Posted on 07/05/2004 2:49:03 PM PDT by phil_will1
A recent United States Federal Government report produced by its General Accounting Office (GAO) shows that the Cayman Islands is home to subsidiaries of more than 150 US corporations, leading to criticism from officials in that country.
Twenty-four of the 100 largest contractors with the US Federal Government, including Altria Group, Oracle and Procter & Gamble, have subsidiaries in the Cayman Islands according to report by the GAO, the US Congress's investigative arm.
Those 24 companies received a total of $35 billion from the US government in 2001, the GAO found.
"They are shortchanging our country even as they profit from it," said Senator Byron Dorgan, a Democrat from North Dakota, in an article in the New York Post.
Oracle spokeswoman Deborah Lilienthal said the database software maker's Cayman subsidiary owns a minority share of a foreign company she declined to disclose.
Procter & Gamble spokesman Douglas Shelton said the household goods maker's Cayman subsidiary is an inactive holding company.
"We're currently exploring dissolution of that entity so it doesn't raise questions in people's minds," he added.
The 100 US contractors own 464 subsidiaries in offshore tax havens, according to the GAO report. The offshore subsidiaries often serve the sole purpose of allowing companies to avoid paying US taxes, said Senator Carl Levin, a Democrat from Michigan.
"Many (offshore subsidiaries) are little more than a post office box set up to allow corporations to move profits to the low-or-no-tax havens rather than reporting that income in the United States," he added.
JP Morgan Chase & Co estimated in a June study that $650 billion of profit earned abroad by US companies over decades had never been taxed by the US. That's up from a cumulative total of $500 billion cited by JP Morgan in a study a year ago.
In 2001, almost half of the money US companies earned money outside of that country - 47 percent - was accounted for in offshore tax havens such as the Cayman Islands, which has no corporate income tax, said Martin Sullivan, a former US Treasury Department economist, citing Commerce Department data.
As a result, companies didn't have to pay the 35 percent US corporate income tax. Sullivan said his research shows the Cayman Islands is being used for US tax avoidance.
Coca-Cola, the world's largest soft-drink maker, manufactures syrup in two Irish plants owned by Coke's Cayman-based subsidiary, Atlantic Industries. Coke, based in Atlanta, saved $500 million in US taxes last year by earning 63 percent of its income through foreign subsidiaries, according to its 2003 annual report.
Intel, the world's biggest computer chipmaker, uses a Cayman subsidiary to run plants in Ireland, which has a 12.5 percent corporate income tax. Intel, using its offshore units, avoided $792.6 million in US taxes from 2001 to 2003, according to SEC filings.
Based in California, Intel did not deny why it uses a Cayman subsidiary. "I can only assume it's for tax purposes," said company spokesperson Chuck Mulloy in a Bloomberg News article.
Forty-five percent of US corporations with revenue exceeding $50 million or assets of more than $250 million paid no federal income tax in 2000, according to another GAO study. That has increased each year since 1996, when it was 33 percent, the GAO found.
Parmalat, the Italian food company that collapsed in December after telling investors it had lied about its finances, used three Cayman subsidiaries to misrepresent assets, according to Italian prosecutors.
Enron used 441 Cayman affiliates to help hide $2.9 billion in losses, US Senate investigators said.
Reminds me of Claude Rains in "Casablanca" who said he was "shocked" that there was gambling going on in the casino.
Tax reform bump
Maybe if there were no corporate tax, they wouldn't leave.
Oh wait, that defeats the purpose of having them here.
Those corporations should be declared as 100% foreign and IMPORT TAXES levied against them and all their products.
We don't need to provide welfare for ILLEGAL aliens - this includes alien corps!
Apparently these guys never heard of FISCS, foriegn sales corporations that must be set up off shore to facilitate use of US government law promoting tax savings on foreign sales.
The Cayman Islands are a favored location because they are close. There are many others, all are for compliance with IRS regulations. These FISCS have been under fire for years because other countries, most notably the French think they are unfair trade practices.
