Tags: medtronic | tax | congress | propaganda

Medtronic Case Highlights Tax Propaganda by Congress

Medtronic Case Highlights Tax Propaganda by Congress
 (Photo by Win McNamee/Getty Images)

By    |   Monday, 20 June 2016 10:27 PM

Medtronic plc is a multinational medical technology and services company. It markets its medical devices and technologies in approximately 160 countries.

Among Medtronic’s innovations is a miniaturized pacemaker implanted directly inside the heart.  It’s a cool company.

However, to Congress, big multinational companies are an easy target.  Big companies don’t vote.  It’s easy to blame all the problems everyday voters are so angry about on those nasty, evil corporations. 

The design of the income tax law by Congress with ambiguous tax provisions, vague references to undefinable terms, and abstruse concepts any taxpayer, and in particular corporations with complex businesses are sitting targets. 

Like so many other multi-national corporations it received a monster tax bill from the US government via the IRS that accused it essentially as a tax cheat.  The government claimed that they owed another $1,500,000,000 in tax.

Most tax disputes get settled. Trying to defend a tax case in court involves taking on a fight where the rules of the game are tilted in the government’s favor.

For tax disputes, Congress made sure that the government has a big edge. The income tax law says that the government is presumed to be correct. It’s up to the taxpayer to prove innocence.

Technically, this case was about Medtronic in the United States paying too much of royalty to Medtronic Puerto Rico thereby, for tax purposes, shifting its profits offshore.

You may not have realized it, but for tax, Puerto Rico is not part of the United States exactly but is an offshore tax-haven. 

Consider with what Medtronic’s was dealing. As the Wall Street Journal reported, corporations must make transfer pricing transactions “as if they were engaged in arms-length deals between unrelated companies, and allocate income where it is earned, depending on which entity truly generates the profits.”

Trying actually to figure this out is utter nonsense. But the with an income tax law based on the Mad Hatter’s Tea Party Rules, you get this.

The complexity in tax law has little to nothing to do with having a viable and efficient tax system which impacts everyone equally.

No, Congress operates the income tax system as a part of its political propaganda machine.

The purpose of the particular political tax flimflam that Medtronic’s got caught up in is to make Puerto Rican voters happy with big corporations being incentivized to have Puerto Rican operations and workers. Congress takes a chunk of money back so Congress can both redistribute it to some other special interest voting constituency.

George Orwell would have been proud at how the politicians sell this concocted story about their devotion to serving the public by cracking down on tax cheaters.

The price of every product includes any tax paid to the government. A corporation’s stock is valued on its earnings per share after tax.

The only tax cheats in this process are Congress and the tax compliance industry which makes about $400 billion a year off being (metaphor here) the tea servers at the Mad Hatter’s Tea Party.

The Congress could not care less about the taxes.

They will collect it all back in spades. Medtronic will have more capital to invest, expand its business, hire more employees, and make income. And its earnings per share will go up generating even bigger capital gain taxes on the stock sales.

What distresses Congress is losing the propaganda value that the Medtronic’s case could have provided in this election season.   
Denis Kleinfeld is known as a strategic tax and wealth protection lawyer, widely published author and creative teacher. To read more of his articles, CLICK HERE NOW.

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Medtronic plc is a multinational medical technology and services company. It markets its medical devices and technologies in approximately 160 countries.
medtronic, tax, congress, propaganda
Monday, 20 June 2016 10:27 PM
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