President Obama’s decision to go after American businesses that are avoiding taxes by international domicile is a serious attack on the US. If he has a problem with tax havens, why not attack them at the G10 like everyone else. Condemn the countries offering the tax, do not punish the countries benefiting from the tax, ESPECIALLY if it is your own.
Yes, that is correct, the US benefits from these tax havens. US companies stay in the US because they can claim domicile of foreign earnings in those countries without having to set up shop there or elsewhere.
“White House officials said the latest proposals simply follow through on Mr. Obama’s frequent criticism that current U.S. tax rules encourage multinationals to move jobs overseas.”
That makes no sense to me. I see the exact opposite effect happening.
Think of it this way. Say you are a big US company that has a lot of employees in the US and your main operations here, yet your official domicile for foreign revenue is the Cayman Islands. You are truly an international company. You have 20 offices around the world with smaller operations in each and you sell your product worldwide. This is more an more the case these days as the world becomes flatter. All of the sudden, the US is going to charge you billions of dollars in taxes for maintaining operations in the US. What do you do? Do you close down your international sales? No. If you are a listed company, you have to do what is best for your shareholders, which will say move your operations to another country where there will not be problems and save yourself billions of dollars.
I am not saying that companies should avoid paying taxes, just that Obama should think about the repercussions in an economy like this. First, this will drive US companies offshore, leaving unemployment in its wake. Second, this gives a leg up to any foreign company (also domiciled in a tax haven) competing against an American company that tries to stay and pay the taxes, big or small. That’s correct, small US companies are going to get punished from this strategy as well.
In all reality, tax havens will continue to exist for a long time. There is probably a time and place to attack the legality of those countries through trade restrictions or other political measures. But, just because Obama has run out of money from rampant spending on banks and autos that he still does not have the guts to bankrupt or nationalise (I would prefer either over the current situation), does not mean he should continue to stifle US economic growth by taxing everything and anything.
It seems to me that Obama’s strategy so far is to spend money one day and then go out the next day and try to find someone to tax to pay for that spending. That will not work if he is hurting the economy more the second day than he is helping it on the first day.
No related posts.
I’d like to point out that the term “tax haven” is both pejorative and relative.
“Pejorative” because it is often used inaccurately. Just because a country chooses to raise its revenue differently from the US, doesn’t mean it is doing something wrong. True, Bermuda does not have an income tax, but we raise substantial tax revenue charging an import duty on every good brought to the island (and before anyone loses their shit about free trade, Bermuda has no domestic manufacturing industry so this is not protectionist). Think of it as a sales tax, levied at the dock.
“Relative” because the US was, for many years, a “tax haven” compared with, say, its European counterparts. For some reason, many Americans like to think that their government has hit the sweet spot vis-a-vis taxation – any who taxes more is socialist, anyone who taxes less is a haven.
I agree that countries which operate institutions designed to help individuals hide assets from their home governments is wrong; transparency is always the best policy, and secretive black-box banks in Switzerland are giving the rest of us a bad name. I also agree that it would be unfair for a country to free-ride off the public sector of a neighbour and then benefit by charging lower taxes (for instance, I imagine Lichtenstien and Bermuda can afford to spend relatively little on national defense, comfortable in the assumption that Britain or the US will ride to our rescue if we were ever invaded); my solution to this is a quid-pro-quo, with greater openness from the low-tax jurisdiction regarding their financial institutions and customers.
As for those companies with a PO Box in the Caymans but all other operations onshore claiming to be “foreign”, I say bust ‘em, and good riddance – the economies of offshore financial centres do not and should not revolve around chicanery. My worry is that the whole spectrum of legitimate foreign companies (from 49% operations in the US down to 1%) will get tarred and feathered the same.
As usual, I don’t think the White House’s position was made on the advice of cool-headed economists, but rather because it is a politically attractive soundbite to point to a foreign scapegoat and make John and Jill Voter think that all their problems are caused by the mobile rich chilling out in tropical islands, and multinational corporations “sending” jobs overseas. Obama ran a compelling campaign, denouncing fear mongering and unthinking devotion to the party line, but I guess once in office those old tricks look damn appealing.
This column is “dead on”. Read The Wall Street Journal article on Wed May 6th, under “review and outlook” on Opinion page. It is entitled “Obama’s Global Tax Raid”. It is another example of his shortsighted thinking and long term negative consequences we can look forward to.
Dad, I believe this is the link you refer to:
http://online.wsj.com/article/SB124157636504090459.html
Also, I am not going to touch what Obama is doing with Chrysler and the Senior Bond holders there. That single act could ruin American financial law as we know it. I encourage you to read Clifford Asness to get going on that one:
http://zerohedge.blogspot.com/2009/05/cliff-asness-i-am-ready-for-my.html
Folks you elected an anti-capitalist and an anti-American!!!!
He’s gonna bring you low and squander what generations fought for, guaranteed. Only hope is to ask him for his birth cert, so you can see you’ve been royally screwed and get him the hell out of there before his international friends cut your collective throats.
But chances of this are mighty slim, when your media has turned so far left and treats conservative citizens as dummies and tea baggers.
Every day a new outrage – today we hear this move, but if there were ANY oversight or accountability for the trillions he’s spending (yeah – transparency) this wouldnt be necessary.
Hasn’t anyone in your country read of your President’s associates and works and beliefs before he ran for your leader?
Collective suicide at the very time the west needs to stand firm in its resolve.
Finally! A post in response to this Obama finger pointing blame game that makes sense; not just because I’m from Cayman and agree with Conor but because someone finally stated an opinion! I’ve seen some other posts via domaining.com that said nothing new other than “glad my company isn’t offshore.” Thanks Conor, you get it!
