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Slavic
5 May 2009, 09:16am
http://news.yahoo.com/s/nm/20090504/pl_nm/us_obama_economy_taxes




WASHINGTON (Reuters) – President Barack Obama vowed on Monday to overhaul tax policies that he said reward companies for shifting U.S. jobs overseas and allow wealthy people to evade taxes using offshore accounts.

The White House estimated the plan would save $210 billion over the next decade.

In one proposal businesses are poised to fight, Obama would tighten tax-code provisions that allow firms to defer paying taxes on profits they make overseas as long as those earnings are plowed back into the foreign subsidiaries.

That portion of his plan has drawn opposition from big multinational firms such as Pfizer Inc and Oracle Corp.

The president said he also would close loopholes and bolster enforcement to prevent tax avoidance by companies and individuals.

"The steps I am announcing today will help us deal with some of the more egregious examples of what is wrong with our tax code," Obama said at a joint announcement with Treasury Secretary Timothy Geithner.

"It is the downpayment on the larger tax reform we need to make our tax system simpler and fairer and more efficient for individuals and corporations."

The proposals must go through Congress. Several lawmakers, including U.S. House of Representatives Ways and Means Chairman Charles Rangel, signaled support for Obama's proposals. But one crucial player, Senator Max Baucus, Democratic chairman of the Senate Finance Committee, called for more study of how U.S. businesses would be affected.

Currently, U.S. firms are allowed to defer paying taxes on profits earned overseas if they put those profits back into their foreign subsidiaries. Critics say those rules encourage businesses to bolster their foreign operations instead of creating jobs at home.

During his campaign last year, Obama promised to change those provisions.

In March 200 companies and trade groups like the U.S. Chamber of Commerce sent congressional leaders a letter opposing changes to the "deferral" provision. The letter said the firms would not be on a level playing field with international rivals, many of which are not required to pay taxes at home on overseas entities.

Pfizer, Oracle, Microsoft Corp Johnson & Johnson and General Electric Co were among the firms that signed the letter.

NO MORE DEDUCTING EXPENSES

Under the Obama plan, companies would no longer be able to deduct expenses supporting their overseas operations until they pay taxes on their profits.

The plan also would end a practice by which some firms take big deductions against their taxes by inflating the amount of foreign taxes they have paid.

In addition, Obama would extend a research and experimentation tax credit that businesses have sought.

Drew Lyon, a tax expert at PriceWaterhouse Coopers, said the changes to the "deferral" provision would be sweeping, since half of multinationals firms' income is earned abroad.

"It's really hitting most Fortune 100 companies that depend to a great deal on growth of foreign markets for growing their total earnings," Lyon said.

U.S. officials said Obama's plans were balanced and would not put excessive burdens on firms. They said studies looking at effective tax rates -- the amount paid after deductions -- show the United States is in the middle range of other Group of Seven countries when it comes to corporate taxation.

"I think it's important ... that the American people and businesses understand that this is fairness, not something that will put them at a competitive disadvantage," White House spokesman Robert Gibbs said.

In addition to the changes to the deferral provisions, separate proposals in Obama's plan would raise $95 billion by cracking down on overseas tax havens. Such tax havens became a major topic at the April meeting in London of leaders of the Group of 20 major economies.

In one of the proposals to crack down on tax evasion, the administration would require financial institutions to share information with the Internal Revenue Service about its U.S. customers. Foreign institutions must sign up with the IRS to become "a qualified intermediary" or else face a presumption that they are helping individuals evade taxes.

Consumer advocates said the changes were long overdue fixes for tax abuses.

Swiss banking giant UBS AG acknowledged in February that it helped U.S. clients conceal assets from their government. It agreed to pay a $780 million fine and has since identified about 320 of its American clients.

(Additional reporting by Ross Colvin; Editing by Doina Chiacu and Bill Trott)

It seems like Obama is rolling in the heavy duty protectionist policies now. From what I take from the article, international corporations that are based in the US will now have to pay a tax on the profit that they earn overseas; an uncommon practice in most free market economies.

This policy looks like a populist measure only aimed at appeasing the lower classes and left wingers at the expense of the stability of the economy in the long run. Granted, this will bring in some extra cash in taxation but it is only putting more restraints on international companies that are already conducting overseas operations because of the high price and low quality work found in the US.

This is going to effectively ram another stake in the heart of international businesses housed in the US. I can only imagine more international companies moving their HQs overseas to avoid this taxation instead of biting the taxation bullet.

Furthermore, this is profit being made OVERSEAS, not in the US. It should not be susceptible to US taxation. International companies shouldn't be taxed in this way because they are by their very nature; international, not bound completely by the laws of its original country. This measure is basically a pseudo nationalization of US based international companies. Punishing those who do not operate strictly in the US, and rewarding those who sacrifice for the sake of benefiting the US tax system.

your thoughts?

Red
5 May 2009, 09:29am
President Barack Obama vowed on Monday to overhaul tax policies that he said reward companies for shifting U.S. jobs overseas and allow wealthy people to evade taxes using offshore accounts.

Maybe if corporate taxes at home weren't so fucking high in the first place this wouldn't happen?

And by "reward" does he mean 'save them money' that they can then use to keep hiring people; both domestically and abroad.

How out of touch democrats are when it comes to taxes tears the very fabric of space and time.

Drox
5 May 2009, 09:53am
Honestly, I agree in a way how we should keep alot of businesses in America to make jobs for Americans, but when our government dips its fingers in these businesses its hard for them to want to keep jobs here, and with how Obama wants to keep taxing them and putting restrictions on some of them, I believe more and more will put their HQ's overseas just because of this and screw America.

