Companies Guard Tax Loopholes, Stalling Tax Cuts

As President Obama considers lowering the corporate tax rate, an impediment to reform is the corporations who, in theory, stand to benefit. In short, corporate America, can't decide which highly lucrative tax loophole it should fight to keep.

To reduce the 35 percent corporate rate, the Financial Times reports, companies would have to give up any number of the provisions that currently allow them to engineer their own tax breaks -- by, for example, deferring profits on overseas income, recording profits in low-tax countries or getting tax breaks for research. The trouble is, they can't agree on which perks they want to give up, and, the FT reports, the divisions could stall reform.

Ralph Hellman, a senior vice president at the lobbying agency Information Technology Industry Council, told the FT that some companies are also worried about a bait and switch: If they fork over a a current tax provision, they fear, the president might fail to uphold his side of the deal.

Some of these current provisions can be quite lucrative. Google, for instance, as Bloomberg reported last week, funnels much of its overseas profit through Ireland and the Netherlands to Bermuda. The complicated strategy, whose components are called the "Dutch Sandwich" and the "Double Irish," has effectively cut Google's overseas tax rate to just 2.4 percent, saving it about $3.1 billion over the last three years.

Other technology companies, like Microsoft, use similar strategies. If the president were to increase corporate taxes, Microsoft threatened last year, it would retaliate by shipping not just profits but also employees overseas.

The U.S. budget deficit, meanwhile, is about $1.3 trillion.

The president's attempts to offer corporate tax breaks have, in recent months, been largely spurned by corporations. When he unveiled the part of his new stimulus plan (of course, the administration doesn't use that word) that would give companies tax breaks for buying equipment and doing research, those companies said no thanks -- they'd rather he preserve the Bush-era tax cuts for wealthy individuals.

Comments

[delta7777]

02:45 PM on 11/01/2010

.
How about shutting down ALL tax loopholes, dodges, and shelters
related to profits that are realized or evasively shifted overseas.
.

[delta7777]

03:31 PM on 11/01/2010

.

like...heres a typical grift, not just Deathstar:

"Typically, he said, a company like Microsoft develops a product like Windows in the United States and deducts those costs against U.S. income. It then transfers the technology to a subsidiary in Ireland, where corporate tax rates are lower, without charging licensing fees. The company then assigns its foreign sales to the Irish subsidiary so it doesn’t have to claim the income in the United States."
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAKluP7yIwJY

Like..how about this one:????

the proposed break where business can write off
100% of plants and EQUIPMENT in 2011????
..writeoff at high US tax rates...and then....???
not really too expensive to ship equipment overseas, is it????
(maybe with a short cool-off period for the equipment "to become obsolete"????

http://online.wsj.com/article/SB10001424052748704392104575475920686869934.html
.

[delta7777]

04:05 PM on 11/01/2010

.

[the proposed break where business can write off
100% of plants and EQUIPMENT in 2011????]

Since the usual source of equipment these days
is China, Japan, Korea, etc.
this should give a fantastic boost to these economies

but come to thinking more about the possiblities of
this proposed tax writeoff break----

If this 100% writedown were restricted to
----ONLY EQUIPMENT MADE IN USA---

indeed it could really help to stimulate jobcreation here at home.

I don't think that such a special US tax break given to US domestic industries
would necessarily fall under the category of a tariff under NAFT agreements.

(but then, I don't think we make (or even can make) anything at all here anymore)
unless you count running the presses that print US money as making something)
.

[thebigbike]

04:35 PM on 10/31/2010

They just want to keep ALL of them, that's easy

[montn2]

05:21 PM on 10/30/2010

Some of the corporations that do NOT pay taxes -- ZERO in '09: Bank of America, AT&T, GE, Bristol Myers, Citicorp, Wells Fargo, Pfizer, Phillip Morris, Exxon. Interesting to note that JP Morgan Chase made a profit of $12 billion in 09 and will receive a tax refund of $1.4 billion. Yep, this after the bailout from us. Guess they need the bucks to hand out the big bonuses, bless their little heart. No wonder they do not want to give up their loopholes.

[Bumpkins]

01:17 PM on 10/30/2010

It has been decided for the corporations by the Supreme Court. The corporations are now individuals, and have lost their unique status as corporations. The corporations cannot eat, sleep, get married, have children, but they are now individuals, and should enjoy the same tax rate as individuals....tax em like us...20-25%....deficit solved, money for economic recovery, and social programs. Now does Congress have the guts to do it.

[vetxcl]

07:09 AM on 10/30/2010

corporations also get subsidies from our government:
"When a company wants to expand, it should rely on its own resources or borrowing capacity. But the truth is many companies look to federal, state, and local governments for lucrative subsidies: tax credits, low-interest loans, tax exemptions, property tax abatements, and research aid. Some estimate that state and local economic development subsidies alone total more than $50 billion each year in the U.S.

This week, Boeing was found by the World Trade Organization to have received $23.7 billion in federal, state, and local government support, much of it illegally. The WTO declares a subsidy as illegal when it benefits a specific company or industry to the detriment of a rival company. Ironically, Boeing claimed to be harmed by subsidies Airbus received in Europe.

Boeing played the subsidy game and won big in Washington State, Kansas, South Carolina, and Illinois. In Washington State, the Governor rammed through the legislature a special package for Boeing worth $3.2 billion. In Kansas, Boeing benefitted from enormous incentives before selling the production facility. In South Carolina, the company received an estimated $900 million package. Out-going Mayor Daley of Chicago awarded Boeing $56 million for its headquarters." - clawback.org

[Longtimeliberal]

04:43 PM on 10/29/2010

Well hope everyone gets it. Dems are pro-American jobs with a lower tax rate. Republican elites are pro-Intl Corporations at the expense of America.

