America's most successful multinationals make great products and offer superior services. But they have another, less enviable quality in common -- they have become world leaders in tax avoidance.
General Electric's global effective tax rate for 2010 was 7.4%. Pfizer's was 11.9%; Cisco came in at 17.5%. The nominal U.S. corporate tax rate is 35%.
Each company has its own tax story, but all -- like other multinationals -- have for years relied heavily on low-taxed foreign income to drive down their worldwide tax obligations, including those of their U.S. businesses.
American multinationals claim they are taxed on their worldwide income, but in reality the "active" income they earn through foreign subsidiaries is not taxed in this country until the cash is repatriated. In addition, financial accounting practices (the lens through which we view these firms because their tax returns are not public) permit a company not to book any U.S. tax liability on foreign earnings if the firm states that the income is "indefinitely invested" abroad.
General Electric has $94 billion in indefinitely reinvested earnings. The total for corporate America is more than $1 trillion. 

If the story was simply that U.S. firms have successfully expanded into international markets and are paying taxes abroad at lower rates, one could argue that there is no U.S. tax mischief afoot. But these are not the facts.
Tax collectors in the U.S. and in high-tax foreign countries are the direct victims of the tax avoidance, but we all suffer from the resulting budget deficits and distorted investment decisions that firms make as a result of their ability to generate what I call "stateless income" -- income derived from selling goods and services in a high-tax country but that, through internal tax legerdemain, surfaces in a low-taxed affiliate.
What's going on is a highly choreographed six-step dance.
Step 1: U.S. firms rely on aggressive "transfer pricing" to sell, at bargain prices, high-profit U.S. assets or business opportunities to their low-taxed foreign subsidiaries in countries like Ireland. It cannot be simply the luck of the Irish that explains the extraordinary profitability of the Irish subsidiaries of U.S. firms relative to their European sister companies.
Step 2: U.S. multinationals move income from higher-tax foreign countries, where their customers actually are located, to lower-taxed ones not only through transfer pricing but also through "earnings stripping." For example, a corporation funds its German subsidiary with loans secured in Ireland, so the interest is deductible in Germany.
Step 3: Not satisfied with low corporate tax rates in Ireland (12.5%) or in other countries, U.S. firms set up exotic internal funding structures -- with such names as "Double Irish Dutch Sandwich" -- to shift income from these countries to zero-tax havens like Bermuda.
Step 4: Firms arbitrage what remains of their U.S. tax base by parking their global external-debt financing here, which creates interest deductions to shield their U.S. income. They then overstuff their low-taxed foreign subsidiaries with equity capital.
Step 5: Having put their stateless-income generating machines in motion, U.S. firms let their ultra-low-taxed foreign income accumulate abroad. Microsoft, for example, has accumulated $29.5 billion in offshore indefinitely reinvested earnings. Its financial statements suggest that its effective foreign tax rate from selling its products and services to customers located primarily in populous and relatively high-tax countries is in the neighborhood of 4%.
Step 6: With more than $1 trillion in low-taxed earnings offshore, the firms complain to Congress that U.S. tax law impedes their ability to reinvest their foreign earnings back home because they have not yet paid U.S. taxes on them. They demand a special tax holiday from Congress so they can complete the circle and repatriate all those earnings at nominal cost.
All this tax engineering has yielded tax burdens that bear no relationship to tax rates in the United States or in the populous foreign countries where the firms actually have personnel, real investment and customers.
It's true that the U.S. corporate tax rate, at 35%, is too high relative to its economic peers, about 28% on average. (Click here for data on the 31 member states of the OECD; the 28% figure is an unweighted average of the larger OECD members. Click here for the "BRICs" and other non-OECD countries.) But the solution is not to reward U.S. multinationals for concocting and implementing worldwide tax-minimization schemes.
The only feasible solution is to lower the U.S. rate to a level comparable with global norms and to pay for the reduction in part by introducing worldwide tax consolidation for U.S. firms, just as they today consolidate their worldwide operations for financial accounting purposes.
Edward D. Kleinbard, a professor of law at the University of Southern California Gould School of Law, is former chief of staff of the U.S. Congress' Joint Committee on Taxation. The facts and arguments in this piece are abstracted from two recent papers authored by Prof. Kleinbard: Stateless Income and The Lessons of Stateless Income. 



Many rich people and corporations are like that.
They benefit from everything a country (America for example) has to offer and then turn around and do everything possible to avoid taxes.
Greed, selfishness, and no ethics. Also, NO patriotism to their country.
Sickening and sad.
It is even worse when politicians aid and abet due to campaign money given.
Am I correct in this: if an individual does what these corporations do, he or she would go to jail?