PotshotPolka
5 May 2009, 05:26pm
Honestly, I agree in a way how we should keep alot of businesses in America to make jobs for Americans, but when our government dips its fingers in these businesses its hard for them to want to keep jobs here, and with how Obama wants to keep taxing them and putting restrictions on some of them, I believe more and more will put their HQ's overseas just because of this and screw America.

It only makes sense to produce in countries where costs of production are lower. Keeping jobs in the U.S. is the people's prerogative anyways, not the government's.

LegalSmash
5 May 2009, 06:57pm
Slavic: "It seems like Obama is rolling in the heavy duty protectionist policies now. From what I take from the article, international corporations that are based in the US will now have to pay a tax on the profit that they earn overseas; an uncommon practice in most free market economies.

This policy looks like a populist measure only aimed at appeasing the lower classes and left wingers at the expense of the stability of the economy in the long run. Granted, this will bring in some extra cash in taxation but it is only putting more restraints on international companies that are already conducting overseas operations because of the high price and low quality work found in the US.

This is going to effectively ram another stake in the heart of international businesses housed in the US. I can only imagine more international companies moving their HQs overseas to avoid this taxation instead of biting the taxation bullet.

Furthermore, this is profit being made OVERSEAS, not in the US. It should not be susceptible to US taxation. International companies shouldn't be taxed in this way because they are by their very nature; international, not bound completely by the laws of its original country. This measure is basically a pseudo nationalization of US based international companies. Punishing those who do not operate strictly in the US, and rewarding those who sacrifice for the sake of benefiting the US tax system.

your thoughts? "

Okay, let me address each comment in turn here.
While I disagree with the manner in which corporations are taxed in this country on a fundamental basis, I cannot agree that these policies are ALL protectionist.

The Internal Revenue Code (hereinafter IRC) is a huge and cumbersome piece of law, which is REALLY convoluted at this point, the corporate section, just as much as the individual section.

The Congress has the authority to tax and spend, and ever since corporations were first envisioned, they've paid taxes because its financially lucrative. This is not simply the federal taxes, each state, and even some localities are allowed to impose taxes on corporate entities as well. All in all, a corporation can suffer a loss of 50-60% of its gross income due to taxes alone. That is what it is, there's a price placed on federal protection of the courts, same on state, etc. I'm not advocating for it, but that is what the congress bases those taxes on.

It gets better though: US citizens, even outside the US, STILL HAVE TO PAY INCOME TAXES TO THE FED GOVT, regardless of NEVER living in the US, if you are a citizen, and work abroad, you owe US taxes, as well as foreign taxes.

Now, I don't really have a huge problem with the concept of someone who doesn't live in the US, doesn't avail himself of any financial benefit of state programs of the US not having to pay income taxes, but I DO have a problem with people actively living here in the US actively avoiding the taxes they are required to pay, then coming around and trying to complain of taxes their company has to pay because of their active avoidance of individual taxes. (I know that sounds circular, but read it a few times and it will make sense).

I'm not arguing populism, I AM arguing fundamental fairness however.

As for getting rid of write off/expense deduction on companies, I don't really have a problem with this because its basically correcting on a federal tax level for corporations, what was essentially a HUGE issue for individual taxes (passive activity losses applied to "active gains"), where people with enough money to invest in complete failures of programs would invest just enough money to throw out in order to wipe out their tax debt entirely. I think the measure should be tweaked to require that the company pay taxes based on US income, and apply deductions used in US, and have the seperate foreign costs expense deductions only apply against their foreign income, similarly to what is done currently with individuals regarding passive activity gains and passive activity losses.

Realize that in the eyes of the law, a corp is for all intents and purposes, a person.. just like you and I, its entitled to due process, and a whole bunch of rights you and i are not even allowed to have, and this "person" is essentially a liability shield for a group of people who wish to make money.

Not many people in this country can say they are held to "the business judgment rule standard" when they cause an entire company to collapse, most people get fired for this, corporate officers get promoted in some cases, or in other cases, shifted sideways to a position of equal pay and little responsibility.

The US NY/East and West coast corporate culture is VERY VERY different from that which exists in Japan, or most of Asia, even the central US, it focuses a great deal on oversaturation of ideas, under use of good talent, and a complete lack of presence when it comes to future planning... remember, Enron, Worldcom, and the Lehman Bros didn't come out of Frogballs AR, or Kyoto, they were jackass new york yuppies that were drunk on their power, or illusion thereof.

I think a reformatting of the corporate tax code is in order, allow losses and expenses to be deducted, but against the income they were produced from (foreign gains v. foreign losses as opposed to US gains or combined gains v. foreign losses), have a greater degree of liability for corporate officers who misuse office, or make mistakes that are elementary and unforgivable, for God's sake, lawyers, doctors, teachers, even a fucking plumber who makes 15 an hour are held to malpractice standards, a fucking business executive with a harvard education and a 159M a year salary can't be held responsible when he drives a company into the ground? Seriously? Is that the double standard we want to show the rest of society or our future generations?

The only "populous" measure that I will ever advocate is an equalization of responsibility, and an equalization of fault laying, Bernie Evers, Bernie Madoff, and other assorted business criminals should not have been given the OPTION of bail. If Red or Slavic embezzle even 20K out of your jobs, your asses would be in Jail for Grand Theft, a 5-15 year felony in some jurisdictions... you are telling me that because he is the enron CEO though, he SHOULDN'T suffer the same consequences?

That is what upsets me.

I love American Corporations, and I believe in taxing them less here, but companies that move operations abroad and then try to shell game their returns to avoid taxation, then want to reap the benefits of the US code, claim at lower rates than the nation they stuck themselves in, and avoid US labor laws regarding hours, wages, and conditions of employment don't have my sympathy.

PotshotPolka
5 May 2009, 07:18pm
lol, yuppies.