Also Hillary Clinton and Donald Trump. An article at The Guardian explains how tax avoidance works:
This squat, yellow brick office building just north of Wilmington’s rundown downtown is the registered address of more than 285,000 companies. That’s more than any other known address in the world, and 15 times more than the 18,000 registered in Ugland House, a five-storey building in the Cayman Islands that Barack Obama called “either the biggest building in the world, or the biggest tax scam on record”.I am so very, very, very tired of this. It's been going on for generations and will never end because the wealthy and the corporations of this country own the politicians who make the laws that enable these arrangements. Let's call it what it is - pure bullshit.
Officially, 1209 North Orange is home to Apple, American Airlines, Coca-Cola, Walmart and dozens of other companies in the Fortune 500 list of America’s biggest companies. Being registered in Delaware lets companies take advantage of strict corporate secrecy rules, business-friendly courts and the “Delaware loophole”, which can allow companies to legally shift earnings from other states to Delaware, where they are not taxed on non-physical incomes generated outside of the state.
The loophole is said to have cost other states more than $9bn in lost taxes over the past decade and led to Delaware to be described as “one of the world’s biggest havens for tax avoidance and evasion”.
But it’s not just big corporations that have chosen to make 1209 North Orange their official home.
Both the leading candidates for president – Hillary Clinton and Donald Trump – have companies registered at 1209 North Orange, and have refused to explain why...
Several accounting experts said there are many legitimate reasons why US and foreign companies incorporate in Delaware, particularly because of its highly respected Court of Chancery and business-friendly state government. The process of setting up a company in the state can be completed in just a few hours and requires less paperwork than registering for a library card in the state. There are more than 1m companies registered in the state – more than Delaware’s population of 935,000.
It's not even secret. And it will not end under a Clinton or a Trump or a Cruz or a Kasich presidency.
The counterpart to these domestic loopholes is the holding of assets overseas.
I know I'm repeating myself, but...More than any other American company, Apple holds $181.1 billion in offshore accounts, according to a Tuesday report released by Citizens for Tax Justice, an advocacy group.Other major American tech firms—including Cisco, Google, Hewlett-Packard, and Oracle—are among the largest companies that are using legal but questionable tax tricks to keep money overseas and effectively pay little to no American federal corporate taxes...
"Losing $90 billion of potential tax revenues every year is a very big deal," Neil Buchanan, a professor at George Washington University, said... Politicians who respond to proposals to fund these programs by saying that ‘we can't afford it’ are simply saying, ‘I'd rather cut Apple's tax bill than educate our children.’"...
"US corporate tax collection as a percentage of GDP is currently at an all time low. This means the U.S. government has to compensate for the shortfall from other sources (read: domestic taxpayers with no multinational activity) and cut public spending. There is, of course, an alternative: to change the law so Apple actually pays taxes on this income. In current Congressional environment, this will happen immediately after hell freezes over."
It just never ends.
It will not end under a Sanders presidency either. No individual has the power to stop this. It would take an unlikely majority of like-minded lawmakers and other elected representatives to begin chipping away at issues such as this.
ReplyDeleteNo, I fear this pattern will continue until it can no longer sustain itself and America reaches a critical tipping point.
Maybe not but, he could make it much harder to go unnoticed.
DeleteRUFK? Past tipping point?wow. Bless u
DeleteThe less money the government snatches out of our pockets, the better. It's a dirty system, but in the end, that money will be used far more efficiently but the private sector than by the filthy politicians.
ReplyDeleteThat's right. Because the baby Jesus sends his little angels to whisper in the ears of all the CEOs.
DeleteThe baby Jesus and his whisperings ain't got nothing to do with it. The politicians will be happy to spend all your money and mine to get re elected, and then borrow as much as they can, with you and I on the hook to pay for it, if the tax draw isn't enough. The private sector, left on their own, can only waste and lose their own money. Unless, of course, they go to the state and get the politicians to give them your tax money and mine, to play their games. Let's just keep our own money and waste it ourselves.
DeleteWow, the perception filter you have. This does not force the government to spend less money, it makes them seek the funding from elsewhere (this means YOU!) to make up the difference.
DeleteThis explains why there are so few Americans in the Panama Papers. No need to!
ReplyDeleteTo be clear: the Delaware incorporation only affects state income taxes, not federal income taxes.
ReplyDeleteFor this reason alone, it won't end no matter who is president. It's not a federal issue.
The money held overseas, however, is a federal issue.
Mike is correct, and this is hardly a loophole, it's just the state tax law.
ReplyDeleteNo no, you misunderstood. The main reason why companies incorporate in Delaware is just that the legal procedures are more established. Over half of publicly traded companies are incorporated in Delaware. When you do that, you need what's called a "registered agent."
ReplyDeleteThis has nothing to do with avoiding taxes.
While it's true that one COULD have a Delaware corporation and use it to avoid taxes, that's a bit of an unfair accusation. You also could use your knife to kill someone, but to suggest that you might be a murderer because you own a knife is quite a leap.
Interesting Planet Money series on this type of thing from 2012.
ReplyDeletehttp://www.npr.org/sections/money/2016/03/16/470722656/episode-390-we-set-up-an-offshore-company-in-a-tax-haven
Instead of getting mad at businesses for making good business decisions, other states could enact Delaware's laws and bring the tax money (and jobs) back to their own states.
ReplyDelete