With that said, corporations should not pay income taxes in the first place. Nor should they collect any for the gov't.
I wouldn't be too quick to condemn these companies. There's lots of European money invested in the US precisely because the US has lower tax rates.
Maybe if there were no corporate tax, they wouldn't leave.
Heck change how the federal government taxes to a retail sales tax only and half the world's businesses are likely to show up in our backyard, can't let that happen:
Chairman of the House Ways and Means Committee,
Rep. Bill Archer (R-TX)
August 12, 1996
- "A recent survey was done, in Europe and Japan, of the major corporations and I was astounded at the results. They were asked, 'If the US abolished its income tax and went to a sales tax, would that have any impact on your decisions?' Eighty percent of the corporations said they would build their factories in the United States of America. Twenty percent said they would move their international headquarters to the United States of America."
And here we still sit. Disgusting.
"The IRS has created more liars than fishing and golf combined."
--Will Rogers
A Taxreform bump for you all.
If you would like to be added to this ping list let me know.
John Linder in the House & Saxby Chambliss Senate, offer a comprehensive bill to kill all income and payroll taxes outright, and provide a IRS free replacement in the form of a retail sales tax:
H.R.25, S.1493
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national retail sales tax to be administered primarily by the States.Refer for additional information: http://www.fairtax.org & http://www.salestax.org
"I wouldn't be too quick to condemn these companies. There's lots of European money invested in the US precisely because the US has lower tax rates."
I'm NOT condemning the companies; I'm condemning the legislators who write the laws that provide the incentives for companies to do this and then criticize them for taking advantage of the system that THEY set up!
THe issue isn't the rate of corporate taxation, as I understand it. The US is one of a very few countries around the world that insists on taxing US based corporations on their world-wide income. I read the other day that the only other country that does that is Uganda, or something like that.
The purpose of having corporations here is for them to pay tax?! Ehhhh???
I think their purpose is to make a profit. As a by product of profit, they employ people.
No, the purpose of having business in America isn't to collect tax. Business doesn't pay tax anyway... business only recovers tax costs, like any other cost, by increasing prices, reducing wages, or lowering ROI.
It is the goal of business to mazimize profit- and that goal is obviously served by reducing expenses of all kinds - including tax expenses to include income tax, payroll tax, and compliance costs.
I try to take all my legal deductions when I file...why shouldn't business do the same??
The problem is the tax system. Plain and simple.
I was speaking from their point of view.
Liberals think Corprorations exist to pay taxes and provide jobs.
Conservatives understand that Corporations exist to make a profit for its owners.
Corporations are associations of shareholders. They are all ultimately owned by individuals, with the exception of shares owned by foundations and governments.
The only things to tax are you and me. Increase taxes on any legal entity, and you and me pay.
How 'bout if Congress didn't tax them so much and they come back here on their own. You know, the old honey and vinegar story. They are outside the US because the financial climate is better somewhere else for them, the same reason I don't live in Hawaii.
Phew! I thought you were, well, socialist!
I would agree ONLY if they totally removed the illegal citizens' income tax. It only serves to enslave.
If they want to tax - tax EVERYBODY - that includes Kerry, Kennedy, Bush, etc for spending! That means a sales tax. They can't hide behind their tax shelters etc that way. No more exemptions either - they only go to those that pay the criminal lawyers, politicians, and judges.
The corporations though, merit the income tax. They are not exempt anywhere in the world except here on the USA.
If they have an exemption from a different country, then that "corporation" actually belongs to that country (communist china for example).
Evey tax dollar they cheat on, is one you and I have yo pay.
I've got news for you, every tax dollar they pay, you pay them first so the government can collect it from them. Furthermore it costs that business, and ultimately you through the stuff you buy, another 65cents for every dollar of tax collected through those businesses.
Ain't it nice to know, that they got you at the backend while you are filing to pay at front end too?
