Obamas Attack on Business

[crb]

http://news.yahoo.com/s/ap/20090504/ap_on_go_pr_wh/us_obama_taxes_8

Can anyone defend this? Talk about chasing more jobs overseas, why not just make corporations illegal? Does anyone really think this will not hurt us in the long run and cost us jobs?

And WTF, is Obama Simu now? Fixing the "loophole" bugs but not addressing the overarching second highest rate in the developed world problem because it doesn't help us?

First up, protectionist nonsense.



First up: Companies won't be able to write-off domestic expenses for generating profits abroad. For instance, administrative tasks performed in New York for a London office would not be tax deductible in the United States.

Administration officials depicted the move as a way to close unfair tax loopholes that encouraged companies to send jobs overseas. They argued that if it costs the same amount to do business in, say, Ireland as in Iowa, why not do it entirely in Des Moines? Officials said Obama would characterize the move as a way to keep jobs in the United States and fight a system that is rigged against U.S. companies who keep their entire business operation domestic.


Umm... so those jobs will go to London, the London subsidiary (likely serving UK customers) is not going to come here. Most multinationals aren't multinational out of convenience, they are so because they serve customers all over the world.



Obama also planned to ask Congress to crack down on tax havens and implement a major shift in the way courts view guilt. Under Obama's proposal, Americans would have to prove they were not breaking U.S. tax laws by sending money to banks that don't cooperate with tax officials. It essentially would reverse the long-held assumption of innocence in U.S. courts.

Guilty until proven innocent is a fine notion for a communist country.



The White House said that in 2004, multinational corporations enjoyed an effective tax rate of 2.3 percent in the United States because of such allowances. Aides said that was the most recent year available for analysis.

A US Tax rate on profit or on gross (probably gross, politicians love to intentionally mislead like that)? Did they pay any foreign taxes where they operated. How much income tax revenue did their employees generate?

Essentially Obama wants to do the same thing some high tax States want to do, and force businesses that operate elsewhere to pay taxes both where they operate and back home. Making sure they're taxed twice on the same money. In the end, that is only going to force more companies to wholly locate in low tax places like Ireland, and cost us jobs.

[Keller]

Unfrotunately it doesn't appear you know a whole lot about international tax credits.

Many (most, all) major corporations with international gross income use the following structure.

Parent corporation owns controlled foreign corporations (CFCs). CFCs are partners in a partnership. The partnership owns the operating businesses of the CFCs (the Branches). Each Branch specially allocates income, losses, deductions and, most importantly, tax credits to the CFCs (the partners in the partnership). These tax credits, known as creditable foreign tax expenditures (CFTEs) are allocated in such a way that it will "hype" the credits included in the US pool (ie - it will most of the time, if planned correctly, completely offset any US income tax liability) and will "dillute" the non-US pool (ie - it will most of the time shift all income tax liability to low tax jurisdictions). Generally, the "hyped" pool will consist of income that you plan to bring home to the US (the "full remittance" partner) and the "dilluted" pool will consist of income that you plan to keep out of the US (the "permanant reinvestment" partner). If you ever brought the income from the permanant reinvestment partner back to the states, you'd have to pay a shit-ton of taxes on it -- but you never will.

Edit: For clarities sake, this is by all accounts a "glitch" and was never intended by the drafters. In fact, as recently as 2004 Treasury tried to issue regulations under section 704(b) (partnership allocation regs) to prevent this behavior. While they made it significantly more difficult to allocate credits to the hyped pool, they only made it more difficult.

Special note: we are actually beginning to see clients bring home cash from their permanant reinvestment funds due to the need for stateside liquidity. We're actively discussing how to do this, and I think there is a solution that is utterly devious and cool. And likely legal!

[thefarmer]

Most multinationals aren't multinational out of convenience, they are so because they serve customers all over the world.

Source?

[Keller]

Here is a better article: http://www.cnbc.com/id/30556655


The officials said the plan would also end a practice by which some firms take big deductions against their taxes by inflating the amount of foreign taxes they have paid.

[ClydeR]

Can anyone defend this? Talk about chasing more jobs overseas, why not just make corporations illegal? Does anyone really think this will not hurt us in the long run and cost us jobs?

I certainly can't defend it. This is one campaign promise Obama should not have kept.

[Keller]

Making sure they're taxed twice on the same money.

And that is wrong.

Even assuming that your average business is not setting up a partnership splitter to isolate high-tax earning from low-tax earnings and hype their US credit, the bland, vanilla rules provide for a credit against taxes paid.

So, if you earn $100 in Ireland and are taxed at 10%, when you bring $90 back to the US you are taxed on 35% of $100 (not $90), or $35. But you get to credit the $10 of Irish taxes paid. So you only pay $25 to uncle same. At the end of the day, you've earned $100, paid $35 in taxes, and have $65 in your pocket. Just like you paid a single level of taxation on US income.

[Rocktar]

Quote:
Obama also planned to ask Congress to crack down on tax havens and implement a major shift in the way courts view guilt. Under Obama's proposal, Americans would have to prove they were not breaking U.S. tax laws by sending money to banks that don't cooperate with tax officials. It essentially would reverse the long-held assumption of innocence in U.S. courts.


Guilty until proven innocent is a fine notion for a communist country.


Works fine for a lot of crimes currently, why not add this to the list? Seriously, despite the lofty notion of innocence before guilt beyond a reasonable shadow of doubt, if you are accused of or arrested for a large number of crimes these days, you are guilty until proven innocent and even then, still guilty. If not in law, in action and social stigma and in many cases, employment and various other circumstances.

For example:
Child Abuse
Any sex crime (solicitation, prostitution and so on)
Incest
Rape
Sexual Harassment
Tax Evasion (already fact for individual tax payers)
Adultry

and the list goes on...

[TheRunt]

I wonder how this would effect one of my former employers, it is a hog processing plant that is owned by Mitsubishi with a minor partner itoham co. They ship a decent amount (250k lbs a day) of pork over to japan for sale there, but they "sell" it to the parent companies at something like 1/10 of a cent per lb.

[TheRunt]

Works fine for a lot of crimes currently, why not add this to the list? Seriously, despite the lofty notion of innocence before guilt beyond a reasonable shadow of doubt, if you are accused of or arrested for a large number of crimes these days, you are guilty until proven innocent and even then, still guilty. If not in law, in action and social stigma and in many cases, employment and various other circumstances.


In Indiana I can think of at least one crime, where they don't have to prove you guilty, but you have to prove your innocence. That is carrying a handgun without a license(or being exempt), the law states that the courts do not have to prove your carrying was unlawful, but you have to prove that it wasn't.

[Kembal]

I wonder how this would effect one of my former employers, it is a hog processing plant that is owned by Mitsubishi with a minor partner itoham co. They ship a decent amount (250k lbs a day) of pork over to japan for sale there, but they "sell" it to the parent companies at something like 1/10 of a cent per lb.

That sounds like the normal abuse of transfer pricing there, assuming all the data is correct. That's what this change is supposed to block.