Individuals cannot utilize income shifting techniques in the same way a business (i.e., corporate) taxpayer can! Indeed as pointed out by others, wage earners (as opposed to those who earn income on equity) have very little they can do to avoid the "marginal" tax rates associated with their earnings. Indeed the alternative minimum tax made this even more draconian than heretofore.
Corporations don't "go to jail" as non-persons, and even theri executives bear no criminal responsibility for aggressive tax positions unless those executives are so inept that it does not bear mentioning.
Big tax accounting firms have, on occasion, paid with large fines and serious threats of criminal sanctions, due to highly aggressive tax advantaged structuring...but now that they've been "wacked" they noiw leave the aggressive stuff to the Kleinbard's and others like yours truly.
America has been degraded into the opposite of what it suppose to stand for by greed, and the country slide into decline like every other country in History.
This is besides the poitn anyway; re-read Kleinbard's article. As his scholarly article states, the code and reasonable positions allowed under the code allow corporations to completely avoid the 35% federal effective rate. The rate is a cruel joke; it is too high, but rarely paid. The real effective tax rate paid by most (see "GE Capital" and its tax lawyers) is legally miniscule, and so all the griping by corporations is defensive and not to be taken seriously.
By the way, lower taxes on a federal level will not equal more US jobs. Too much to explain here, but trust me on that one!
"We should return to a ConstitutiÂonal government instead of the hugely wasteful and inefficienÂt leviathon we have now."
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RED66, got it. But that's more of a campaign slogan rather than a policy statement. That's not a criticism, I'm just more interested in details.
So would you say that you approve of government and you also approve of taxes? But you want less taxes? Is that correct? And would you say you want zero federal spending on education and the "social safety net?" Is that accurate?
States can do that and do it more effectively.
The sole purpose of a moral government is to protect the rights of individuals from force and fraud.
It cannot protect us from ourselves.
To do this, government needs money. Taxes work although the current US system is rife with corruption since lobbyists can give money to politicians for a little additional rule exempting their interest.
The Fair Tax would end this.
There are over 17,000 pages of regulations and laws. It's impossible for anybody to follow them.
The GAO just reported hundreds of duplicate programs. This is the result from the federal leviathan since nobody knows the scope of the federal government. We just keep adding to it.
The courts determine what is and what is not legal and the US Supreme Court determines what the Constitution permits. It is stare decisis, long held decided principles of law, that the US government through Congressionally passed legislation can do everything that it currently does; either under the obvious stated rights (defense), the commerce clause (including the dormant commerce clause), and the "privileges" clause.
Moreover, Social Security, Medicare, Medicaid, etc. etc. were all fought and determined to be constitutional.
Those original intent followers state that their positions are clearly right under the founders intent, but they really can't point to legal principles that provide that the consitution was meant by the founders to be interpreted as a static document.
You move a top 2000 company out of this country......a mandatory import duty tax.
For countries that have labor rates less than 25% of those in America an import duty where all funds to directly to Green Technology funding and other growth markets..... and distributed on the fastest time to market first basis. Jobs, Jobs, Jobs
We are the largest market in the world in terms of purchases from overseas.......lets start acting like it for leverage and to help America and Americans.
>>>>>>
Ofcourse none of this or anything that really will help American can ever happen.......somehow we need to fix the legislative process, maybe something like this
Time is up….this is the time for an all new approach ....with todays technology we do not need Congress to have the FINAL vote for us on key and critical matters that we could actually vote on ourselves today.
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This is the best time in history to make the change for Congress to continue as before, but citizens of this country actually have the FINAL vote on key and critical legislation.
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I challenge everyone to view the articles on the Huffington front page today/this week and determine how many issues/problems stated would not exist if we the people had the FINAL vote on key and critical legislation.
Ineresting article: Been seeing/reading alot about GE paying no tax's this year and everybody all up in arms about GE following the rules that our politicians/lobbiests/lawyers made this is pure theater by both sides and totally misses the point which is probably the point?
http://www.ehow.com/list_6796594_china-vat-tax-import-duties.html
They pay tons of money to lobbyists to get Congress to write the rules this way.......and then when folks start howling about them not paying taxes, then they start complaining about how they would love to bring all that money back home if only tax rates were significantly lowered...
However, if you want to eliminate potential competitors.....or at least keep them at arms length, then the obvious solution is to subject those smaller competitors that are trying to get off the ground to overbearing taxation and regulations so that they can't compete with your armies of lawyers, accountants, and lobbyists who create those rules and can navigate through them for you (because in essence they were written specifically for your company in the first place).
How to balance the budget without increasing taxes
I really needed to know that.
1. Don't cut spending during a downturn...it'll make things worse
followed by
2. Don't cut spending during a strong rebound...we don't want to risk a downturn or a slowdown in recovery
So the cycle of irresponsible behavior continues...
All nations end their taxes and the UN decides how much everybody should pay.