DO YOU PAY YOUR INCOME TAX
AT THE SUPERMARKET?
by D. Sherman Cox J.D. L.L.M. Taxation
Don't jump to the conclusion that these guys are "unfair tax evaders".
Remember, these companies are ALREADY paying taxes on all their income that they make in foreign countries. What they are avoiding is paying income taxes AGAIN to the US government on that income -- something that no other country requires of their corporations.
The law is broken. That's why these companies have to jump through hoops to just get back to a level playing field with other countries. Fix the law and these subsidiaries would close up instantly.
By the way, I suspect that if they DIDN'T do this, they would also be subject to criminal prosecution under Sarbanes-Oxley because they are not looking out for their shareholders' investments to the greatest degree possible.
I wish I had a dime for every time I heard that lame argument. You are telling me the United States is a corporate monopoly? That what you say is inevitable and that change and competition and under pricing don't exist?
I could care less if corporate profits are double taxed. This was also the way it was in the 1950s 1960s, back when US corporations paid a greater share of Federal taxes and America prospered. And the Federal tax burden of individuals was smaller.
Come on. This may be true for some of these tax cheats. What? 25%? Many times there is scheming to exaggerate the price (cost) of foreign content produced by a foreign subsidiary, thus paying taxes in foreign countries where the corporate taxes are lower. I believe in fair taxation of (major) corporations so please don't waste your time persuading me.
But they're not cheating at all - they're only taking advantage of legal options to minimize costs! Do you grumble and complain that I take the standard deduction because "I am cheating"??
I'm sure he does ;-)
Corporations are motivated to do everything that they can that is legal to maximize earnings per share every quarter. If they do not, I guarantee that their management will be fired instantly and replaced with people who will.
I don't like the short-term focus on quarterly earnings either (would prefer AT LEAST for the markets to track annual earnings and not quarterly) but I am loath to think about what the alternative is, except somehow giving people incentive to not make as much money as they can, or shut down the markets entirely? You know where that's heading.
This idea of having a tax system that maximizes taxes on corporations and minimizes taxes on individuals comes with a great risk -- which is that if individuals are not directly exposed to the pain of taxation, they will not act as a check on the unlimited growth of government -- in fact, they will just keep demanding that taxes be raised on those evil corporations.
Same problem we have with income tax withholding. if people had to write out one gigantic check every April 15, you'd better believe that they would vote entirely differently from the way they do now.
I don't want taxation to be painless and hidden. I want it to be as painful and direct as possible. If the US government needs to extend its tax jurisdiction over the entire Earth (something no other country does) just to collect enough money to satisfy its insatiable appetite, well, let's just say that I don't think the problem is that taxes are too low.
This idea of having a tax system that maximizes taxes on corporations and minimizes taxes on individuals comes with a great risk -- which is that if individuals are not directly exposed to the pain of taxation, they will not act as a check on the unlimited growth of government -- in fact, they will just keep demanding that taxes be raised on those evil corporations.
Definition [ http://www.encyclopedia.com/articles/13330.html ]:
value-added tax
levy imposed on businesses at all levels of production of a good or service, and based on the increase in price, or value, added to the good or service by each level. Because all stages of a value-added tax are ultimately passed on to the consumer in the form of higher prices, it has been described as a hidden sales tax. Originally introduced in France (1954), it is now used by most W European countries.
A good description of what is wrong with the EU VATs and why Europe is headed into a socialist economic sinkhole.
It's like me in the restaurant: What do I care about extravagance if you're footing the bill?
Walter Williams
Quit taxing production (via the income tax).
The US colonies declared independence from Britain mostly because the British taxes and trade regulations were counter to the economic interests of the colonists, and numerous civil appeals to their government were met with indifference, and later, with outright hostility.
The US citizens since 1913 have suffered worse tyranny under the Income Tax than the colonists could ever have imagined, and they must be spinning in their graves wondering why US citizens have allowed our situation to reach this level of disgust.
