Ending the Corporate Tax Hide-and-Seek - NYTimes.com - 0 views
opinionator.blogs.nytimes.com/...the-corporate-tax-dodge
tax policy corporations avoidance US global
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As muddled and broken as the individual income tax system may be, the rules under which the government collects corporate levies are far more loophole-ridden and counterproductive.
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Unlike individuals, multinational corporations can shuttle profits — and sometimes even their headquarters — around the globe in search of the jurisdiction willing to cut them the best deal on taxes (and often other economic incentives). Much of this occurs under the guise of “transfer pricing,” the terms under which one subsidiary of a multinational sells products to another subsidiary. The goal is to generate as high a share of profit as possible in the lowest-taxed jurisdictions.
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subsidiaries of United States corporations operating in the top five tax havens (the Netherlands, Ireland, Bermuda, Switzerland and Luxembourg) generated 43 percent of their foreign profits in those countries in 2008, but had only 4 percent of their foreign employees and 7 percent of their foreign investment located there.
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All in all, it is a race to the bottom on the part of revenue-starved governments eager to attract even a relatively small number of new jobs.
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As a consequence, the effective corporate tax rate in the United States fell to 17.8 percent in 2012 from 42.5 percent in 1960,
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Business groups, naturally, say the best way to bring jobs and cash home is for Washington to stop taxing profits earned overseas by American companies altogether. But that idea makes little sense. While changing to this “territorial system” would allow some of the estimated $1.7 trillion of cash “trapped” overseas to come home free of tax, it would both cost the Treasury an estimated $130 billion in revenue over the next 10 years and provide greater incentives for American companies to continue to move jobs and production overseas.
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the gaming of the tax system is becoming a global concern, with an action plan coming from the Organization for Economic Cooperation and Development in July. The O.E.C.D. should work toward taxing business profits where they actually occur, not where they’ve been shifted by some tax adviser.
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we should consider taxing a greater share of the profits made by companies not at the corporate level, where they are subject to oh-so-much gaming, but rather at the shareholder level.
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As corporate taxes have declined, corporate profits have increased. That has pushed up stock prices and been a boon to shareholders. It hardly seems unfair to ask those who already benefit from bargain tax rates on capital gains and dividends to share some of those gains with the government.