just who the hell pays the tax?
 

Tex

Well-known member
Juan said:
Tex---It's so simple!

Tom builds a boat to sell to Dick for $100 .Harry ( the Gov.)tells him he must pay $10 tax,so then he charges Dick $110. Now just who the hell pays the tax?

That is pretty simple, but how about this one: Tom pays his taxes and Harry doesn't. Who has a competitive advantage?
 
A

Anonymous

Guest
GW and his new type Republican party has the answer--"charge it" to the bill of our children and grandchildren and their kids- while allowing China and the Arab world to buy up the country so that when our heirs get their to pay it- they won't have their own sovereign nation anyway....

Simple-eh :???: :wink: :( :( :( :( :mad:
 

Steve

Well-known member
since you were to confused in the last thread... after changing the subject a dozen times to avoid answering a question you are afraid or unable to answer.. I'll help you out a little..


http://ranchers.net/forum/viewtopic.php?t=22335&postdays=0&postorder=asc&start=96

as I have already answered it and you were unable to accept that taxing them more is punitive,.. I'll repost your generalized false original quote... and my comment...




tex
You only believe in enforcing the law against the little people who don't have the resources to make up ways of avoiding paying their fair share of taxes.


Not true at all... I just see the results... in one breath the liberals (such as you) whine that corporations are moving overseas.. in the next you want to tax them more...

I believe if they broke the law you should prosecute them...

not just because you don't like that they found a way to make a profit despite the regulations...

as for the rest of the discussion... You can't make a logical argument with what I have said until you change it into something you want to say and then argue with yourself.

your words... that fit you so well... so feel free to argue with your self... cause I want nothing to do with your closed minded whine fest...
 
A

Anonymous

Guest
kolanuraven said:
Red Robin said:
ff said:
And Huckabee says he'll get rid of the IRS.
Only you would think that's a negative. :roll:




Huckabee has managed to get rid of himself with his antics, so I'd say don't waste any time on him with what he will or won't do in the future.

The corporate world have annointed Hillary and Rudi/Romney....They will do anything to stop anyone else...Even Bloomberg ( a #1 rich elitist) said that if Hillary and Rudi are the candidates he would probably not run an Independent race...
 

Steve

Well-known member
concerning the loop hole...

Tex has inferred with out one typed word from me that I am against closing tax loop holes and that I support letting tax cheats get away with breaking the law...

I challenge him to find one comment with me supporting the loop-holes and tax law breakers he so insultingly claims I am supporting...
 

Tex

Well-known member
Steve
I believe if they broke the law you should prosecute them...

not just because you don't like that they found a way to make a profit despite the regulations...

You are the one who said "you (meaning me) don't like that they found a way to make a profit despite the regulations...", steve, not I.

In other words, to win an argument with me, you have to assume I made a statement that I did not.

Like I said, why not argue with yourself, it would be more efficient.

Are you saying that despite the regulations (or laws) you approve tax evasion?

You might be right there, steve. People like you should probably not be "retired", as you say. You defend tax evaders when they use phony offshore tax havens like Enron did for so long, so maybe you want to go to work to pay their taxes for them. :roll:

I am sure that they would appreciate your contribution to their tax liability, steve, just don't ask everyone else to go along and do the same.


.... and oh, in the same breath, I do say it is wrong for rich people or corporations to evade taxes in this manner. It has nothing to do with competition, it has everything to do with right or wrong.
 

Steve

Well-known member
Facts
Tax Notes publisher Thomas F. Field wrote: "One obvious change in the international area is the near-universal reduction in corporate tax rates on a country-by-country basis and the ongoing competition between taxing jurisdictions to reduce their corporate rates further.

There are a variety of ways that large U.S. multinationals can use offshore tax havens to avoid taxes, depending on the type and location of the business they are in, their investment strategy, tax strategy, etc. Here are descriptions of a few ways that corporations use offshore tax havens to avoid taxes:

1) Deferred tax payments. The U.S. nominally has a worldwide system of taxation under which a company's worldwide income is subject to U.S. tax. However, corporations are allowed dramatically reduce their taxes by being allowed to postpone tax payments on the profits from overseas operations by reinvesting that money in foreign operations. (This is in addition to reductions on the taxes they pay to the U.S. for taxes paid to other countries).

GAMING THE SYSTEM

There are two basic ways that corporations exploit offshore tax havens. One is through corporate expatriation, where a company transfers its corporate headquarters in name only to an offshore tax haven, without moving its top management or physical operations. Also known as "corporate inversions," this move allows companies to significantly reduce their taxes at minimal expense (e.g. by merely registering the company and establishing its residence by renting a post office box).(16) The savings are made as corporations no longer have to pay taxes on their overseas operations. (17) Tyco, for example, which relocated to Bermuda in 1997, estimated that it saved $400 million in 2001 alone.