While I agree with everything in Trevnutz response above I’m a little tired of everyone jumping on this “18,000 companies in one building” bandwagon that Obama is using to get headlines. Should have seen the clueless Tweets flying around about #Cayman after that comment! Trevnutz, sounds like you may be in Bermuda (our competition), remember though, we’re all in this together (G20 grey list sound familiar?). I know you meant no harm, but be careful not to join in on this little blame game on Cayman.
Cayman is clearly not in the business of chicanery as evidenced in numerous treaties that we have signed such as the 1986 Mutual Legal Assistance Treaty with the U.S. as well as more recent measures to come in line with European Union savings directive.
Whether US subsidiaries should be entitled to tax deferral is entirely a matter of United States tax policy, however, having a registered office address in the Cayman Islands is driven by commercial considerations, not by tax avoidance. It allows companies to raise capital and conduct global business.
Perhaps if more companies and individuals had utilised the legitimate asset protection and management services offered in the Cayman Islands instead of the all the recently folded U.S. domestic investment companies they (and the country) would be in better shape.
I wholeheartedly agree with Conor that offshore financial centers are indeed essential to the U.S.
Thank you for allowing me to share my views, I’m just a Cayman architect, musician, domainer, husband, and father that is tired of all the misconceptions people have of my country and the continued propagation of these ideas by Hollywood and now the President of the United States. Hope my small voice is heard by some.
Thanks Caymanick. I did not mean to jump on Cayman any more than Bermuda, Panama, Switzerland, or Hong Kong (hilarious how France called HK a tax shelter!). Only that it is the most popular.
TrevNutz is in Bermuda…crazy shorts and all.
Maybe they should go after the billions in money that was “lost” or stolen by the previous administration. Bush and co. basically just bankrupted the country by creating a false war. No one that attacked the US on 911 was from Iraq. Most were from Saudi Arabia. Bush and co. are buddy buddy with the Saudi’s so they couldn’t steal their oil. They wanted an excuse to invade Iraq and this was it. Haliburton, Arbusto, Carlyle Group, Wolfowitz Doctrine, I mean you couldn’t make this stuff up.
Plane loads of cash sent to Iraq and “lost”, 2 stolen election in the US to keep these warmongers in office and now rumblings of “Jeb” are in the news. Nasty business. Hopefully the new administration has at least a chance to clean up the mess before the county implodes.
Cheers.
Yeah, you’re right. $800 billion spent over 8 years fighting fighting is a lot. Especially to keep gasoline prices $5 lower per gallon than anywhere else in the world. And especially to stop the breeding ground for terrorism at it’s source.
Of course, it’s not that much compared to the $7 or $8 trillion that we’ve spent or pledged to spend just in the last several months.
I always find it interesting to note that the world had no problem lending us money for the War in Iraq yet is closing their wallets to lend for the spending we are doing these days. Do they know something our leaders don’t know?
Hi Conor,
My personal belief is that the Bush Administration created a breeding ground for terrorists. I mean if they would have invaded Afghanistan or Pakistan where the terrorists actually were located they would have calmed things down. Invading a country that had nothing to do with 911 was THE catalyst that turned Iraq into a hornets nest. I mean the Bush administration sent innocent American men and women, most just kids under 25 to steal oil and resources under the guise of terrorism. WMD my ass, Iraq could barely take care of itself. The US was pissed that all of the oil in Iraq had been promised to the Russians and French. Rather than negotiate to buy the oil, Bush, Rumsfeld, Wolfowitz and Cheney decided stealing it was a money machine for everyone, them included. Haliburton (cheney’s company) was awarded Billions in untendered contracts, and the American people just let it happen. Patriot act; stealing your rights away under the illusion of security, it has actually made the country a frightened “Fortress” where its’ own citizens are afraid to speak out. This Brave New World sucks, thank Bush Sr. & Jr. and the rest of the bandits that have apparently been left to walk off into the sunset with buckets of your money.
IMO.
Cheers!
Hopefully the new President will get a chance to clean the mess up.
Umm, we did go into Afghanistan. We went there first in 2001 and removed the Taliban from power, remember?
How were any of our soldiers innocent? Every one of them volunteered to join the US Military. We have not had a draft since 1972.
Lol! Popularity has it’s good and bad points I guess!
Hey, I’m about to make the switch to shorts myself, getting kinda warm down here. No knee high socks though.
Impeach, you haven’t a clue. Good luck America.
oops, I was away from my “machine”.
Conor,
We did go into Afghanistan and “remove” the Taliban. Apparently they are still there running things and getting more recruits from Pakistan, etc, everyday. They are running many of the townships outside of the main cities. TODAY.
Soldiers innocent? Tricking American citizens into believing that the bogey man was in Iraq was what Bush and company wanted. Creating a false war to steal resources was THE ONLY REASON Bush and bandits wanted to invade Iraq. How many terrorists that attacked the US on 911 had Iraqi passports? NONE. Weapons of mass destruction = NONE.
“Seriously”
Every day a new outrage – today we hear this move, but if there were ANY oversight or accountability for the trillions he’s spending (yeah – transparency) this wouldn’t be necessary.”
Wow, I could certainly apply that statement to Bush and companies campaign of terror and mismanagement during his terms. America is bankrupt because it’s fighting made up wars to steal resources that aren’t theirs. If there was ever a polarizing president it was Bush. He apparently stole 2 elections and American’s let it happen, twice. Electronic ballots with no receipts. ouch.
Brave new world. not.
Cheers.
Interesting link from Owen about Michael C. Ruppert and his work. Nasty road ahead. Cheney and the bandits saw it coming.
http://energybulletin.net/node/48990
“The Bush-Cheney administration, knowing that collapse was coming, looted the U.S. economy on behalf of its base. It was perhaps the largest wealth transfer (theft) in history.”
Get your livestock and gardening skills ready. Globalization is dead.