Tags: Levin | tax | proposal | multinationals

Senate Committee Proposes Crippling Tax Measures for US Multinationals

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Monday, 29 Oct 2012 07:38 AM Current | Bio | Archive

Competing in this global world is tough enough without our own government adding to the difficulties.

A major problem for big and small multinational businesses is coping with the U.S. income tax system. The international tax rules, in particular, have been a nightmare for private business to contend with.

Over the years, Congress has added a mindboggling assortment of benefits and detriments, which have ultimately been just an unyielding burden on globalized business operations.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

Now, a proposal has been made to eliminate "loopholes," which are nothing more than provisions of the income tax code that Congress enacted into law in the first place.

The chairman of the Senate’s Permanent Subcommittee on Investigations, Sen. Carl Levin, D-Mich., has proposed drastic tax changes on the taxation of U.S. multinational corporations.

If enacted, it is expected that the impact of these changes would both dramatically influence market valuations and weaken the economy even more.

Levin is not alone in this effort. Congress seems to see it politically expedient to portray any form of offshore tax minimization planning as being abusive if not otherwise unpatriotic or criminal.

Congress has been going down this road for quite a while, so Levin is just accelerating an existing tax trend by Democrats and Republicans alike.

Anti-tax abuse rules now take up thousands of pages of the tax code alone.

Trying to define what is or is not income for purposes of international tax has resulted in a mindboggling complexity of tax law, regulations, case decisions and other pronouncements that no one, especially the politicians in Congress, fully understand.

Not even the most brilliant of tax professionals being paid $1,000 per hour fully understand it.

Multinational private and corporate taxation is already in litigation turmoil and is hotly contested. These new proposals raise these disagreements almost exponentially.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

The goal of this current proposal is to achieve additional tax revenue for the purpose of reducing the deficit. The difficulty of this approach is that, like prior tax legislation has shown, the end result does not produce "significant revenue."

This proposal is couched in terms that classify presently acceptable international tax planning as being somehow nefarious or illegal. Words like "abusive … arrangements," "pretend," "dodge," "shell corporations" and "secrete tax haven."

International businesses are summarily condemned for using existing tax law to minimize tax. Convicted even before they have had a trial.

The idea that corporations are organized to achieve net profit after tax for their shareholders seems to be an abhorrent thought to a large number of legislators, even though many of them have made a lot of money on stocks of companies making net profit after tax.

Business operations can and are set up throughout the world. Tax to a business is a cost, which reduces cash flow. If the United States insists on raising the tax cost of being an American business, then many, if not most, business operations will choose to locate somewhere else.

Both small and large multinational businesses fiercely compete all over the world. Keeping net cash flow high is the key to surviving financially and ultimately producing a return on investment for the shareholders.

The government is not a stakeholder in this process. It is paid to provide services to facilitate international trade and maintain the supportive infrastructure.

This proposal to Congress claims that "closing these loopholes" would "strengthen tax fairness." But tax fairness goes both ways.

Clearly, having American multinational companies being weighed down with excess taxes is counterproductive for the U.S. economy. Especially when the taxes are to be used for paying off an astronomical debt incurred because Congress cannot stop itself from overspending. The government might think this is fair, but business does not.

Editor's Note: You Owe It to Yourself to Know What Obama and Bernanke Are Hiding From Americans

Congress already puts roadblocks in front of private businesses. The existing tax law and a large catalog of other laws and regulations are formable impediments.

Encumbering multinational business operations with even more taxes and regulations would cripple these international businesses at the very time when the U.S. economy and that of the world needs substantial economic expansion.

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Kleinfeld
Competing in this global world is tough enough without our own government adding to the difficulties. A major problem for big and small multinational businesses is coping with the U.S. income tax system.
Levin,tax,proposal,multinationals
722
2012-38-29
Monday, 29 Oct 2012 07:38 AM
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