The second, and more complicated way that corporations exploit offshore tax havens is through the use of offshore tax haven subsidiaries.

In Appendix 1, we list the 25 corporations of the Fortune 500 with the greatest number of offshore tax haven subsidiaries, as reported to shareholders. (19) Virtually all of the Fortune 500 corporations with the most offshore tax haven subsidiaries (see Appendix 1 for a list of companies) increased the number these offshore subsidiaries significantly in recent years. For example, the company with the most offshore tax haven subsidiaries -- El Paso - added 192 tax haven subsidiaries between 1999 and 2002.

The practice is common in the energy sector, where many large companies have an unusual number of subsidiaries in "far-flung places with lots of sand and sunshine but precious little oil or gas." (20)

Anti-deferral rules do require that some portion of income be counted immediately. Nevertheless, oil and gas companies pay the lowest taxes of any major industrial sector. Between 1996 and 1998 the petroleum and pipeline industry had an effective tax rate of 12.3 % -- the lowest of all major U.S. economic sectors. (21) "Energy companies have more opportunity to do this [shelter their income elsewhere] because much of their income is abroad," a former Treasury Department international-tax expert told the Wall Street Journal. (22)

According to our analysis, the Fortune 500 companies with the most offshore tax havens is dominated by companies in the energy sector, including El Paso (#1), AES (#2), Aon (#5), Mirant (#7), Halliburton (#), and Williams (#14).

2) Income Stripping. In this scheme, money is "lent" by the offshore subsidiary to the U.S. parent company or another U.S. subsidiary and paid back to the offshore company at higher rates of interest. That interest payment is then deducted from the U.S. company's federal taxes.

One example of this occurred at Tyco, which set up a Luxembourg-based subsidiary to finance most of the company's debt. The Luxembourg subsidiary made loans to Tyco units in the U.S. and elsewhere, which then deducted the interest payments from their taxable income. (23)

3) Parking Intellectual Property ("Intangibles") Offshore. A third way corporations reduce their taxes is by relocating intellectual property to offshore subsidiaries in order to shelter income from overseas sales. The subsidiary company then charges a licensing fee for the use of trademarks, patents, etc. Any such income that comes from overseas operations is not taxed in the U.S. The subsidiary can also charge the U.S. parent or other U.S. subsidiaries -- a variation of income stripping.

The practice of holding intellectual property offshore began in the early 1990s and is now so widespread that it has prompted an aggressive crackdown by the IRS on alleged abuses that one IRS consultant says could total tens of billions of dollars. (24) More than two dozen U.S. pharmaceutical and computer companies have set up subsidiaries in Bermuda in recent years.

4) Transfer pricing is another arrangement whereby companies with operations around the world arrange their transactions so that profits show up in jurisdictions with kinder, gentler tax collectors (since a large percentage of international transactions and trade takes place within centrally managed corporations either as sales between subsidiaries or as sales between parent and subsidiary, the prices are not set by arms-length market forces).
http://www.citizenworks.org/corp/tax/taxbreif.php

If the "common practice" is unlawful then prosecute them.. if the law is flawed then change it... don't the democrats have a majority? if they don't like the law as they claim.. them submit changes or fix the law...

they won't do that because it would hurt their huge supporters

for those who want to raise taxes on the "rich" corporations that action only penalizes those who have stayed in the US and worked by the rules...

and after you fix the rules try not to be to shocked when a large number of multinational corporations drop the US.... leaving US with no tax revenue from them... (20% of their corporate taxes is better then zero)...

(tex don't bother responding)... cause I could care less what little you have to say..
 

Steve

Well-known member
tex
Are you saying that despite the regulations (or laws) you approve tax evasion?

I guess you can't read...

I believe if they broke the law you should prosecute them...



not just because you don't like that they found a way to make a profit despite the regulations...

If a corporation uses a "legal" tax loop hole then I have "no Problem with it"...

If you don't like that they found a way to cut costs then go to your liberal leaders and get them to fix the problem...
 

Steve

Well-known member
tex
You defend tax evaders when they use phony offshore tax havens like Enron did for so long, so maybe you want to go to work to pay their taxes for them.



Care to back up that lie...!

Enron broke many laws including tax code laws.. and yes they took advantage of current existing tax avoidance laws...

if a corporation operates within the law it is not the corporations fault... it is congress's fault for not fixing the loop-hole or law..



Tex has inferred with out one typed word from me that I am against closing tax loop holes and that I support letting tax cheats get away with breaking the law...

I challenge him to find one comment with me supporting the loop-holes and tax law breakers he so insultingly claims I am supporting...
 

Tex

Well-known member
Steve said:
tex
Are you saying that despite the regulations (or laws) you approve tax evasion?

