How the US Corporate Tax system outsourced your jobs (part III)

[FreakinDJ]

In case you missed parts 1 & 2, they can be found at the links below

Part 1 - http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x88792
Part 2 - http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x88802

Hopefully DU will have enough interest to follow this series exposing the failed Corporate Tax Structure of the United States and gain a thorough understanding of the underlying structural problems in our Corporate Tax Code. The following is merely the "Tip of the Iceberg" and typically these are subtle changes in the Corporate Tax Code that have HUGE consequences for Working Americans.

OK – Here comes the Nuts and Bolts

How the current US Corporate Tax Code encourages Corporations to Outsource American Jobs and enables Corporations to avoid $Billions in taxes is a very complex “Slight of Hand”. No 1 single line item / exemption alone creates this paradox but rather the result of a well orchestrated symphony of Corporate Tax Madness.

First the Corporation needs an Off Shore Parent Corporation. It also has it advantages

Corporate Inversion

A United States corporation that undergoes a corporate inversion becomes a subsidiary of a foreign corporation or parent corporation organized in a tax haven country.

A corporation owned and organized in the United States pays federal taxes on corporate global income. A foreign corporation pays federal taxes and state taxes only on U.S. income generated. As a result, a technique known as corporate inversion is commonly employed to lower U.S. tax impact. Without a corporate inversion, all sources of income are subject to taxation in the United States.

These offshore international banking subsidiaries perform functions that allow the corporations to cut their taxes. Offshore offices handle imports and exports, buying a U.S. export from a company at a sharply reduced paper cost and selling it abroad for market value at no profit. In the reverse, a company buys goods at a prearranged price and sells to the corporation at a grossly inflated one. In this way, the U.S. firm has a huge cost to deduct when it uses the item in manufacture or resells it at a loss.

Earnings-Stripping

A strategy corporations use to reduce their income taxes involves a foreign corporation and its U.S. subsidiary engaging in inter-company transactions designed to generate tax deductions for the U.S. company. Or even selling Assets of the US Based Corporation such as Intellectual Property Right, Patent Rights, and License Rights at BELOW market values to the offshore parent Corporation. Then those same Patent Right/Intellectual Property Rights result in License and Fees charged back to the US Subsidiary at inflated prices. That is why you see the R&D being performed in the United States and the production being performed offshore (Intel)

Payments of other deductible amounts by a U.S. corporation
to tax-exempt or partially exempt related parties also provide an opportunity to shift
income out of a U.S. corporation, the use of related-party debt arguably is the most
readily available method of shifting income out of U.S. corporations.1 Income shifting
through interest payments is certainly the most recognizable manner of shifting income in
this context.
http://www.treasury.gov/resource-center/tax-policy/Documents/ajca2007.pdf

Stay tuned

[Mimosa]

1. These policies have to be changed for people to get jobs.

Thanks for the info. Most of us don't know the policies and laws by which almost all manufacturing was offshored.

[JustAmused]

2. Exactly

Obama mentioned this in his campaign personality, but it seems to have dropped to the bottom of his barrel since being elected.

[FreakinDJ]

3. They have been discussing it in Congress since 2004

and have sat by watching 43,000 manufacturing facilities and 3 Million Good Paying American jobs slip through the cracks. I have GAO reports dating back to 2004 ordered by Congress outlining what has been going on - they know - they just don't do any thing about it

and I have yet to see so much as a news blub

<on edit>
For the Record Obama does have a plan to Restructure the Corporate Tax code - Why do you think the TeaFarty RATpubliCONs are making a Full Court Press in the Debt/Deficit Talks to take up revenue(taxes) in the 2nd phase

[Cool Logic]

4. "That is why you see the R&D being performed in the United States and the production being

performed offshore."

Actually, one of the primary reasons relates to double-taxation. American companies with operations in multiple countries are subject to being taxed by the country where their operations are located, and then taxed by the US, where they are not located.

[FreakinDJ]

5. That would not be accurate - or even a little bit true

US Corporations are allowed a Deduction for all Foreign Taxes paid, and they can take the deduction immediately. The US Corporate Tax Code also allows them to "Deffer" paying taxes on those same profits indefinitely.

Known as the Off Shore Profits Tax Exemption

The U.S. tax code's treatment of profits earned by foreign subsidiaries of American corporations. Profits earned in the United States are subject to the 35% corporate tax. But multinational corporations can defer paying U.S. taxes on their overseas profits until they return them to the USA — transfers that often don't happen for years. General Electric, for example, has $62 billion in "undistributed earnings" parked offshore, according to recent Securities and Exchange Commission filings. Drug giant Pfizer boasts $60 billion. ExxonMobil has $56 billion.

[upi402]

6. Thank you for this

:bow:

[FreakinDJ]

7. Check out part 5

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x88850

puts it all together how they "Transfer to Wealth" out of the country to Tax Havens