US productivity is taxed, and taxed, and re-taxed, at the corporate income level, on investment returns, and on every drop of sweat involved in the production, transportation, and sale of a US-made product or service.
Then to add insult to injury, some of those taxes are used to subsidize competing foreign producers, whose products and services are sold back to the US with no taxation.
The founders complained of "taxation without representation".
In addition to that complaint, we could rightly add "taxation by representatives and agents of foreign entities".
Neither political party represents the interests of the American citizens, and there is not yet a viable third party alternative to the two-card monte. It's about time.
Evey tax dollar they cheat on, is one you and I have yo pay.
Cheat???
Where did you come up with that term? Perhaps you are not aware of the difference between tax avoidance, which is entirely legal and tax evasion, which is illegal. For your enlightenment:
"Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes."
- Justice Learned Hand
Helvering v. Gregory, 69 F.2d 810 (1934)
Tax avoidance is the act of avoiding any tax that you are not legally required to pay.
When you take a dependent deduction, for your child, on your tax form, that is tax avoidance. If you take a deduction for your 401k or IRA, that is tax avoidance. If you use your own car in travels for your work and take a deduction for it, that is tax avoidance.
What those corporations are doing, is entirely legal and they report their activities, as required by US law. Only when they fail to report their activities, do they cross the line between avoidance and evasion. In fact, these companies and more, use foreign sales corporations, in order to remain, at least, partially competitive with their foreign competitors.
Since US companies have to pay income tax on foreign earned income and almost all foreign companies do not suffer under that onerous weight, that worldwide taxation, by the US government, serves as a severe financial handicap to US companies, involved in foreign sales. If they could not manage to write off just a little of those foreign profits, then the only remaining choice would be to move offshore entirely, where the only tax that they would owe to the US, would be on the income earned from US sales, in the US. Then, instead of sheltering just some of their foreign earned income, they would be effectively sheltering all of it. The result is that there would be fewer jobs in the US and you and I would have to pay taxes to support those who are out of work, because of the greed of our government.
It's not cheating. It's just good business.
What the government should be doing, instead of trying to place an even bigger burden on our corporations, forcing even more to move completely offshore, in self defense, is to eliminate the corporate income tax and personal income tax, in lieu of a National Retail Sales Tax, that would make our companies extremely competitive in offshore markets. But, the politicians (in BOTH parties) realize that to do so, would take away a giant anvil that they can hold over our heads, any time we don't kowtow to them, so there is a lot of resistance. At least we now have Tom Delay on our side on this issue, so we just may see a NRST in a few years. But, until then, we can just set back and watch the government run more and more corporations out of the US. How do such nimrods get elected???
Cheating is what is.
"Sure nit wit. As if a US small businessmen can compete against such tax cheats. I have to go with the Democrats on this one. Such off shore wise guys should be penalized. Should be a clampdown if they want to do business here. Evey tax dollar they cheat on, is one you and I have yo pay."
Why do you think these corporations aren't being prosecuted? Could it be because they aren't breaking the law? YOU may consider them cheats, but as Action America pointed out, there is an important distinction between tax evasion and tax avoidance. You may not recognize that distinction, but most do. Also, you may not recognize the duplicity of the authors of this abominable tax system demonizing those who try to negotiate it to their best advantage on behalf of their shareholders, but many sophisticated business people understand just how disengenuous that is.
"Cheating is what is."
Well, thank you for clearing that up.
Please explain, using the Internal Revenue Code, how this is "cheating." Cheating on taxes is a felony. Surely you can demonstrate the exact nature of the criminal conduct here.
And you (the sucker in the con-game) will make up for the taxes these giant corporations cheat on with their Caribbean tax "avoidance" shenanigans
Actually, your tax burden is independent of the company's tax burden, unless you're a shareholder.