[Enid]

04:01 PM on 10/29/2010

Taxes DUE ?
California business's are sitting on one point nine billion dollars in sales taxes. Dollars not turned into the state yet given over to them in sales tax at time of purchase. Car dealers top of the list. Pay up you tax cheats stop using our tax dollars too pay your way.
Sure this is not unique to California and just not state taxes and as well Social Security funds. Business's mom and pop to Corporations can use the tax courts and avoidance / lawyers to escape paying their rightful share. So they do so consistently and there is even a business model that caterers too them.

[theobserver4]

02:27 PM on 10/29/2010

No surprise as different industries tend to exploit different loopholes for their tax structure. The result is always the same though, they don't pay as much in taxes as small businesses do.....and let me remind everyone that 70% of our employment comes from small businesses.

Close the loophole first and then reduce the tax rate shortly afterwards......companies can cut a big ol check for the difference as repayment for robbing us blind for the last 35 years and shipping our jobs overseas.

[Veri]

12:07 PM on 10/29/2010

Wow. Microsoft threatened to retaliate by shipping jobs and profits overseas. Well, shove a 200% tax rate at them for doing so for each job and each dollar. Then fund, with government, a new public-private partnership to replace Microsoft.

Kill all government contracts with Microsoft. Ban them from The US market while giving tax breaks to their competitors.

The US Government is supreme. Then how come a few companies can order it around?

[Enid]

04:16 PM on 10/29/2010

Just tax heavily their imports to and in the USA. When they can't compete at wholesale or retail the manufacturing and assembling will return to the USA. Middle men shippers minimised plus many other costs can even be reduced by manufacturing in the USA.

[delta7777]

02:41 PM on 11/01/2010

.
[Wow. Microsoft threatened to retaliate by shipping jobs and profits overseas.]

kind of a bit after the fact????

more than half of Microsoft direct employees are overseas,
and this figure does not include subbed-out overseas jobs
manufacturing stuff for, but not direct employees of Microsoft.

Ship profits overseas??--Done!-

In November 2005, The Wall Street Journal wrote that "a law firm's office on a quiet downtown street [in Dublin, Ireland ] houses an obscure subsidiary of Microsoft Corp. that helps the computer giant shave at least $500 million from its annual tax bill. The four-year-old subsidiary, Round Island One Ltd., has a thin roster of employees but controls more than $16 billion in Microsoft assets. Virtually unknown in Ireland, on paper it has quickly become one of the country's biggest companies, with gross profits of nearly $9 billion in 2004."
http://www.finfacts.ie/irelandeconomy/usmultinationalprofitsireland.htm

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aAKluP7yIwJY

.

[BlueSkyPilot]

08:10 AM on 10/29/2010

I can imagine the meeting starting with:
"Represemtatives of the Corporate States of America. Here is your task. Pick your ten favorite loopholes and write 2000 pages of legislation around them so we can reform the system."

[moose and squirrel]

06:39 AM on 10/29/2010

yo corporate world, PAY YOUR DAM TAXES LIKE THE REST OF US!!

[brighterside]

06:11 AM on 10/29/2010

I know a great idea. Why not give tax breaks for those companies that keep their factories in the US? I don't understand why not just reward those companies that decide to stay here and hire American workers? Its as simple as that.

Remove all the tax breaks for Corporations that ship their jobs overseas. Instead give them tax breaks at home, allow for stimulus money to pay for modernization of equipment and such, and retrain the workforce to better handle the new technology that is in today's manufacturing industry.

[Longtimeliberal]

01:55 PM on 10/29/2010

That is exactly what they want to do. By closing the loopholes business tax here wd be lower by 10% and is enough to bring jobs back. Big Corp have ripped off American business for goodness knows how long but more I know the tax break to outsource jobs was under Bush and that one was closed this year. Corporations (big ones) pay almost No Tax at the expense of business here. What a rip off. Wonder who backed all these loopholes?

[montn2]

05:26 PM on 10/30/2010

I thought the Party of No said no to the bill eliminating tax breaks for outsourcing jobs and it failed?

[theobserver4]

02:29 PM on 10/29/2010

This is exactly what the GOP filibustered a few weeks ago. Make sure to vote American and keep the Tealiban out of power.

[mamacat]

05:19 AM on 10/29/2010

Theoretically, corporations pay more in the U.S. than in most other developed nations.
In reality, corporations pay less in the U.S. than just about anywhere else in the world.

[PhilipTaylor]

03:54 AM on 10/29/2010

GOLDMAN has the PERFECT ONE:

They paid 1% in TAXES in 2008.

Their CAYMAN ISLAND PO BOX made $Billions.

[Longtimeliberal]

01:57 PM on 10/29/2010

Halliburton is HQ in Sweden for this reason. There are numerous corp in the US who pay no tax many of whom have placed their headquarters in foreign countries. There are also foreign corp doing business here who pay no taxes. That is who is pumping up people like Sharron Angle.

[montn2]

05:27 PM on 10/30/2010

Like the cruise ships that fly under foreign flags so they do not have to pay US taxes but their customers are all Americans. I will not go on a cruise ever again because of that rip off.

[Marcospinelli]

01:59 AM on 10/29/2010

Wouldn't it be nice to have their problems?