I guess you can't read...

I believe if they broke the law you should prosecute them...



not just because you don't like that they found a way to make a profit despite the regulations...

If a corporation uses a "legal" tax loop hole then I have "no Problem with it"...

If you don't like that they found a way to cut costs then go to your liberal leaders and get them to fix the problem...

So do you believe Congress should give "legal" tax loopholes to people who give them large campaign contributions that make the rest of us pay more in taxes? Do you believe that they should do this and hide it in large bills that don't have a chance to be read before being voted on?

Do you think it is "conservative" to make these loopholes and "liberal" to close them?
 

Red Robin

Well-known member
kolanuraven said:
Red Robin said:
ff said:
And Huckabee says he'll get rid of the IRS.
Only you would think that's a negative. :roll:




Huckabee has managed to get rid of himself with his antics, so I'd say don't waste any time on him with what he will or won't do in the future.
Huckabee wouldn't be my pick but I'd vote for him over hillary and I knew both of them before you did. His antics aren't what I don't like about him. He's a tax and spend liberal , just like hillary. The difference is he's prolife and she's for killing babies.
 

Steve

Well-known member
Tex
Do you think it is "conservative" to make these loopholes and "liberal" to close them?

do you have "proof" that the conservatives made the loop-holes?

I am not sure who made the loophole your complaining about but I believe that they have been in existence since at least,..."President John F. Kennedy, ,..., first proposed closing the deferral loophole 40 years ago,... "the deferral loop-hole has been around since the 1900's"

so to blame it on the conservatives is false,.. and nothing has stopped the liberals from pushing a bill through now,.. except that they don't want the law fixed..

thus your question is based on a un-proven false assumption

but in an effort to show I can answer your childish question..

I believe when a error is made in a law or a discovery that a loop hole exists that can be exploited, the law maker in office should act responsibly and fix the law... not sit around for a year and whine about how unfair the law is...

The disputed tax break is (was) intended to equalize U.S. and foreign taxes on foreign operations to make U.S. firms competitive,...The tax break, which predates the Bush administration by decades, is aimed at easing the difference between U.S. corporate tax rates and the lower tax rates that exist in some countries. It is designed to make U.S. companies competitive with foreign corporations abroad.
 

Steve

Well-known member
tex
So do you believe Congress should give "legal" tax loopholes to people who give them large campaign contributions that make the rest of us pay more in taxes?

What are you talking about? :???: :???: :???:

Where in any post that I have ever made could you possibly come to that conclusion?

I have never made any comment in favor of the loophole or of any support of pay to play conduct?


I don't believe congress should give legal tax loopholes to any special interest that give large campaign contributions...

every politician that receives any money and makes a decision on a law will be perceived as favoring the contributer...is it a fact?... only the politician knows.. but I have no sympathy for any politician convicted of corruption.... no matter which party..
 

Steve

Well-known member
tex
Do you believe that they should do this and hide it in large bills that don't have a chance to be read before being voted on?


Nothing should be hidden in any bill....

every bill should stand or fail on it's merits.. not have to be tucked into another needed bill...

I believe our law process is flawed in that, not even those who vote on the large bills knows whats in them...
 

Tex

Well-known member
Steve said:
Tex
Do you think it is "conservative" to make these loopholes and "liberal" to close them?

do you have "proof" that the conservatives made the loop-holes?

I am not sure who made the loophole your complaining about but I believe that they have been in existence since at least,..."President John F. Kennedy, ,..., first proposed closing the deferral loophole 40 years ago,... "the deferral loop-hole has been around since the 1900's"

so to blame it on the conservatives is false,.. and nothing has stopped the liberals from pushing a bill through now,.. except that they don't want the law fixed..

thus your question is based on a un-proven false assumption

but in an effort to show I can answer your childish question..

I believe when a error is made in a law or a discovery that a loop hole exists that can be exploited, the law maker in office should act responsibly and fix the law... not sit around for a year and whine about how unfair the law is...

The disputed tax break is (was) intended to equalize U.S. and foreign taxes on foreign operations to make U.S. firms competitive,...The tax break, which predates the Bush administration by decades, is aimed at easing the difference between U.S. corporate tax rates and the lower tax rates that exist in some countries. It is designed to make U.S. companies competitive with foreign corporations abroad.

Both parties have used tax policy to advantage contributors. The most recent, you will note, are those for the oil industry. It didn't increase the supply of oil because we have already drilled all the "easy" oil in the U.S.

Record oil prices are enough of an incentive for drilling. Giving more tax advantages for drilling will not make more oil in the ground, and it didn't increase the amount that they did drill for enough to hold prices down. We have had record oil company profits and on top of that they get tax breaks.

I am glad to see that you have come to admit that you agree with me on the other issues. It sure took you long enough to admit it.
 
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