----
Associated Press.

The president's proposal would eliminate some tax deductions for companies that earn profits in countries with low tax rates, as well as consider U.S. citizens who use tax havens in the Bahamas or Cayman Islands guilty of violating U.S. tax laws. If Obama wins congressional approval for the changes _ and he faces a challenge on Capitol Hill _ it could deliver $210 billion in tax revenue over the next decade.

Also, Companies won't be able to write-off domestic expenses for generating profits abroad. For instance, administrative tasks performed in New York for a London office would not be tax deductible in the United States.

Administration officials depicted the move as a way to close unfair tax loopholes that encouraged companies to send jobs overseas. They argued that if it costs the same amount to do business in, say, Ireland as in Iowa, why not do it entirely in Des Moines? Officials said Obama would characterize the move as a way to keep jobs in the United States and fight a system that is rigged against U.S. companies who keep their entire business operation domestic.
--
link

Are they trying to exaggerate a bit here? Why not just say that the CBO (or whoever, maybe the OMB?) projects that we would realize an average $21 billion/year over the next decade?

Further, how does this projection work? Does it account for the fact that tax haven users are usually going to be one step ahead of the law? Does it account for the fact that many might simply leave the country?

I'm in favor of these moves as I'm in favor of fairness in the tax code, but I think the projections and the way they're being presented are a little bit dishonest.

What's the difference between saying it'll save $21 billion per year over 10 years rather than saying it'll save $210 billion over 10 years? Maybe they want to state what the total savings cost would be.

Then why not go out to 11 years? Or 12?

Or do they plan to stop enforcing this stuff in 10 years?

Bigger numbers get more headlines, everyone from businesses to the media likes to multiply out to get the bigger number.

The CBO doesn't do projections beyond ten years, at least that's according to Sen. Inhofe in an interview he did.
link

I think they're trying to put it up against the often cited 15 trillion dollar deficit number, which is also a ten year figure.

People are suddenly long term minded.

I think it's pretty hard to say what real effect it will actually have at this point. My guess is that the $210 billion dollar number is how much would be lost in tax shelters over the next 10 years, all other things being equal. But there is no guarantee that such a move would suddenly bring that money back at the same rate, if for nothing else, because all other things don't stay equal, especially when a major rule change is made.

Do most countries allow you to write off domestic expenses for foreign operations who profit is not claimed domestically? I really don't know.

Obviously, the reason that companies would leave is if not being able to make these deductions would result in a competitive disadvantage in the US tax code. I don't know enough about the tax codes in other countries to know whether that would occur or not, but I do know that many companies currently export operations (and presumably some jobs) because of the tax advantage it creates for them in the US.

So at face value, it could actually lead to the demise of sending some operations overseas, but the real result would be based on the relative net advantage made or created by the changes in the code. Obviously, they will be paying more in domestic taxes with these changes, but would it undo the advantage to such a degree that they all flee to someplace where their effective corporate tax rate is lower and, if so, what countries have lower effective corporate tax rates, accounting for exceptions and deductions?

They can take my guns and they can trash my auto company but if they want my tax shelters they're going to have to pry them from my tropic-breezed dead hands.

If anyone thinks businesses are going to simply work for less profit, they aren't thinking. We'll either lose businesses overseas; they'll cut expenses, including jobs; they'll find new loopholes or they'll pass it on to the consumers. Probably a combination of sorts.

I could see it having more of an opposite effect as BDP stated, there are already many multi-nationals who do a lot of back room operations in Carribean countries (or India, China, Malaysia, etc.) for US or other countries company operations. This in effect penalizes those who do some back room operation tasks in the US for overseas offices, so when the tax deduction is taken away for US operations what is to prevent them from moving those jobs from Des Moines to somewhere offshore where the tax laws are more favorable? So in effect, when they are trying to get more jobs in Des Moines they may actually be giving those companies a reason to send them out of the country.

Typical governmental "logic"

I agree. If I'm running a company and I realize that Des Moines costs the same as Ireland. Hello U2!!! That's a done deal. But if I get a better deal in point A over point B, point A always wins. There's no question. Its a lethal combination of stupidity and arrogance that a corporation would pick the US over making more money. I can see a person or a family making that decision, but not a faceless corp.

If U.S. companies leave for say Dubai or the Carribean just to get out of paying U.S. taxes, then let them leave. Then when those foreign companies try to do business in the U.S. (because the U.S. is the biggest market, duh) simply slap them with tariffs.

Hopefully this will lead the way back to more natural English speaking call centers again

__________________
Dr. Spaceman: Now Jenna, medically speaking for your height your weight puts you what we call the "disgusting" range. Fortunately there are solutions. For example, crystal meth has been shown to be very effective. How important is tooth retention to you?

The fact that so many people don't understand is that the purpose of a
business is to make money for the owners or stockholders. It's not to
create jobs or to improve the community. Those are benefits that occur
after the business becomes successful and is able or willing to do so.
Another bonus is tax revenue. The more a company makes then the more
it's going to pay.

There comes a time when imposing egregious taxation upon a business will
cause it will seek to do business else where. Duh, haven't we been seeing
that?

Hasn't somebody been harping about how using honey works better?

Those policies have gutted our economy in the past. They simply don't work, particularly in a global economy.

More words of wisdom from Reagan......