America is one of two countries in the world that taxes offshore revenues of corporations chartered in the taxing country. The other country that does that the other great economic superpower, Uganda.
It's an idiotic way of doing business. Among other things, it hurts our balance of trade, because it's less profitable to do business in Germany as an American corporation than it is for our competitors.
The tax code was significantly different in the 1950s and 1960s. Among other things, you didn't have Subchapter S corporations. These are small businesses that are taxed at the individual rate, and their revenues are treated as coming from individuals for all purposes.
They should pay tariffs on related stuff.
There's my side of the aisle, which calls for ending the double taxation of offshore profits of American corporations.
We also have your side of the aisle, which demands more taxation, and thus more money going to government.
I leave the question of which side actually favors more government and which side favors less government as an exercise for the reader. (Poohbah adopts a smug, manure-eating grin.)
Yep. That's why I support HR 25. It makes every single individual feel the burden of the cost of government every time they buy something.
Not only does HR 25 END WITHHOLDING, it means that folks will have to pull green money cash out of their pocket daily to feed the beast. Each receipt is required to list the amount of federal tax paid on the purchase (as it is now, the federal taxes amunting to 25% or so of prices is not identified on receipts- it's hidden for good reason- so we don't know the true cost of gov't!).
IMO this will not only provide an environment that allows us all to feel the pain of taxes, but will also create an evnironment conducinve to *gasp* lower taxes and hence decreased gov't spending hence smaller government.
If you haven't looked yet, take a 3-5 minute break here.
It's a quick-fact/FAQ link.
"They should pay tariffs on related stuff."
You are mixing apples and oranges. The taxes these corporations are trying to avoid are, for the most part, on sales activities that are taking place outisde the US of A. You can't charge tariffs on goods/services produced and sold outside the country.
"Drop this avoidance shit. You know it's cheating same as I do."
If setting up foreign corporations to shelter income from taxes is "cheating", then it must be illegal. I will ask you again - why are they not being prosecuted?
BTW, do you consider someone incorporating as a Sub S to be cheating if they do so to minimize their tax burden?
No. You're wrong.
If it's cheating, show me statutes.
Of course it's not cheating, so how will you respond?
How about just change it to "well, it may be legal but I don't like it" or something that might be true?
Nope. That's an honorable way to pay taxes. But Cayman Island HQ for your phony corporate subsidiaries (many are just a post office box) is out and out cheating on taxes.
But it isn't against the law, so it isn't cheating. It might piss you off, but so what?
If you being upset that another business entity handling its business well means that you can punish them financially through force of government, then you're in fantasyland.
Of course you could simply just show me statutes indicating that they're breaking the law and I would do a 180 and bow to your greatness. However, my research indicates that these companies are operating legally. No cheating.
Again, if you can show me statutes I'll change up. But if they're doing nothing illegal what gives gov't a reason to interfere???
Since a company can increase profits by leaving partially, many are doins so (duh).
The options are to make a law preventing their departure or to make the business enviroment friendly to the extent that business wants to operate in the US.
The former is the strategy that has been in place. And it obviously hasn't worked. Making it more ewxpensive to do business in the US means business than can leave will leave.
The latter approach, making the business environment friendly enough to actually attract business, is one main pillar of HR 25, the Fair Tax.
'But Cayman Island HQ for your phony corporate subsidiaries (many are just a post office box) is out and out cheating on taxes."
I'll try this one more time.
So why isn't the federal governemnt prosecuting?
No, I would not increase taxation. I would stop taxing wages and sales altogether and replaced them with the tariffs and tax on wealth. Also I would bring back limits on compound interest and anti-usury laws.
I agree with you.
Ah, yes. People would have to rent all of their property and money from the state.
Also I would bring back limits on compound interest and anti-usury laws.
Kiss consumer credit good-bye...followed by anything resembling prosperity.
You got it. Usurers provide something what resembles prosperity - for a while. Same way as drug dealers provide happiness. Usury should be recriminalized.
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