Parking Offshore Profits Hurt the Domestic Economy

via: TheIntelHub
by: James Hall
July 25, 2012

Conducting commerce internationally is not a crime. However, the lack of reinvesting domestically provides an inevitable drag on a viable internal economy. Publically traded companies operate under a set of rules that confuse the average investor. Most privately owned businesses are well aware that paying taxes on profits is the price paid to transact trade. Transnational corporations park extraordinary sums of money offshore to avoid a tax rate that most ordinary businesses pay routinely. Such discrepancies act as negative incentives that plague a feeble employment record.

Bloomberg makes the following points in the article, Repatriation Bill to Tax Overseas Profit at 8.75 Percent.

“Corporate repatriation legislation proposed by Senators Kay Hagan and John McCain would let U.S. businesses bring home offshore profits at an 8.75 percent tax rate.

The rate on repatriated profits would drop to 5.25 percent if a company’s payroll expanded during 2012, according to a summary of the bill released by Hagan’s office. The current top corporate rate is 35 percent.

Independent studies showed that when a tax holiday was last offered, in 2004, the lower tax rate for returning profits spurred little hiring or domestic investment. Most of the money was used to buy back stock. Democrats have said they are concerned that could happen again with a tax holiday.

Under the Hagan-McCain proposal, if a company repatriates profits and then reduces its staff, it would be required to add $75,000 to its gross income for every position eliminated.”

The apparent question is why these domestically chartered companies are not paying a uniformed tax. The U.S. has long taxed the individual on worldwide income. Why enable foreign branches avoidance loopholes to keep huge caches of liquidity overseas? Forbes provides this analysis in, Bringing Overseas Corporate Profits Back To US Not Necessarily A Job Booster.

“All of Western Europe allows for its multinationals to repatriate billions of dollars back home without paying the statutory corporate income tax rate. They enjoy a much lower rate, in the single digits in countries like Japan and UK, where corporate tax rates are similar to that in the U.S., with American companies falling in the middle of the two. In theory, the tax break avoids double taxation on corporate profits filed in other countries, but the trouble with that is that a portion of those profits are being booked in tax havens that have no income tax.

Continue Reading At: TheIntelHub.com

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  1. #1 by nonviolentconflict on July 25, 2012 - 4:43 pm

    Reblogged this on NonviolentConflict.

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