Friday, August 29, 2014

Some of America's top corporations are parking profits overseas and ducking hundreds of billions in taxes. And how's Congress responding? It's rewarding them for ripping us off


Some of America's top corporations are parking profits overseas and ducking hundreds of billions in taxes. And how's Congress responding? It's rewarding them for ripping us off

 

In July, the American pharmaceutical giant AbbVie, maker of the world's top-selling drug – the arthritis treatment Humira – reached a blockbuster deal to acquire European rival Shire, best known for the attention-deficit medication Adderall. The merger was cheered by Wall Street, not for what the deal will do to advance pharmaceutical science, but because it will empower the bigger firm, AbbVie, to renounce its U.S. citizenship.
 
 
At $55 billion, the AbbVie deal is the largest in a cavalcade of corporate "inversions." A loophole in American tax law permits companies with just 20 percent foreign ownership to reincorporate abroad, which means that if a big U.S. firm acquires a smaller company located in a tax haven, it can then "invert" – that is, become a subsidiary of its foreign-based affiliate – and kiss a huge share of its IRS obligations goodbye.

AbbVie shareholders will continue to control 75 percent of the company, which will still be managed by executives outside Chicago. But the merged company will now file its tax returns on the island of Jersey – a speck of land in the English Channel, where Shire is incorporated. AbbVie, which racked up more than $10 billion in Humira sales last year, will slash its effective corporate tax rate from 22 percent to 13. The cost to the U.S. Treasury? Possibly as much as $1.3 billion by the year 2020.

Companies striking deals to become technically foreign can be found in all corners of American business, from California computer-equipment manufacturer Applied Materials to Minnesota medical-device giant Medtronic to North Carolina­based banana behemoth Chiquita. Little is changing in the core business of these firms. They will just pay less in taxes – and to a foreign government, often Ireland or the Netherlands.

These tax turncoats have drawn the ire of President Obama. "I don't care if it's legal," he declared this summer. "It's wrong." These inverted companies, he said, "don't want to give up . . . all the advantages of operating in the United States. They just don't want to pay for it."

more @ http://www.rollingstone.com/politics/news/the-biggest-tax-scam-ever-20140827

1 comment:

  1. The Sarbanes-Oxley Act, also called the Public Company Accounting Reform and Investor Protection Act of 2002 was signed into law on July 30, 2002 by President Bush. In the aftermath of Enron, Arthur Andersen, Global Crossing, and WorldCom, SOX promises greater corporate accountability and transparency. Named after Senator Paul Sarbanes and Representative Michael G. Oxley, SOX focuses on the importance of ethical behavior in corporate governance-across the United States and now…overseas.

    All countries have government-required laws like Sarbanes Oxley. In the UK, it’s the "Combined Code on Corporate Governance," in The Netherlands it’s the "Code Tabaksblatt," Germany has a "Bilanz Reform" and a "Bilanz Kontroll Gesetz." But then, why do we need SOX overseas since we already have the required laws? It’s because companies with U.S. headquarters must ensure that all foreign outposts meet federal standards. This is the major cause of concern in the management and accounting circles. According to some experts, the Sarbanes Oxley Act might have dictated convoluted rules and regulations on the U.S. businesses. While the rules are concrete ideologies that prevent accounting scandals, the constant flux in the policies confuses businesses around the globe.

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