Corporations don't pay taxes, their customers do.

It's that simple.

Another populist issue that sounds appealing in theory. When applied in the real world, it will force the evil corporations to raise prices, lay off workers or make significant cuts.
You know, those evil corporations like Dell, Sonic, Boeing, Chesapeake, Hartford Insurance, Sprint, AT&T, Unit Parts, HCA , Sara Lee, Devon, Hertz, Benham Group, CMI-Terex, Community Health-Deaconess to name a few of these "vilified" companies.
The same companies that employ thousands here in the Oklahoma City metro and are helping fuel the current growth in our city. That's the ticket, stick it to the bastards!
Amazing!!

Articles from Wash Post and Bloomberg

washingtonpost.com

Obama Seeks End of Corporate Tax Break to Raise $190 Billion - Bloomberg.com

Notice the post takes a swipe at Fox's News Corp but fails to mentions GE's 75 billion over the last ten years. Not surprised.

Democrat Underground even has a thread attacking Fox for their tax avoidance.

They don't need to relocate because there's a mechanism just two threads below that allows state based companies to invest in venture capitol funds and avoid state income taxes... or to use tax credits to offset their state income taxes.

But it's also incorrect to think that making money is completely based on the tax code. Taxes are simply one variable in the multiple variables that make up the "making money" equation. And even the tax liability is comprised of several thousands variables. If all things were equal in all markets and only the tax code was different, then you would be right to say that companies will simply move because their tax liability in the US would jump a point due to these changes.

The reality is that the US's effective tax rate is around 22% and many don't pay corporate tax at all. If taxes were the only thing that mattered to companies they would have all already fled for countries that have an effective rate of less than 22%. But the reality is that many of those markets do not have the same resources or benefits the US does to generate the same amount of revenue.

So, yes, some companies may have to start paying the same taxes that every wholly domestic company already does if these changes are enacted, effectively changing their profit dynamic. However, it is not a universal truth that every company affected by these changes would be able to achieve the same efficiencies, revenue growth, or innovation in the handful of developed countries that have effective tax rates below 20% or so. So, while they may be making less money if everything else stayed the same but these loopholes, there is nothing that says they will inherently "make more money" by leaving the US. This would be like saying that if your property tax went up, you would leave Oklahoma based on that one cost variable regardless of how any other variables on your personal P&L sheet would be affected by a move.

It's not hard to illustrate that companies do not locate based solely on a simple cost analysis. Oklahoma City would have been a corporate boom town years ago, and Manhattan never would have maintained its place in the world for as long as it has. And it is not a question of vilifying these companies that take advantage of these tax deductions and deferments. It anything, it actually is more about trying to stop vilifying wholly domestic companies that already pay these taxes and are at disadvantage because of it. It is not as if the multinationals are the ONLY companies in America. They are simply the ones with the scale and means to capitalize on our tax code that encourages them to NOT be wholly domestic companies. There are certainly market forces that push companies to outsource operations, but I don't see why we want to codify doing so as an advantage in our tax code.

Right and one objective of these changes would be to eliminate the incentive these companies have to take these jobs and the profit they generate out of the US, and, therefore, out of Oklahoma, to avoid paying taxes on revenue associated with those operations. The primary effect of these changes is that it makes it more expensive to export operations and profits out of the US.

Whether that cost increase compels a company to abandon the US entirely or to relocate operations back to the US depends on each individual company.

For a move to make sense, their effective tax rate would have to change to such a degree that they feel a move to another market with a lower effective rate would not be offset by any loss of production or revenue growth potential. This would not be the case for every company and there would probably just as many that find the increase in cost negates the opportunity cost advantage that led them to send operations out of the United States in the first place.

It is simply not a one variable equation, nor do all the variables apply to all companies. The real effect will probably be of some losses and some gains. In terms of policy formation, what we should really be considering is if the net affect of those losses and gains is close enough to zero or positive that we can afford a fairer tax code.

Does anyone know why virtually every call center comes out of India?

Because the workers there are highly experienced, proficient, knowledgeable and have excellent English skills.

/s

Because technology has made it able to be so.

Next time you've been switched to an Indian based call center and you want extra special attention, compliment them on the movie "Slumdog Millionaire".

I find the same thing happening with drafting talent. Computer Aided Drafting or CAD and the internet has made it possible to draft anywhere in the world with all the communication and transferring of plans done by email. The Indians are educating their people in this specialty and taking over CAD drafting.

Well, at least tariffs led to buiding foreign auto assembly plants in the U. S., so tariffs on each car unloaded off a boat could be avoided.

Isn't News Corp an Australian based company?

...and you get crap for the most part from them. I worked on Chinese projects for US companies and we had to use "design bureaus" located in China per gov't regulations, we pretty much redid everything that was ever sent to us. We did a Gatorade plant there, they sent the files back and there were four different floor plans for the first floor, when the sheet size wasn't big enough, they just stretched it in one direction, it was utterly useless crap. Eventually we did everything in OKC and never used anything from China. For the most part, it was nothing more than a gov't enforced bribe to do work there.

When I have my own firm I will never consider them, the overseas cad/rendering sweatshops are more trouble than they are worth to me. Do do anything more complex than a simple box is beyond their capability from what I and quite a few others have seen from first hand experience.