Walgreens renouncing U.S. corporate citizenship

[PokerGuy]

Serious question - why is it that these "other countries" can offer lower tax rates? Is it 1) They're generally worse off and doing whatever they can, 2) Make up for it by taxing the hell out of the people directly, 3) Somehow have everything right and just don't need the revenue?

If it's # 3 let's copy them immediately. If it's #1 or 2 then do we really think it's OK these companies move and get the best of both worlds?

It's generally #2. If you look at some of the "destination" places for these corporations (places like Ireland, England etc), it's not like they are some horrible third world hellhole (so not #1). It's also not #3.

I'm not sure what the question is regarding it being "ok". They are following the laws. We could change the laws to remove the incentive for them to behave in certain ways, but keep in mind those kinds of changes are not made in a vacuum, other countries can also make changes that affect us, so it's not an easy 'fix'.

 

[Cozarkian]

Interesting concept, but if all countries did the same, it would be a major net negative for the US. Especially since many US companies sell services or are based on intellectual property, where there is very little physical cost associated with product manufacture.

Maybe, maybe not. It would, however, definitely stop things like this:

http://visualeconomics.creditloan.c...how-google-apple-facebook-avoid-paying-taxes/

With my idea, the first Irish company in the Cayman's would be taxed in Ireland for the profits it makes licensing the royalties in Ireland. However, instead of the profits sitting in the Cayman, they could bring them back to the U.S.

 

[TheSlamma]

I was wondering if someone was going to say something like "who the hell shops at the store where granma buys her liver pills"?

Don't let the door hit you on your way out.

Cause those liver pills are not sold at any other pharmacy?

Please get a clue before you reply to my posts.

 

[TheSlamma]

Have they broken any laws? No. Stop blaming companies or people for acting rationally and doing exactly what logic would dictate they do. If you don't like it, then advocate for changing laws and stop buying products and services of the companies that do things you disagree with, but don't whine about companies acting rationally.

Did you not read the post you quoted and replied to? I don't shop at those places.. Wow what is going on with people?

 

[emperus]

It must be hard contorting yourself on so many issues. People are here defending a US company giving away it's citizenship to pay less taxes? Lol. While they are running July 4th sales on their website.. Nice.

 

[TheSlamma]

It must be hard contorting yourself on so many issues. People are here defending a US company giving away it's citizenship to pay less taxes? Lol. While they are running July 4th sales on their website.. Nice.

I love how to tools in this thread completely turn it around too.

"It's not their fault.. they are only trying to circumvent a system so that the middle class that keeps them in business can also take on 100% of the tax burden."

 

[glenn1]

I love how to tools in this thread completely turn it around too.

"It's not their fault.. they are only trying to circumvent a system so that the middle class that keeps them in business can also take on 100% of the tax burden."

It must just be a "collective action problem." That's what progressives always say when it comes to why they don't pay more taxes than they're legally required to. But when it's a business doing the same thing, well they're evil bastards and unpatriotic.

 

[PokerGuy]

Maybe, maybe not. It would, however, definitely stop things like this:
With my idea, the first Irish company in the Cayman's would be taxed in Ireland for the profits it makes licensing the royalties in Ireland. However, instead of the profits sitting in the Cayman, they could bring them back to the U.S.

I know how the double irish (or double irish with a dutch twist) works, and I know there are various ways the US is trying to close the loophole, but none of these things happen in a vacuum, other countries make changes as well, and companies have a lot more options in the past to decide how/where to incorporate legally and all that jazz. There's probably no simple easy answer. Even if there was, I'm sure the army of lawyers and accountants would surely come up with other creative ways to reduce tax burden -- that's what they are paid to do.

 

[PokerGuy]

I love how to tools in this thread completely turn it around too.

"It's not their fault.. they are only trying to circumvent a system so that the middle class that keeps them in business can also take on 100% of the tax burden."

Again, that's just a stupid way to look at it. The company is doing what is in it's best interest, which might not be in the best collective interest of the country. Companies strive to maximize their profit, not the collective best interest of the country. Blaming them for following the laws in place is stupid. Fix the laws or change the incentives, they are simply being rational actors. Just because the potential result of many rational actors making such rational decisions is not desirable doesn't mean their individual decisions are not rational and correct.

 

[nehalem256]

It must be hard contorting yourself on so many issues. People are here defending a US company giving away it's citizenship to pay less taxes? Lol. While they are running July 4th sales on their website.. Nice.

So a company can have citizenship. Just not religious beliefs?

 

[emperus]

Again, that's just a stupid way to look at it. The company is doing what is in it's best interest, which might not be in the best collective interest of the country. Companies strive to maximize their profit, not the collective best interest of the country. Blaming them for following the laws in place is stupid. Fix the laws or change the incentives, they are simply being rational actors. Just because the potential result of many rational actors making such rational decisions is not desirable doesn't mean their individual decisions are not rational and correct.

Yes, that is the point. They are doing what is in their best interest to maximize money. They could give a rats ass what is in the best interest of the US and not make as much money. That is patriotism. You know like those before us who died doing what was not in their best interest because they cared about their country. Like those soldiers in Normandy coming off the beach knowing the were probably going to get cut down but running forward anyhow.

 

[nehalem256]

Yes, that is the point. They are doing what is in their best interest to maximize money. They could give a rats ass what is in the best interest of the US and not make as much money. That is patriotism. You know like those before us who died doing what was not in their best interest because they cared about their country. Like those soldiers in Normandy coming off the beach knowing the were probably going to get cut down but running forward anyhow.

You mean kinda like the Clinton's?

 

[PokerGuy]

Yes, that is the point. They are doing what is in their best interest to maximize money. They could give a rats ass what is in the best interest of the US and not make as much money.

So when we're talking about people like the clintons using loopholes while advocating more taxes, then it's a collective action problem.... but when we're talking about evil corporations, it's no longer a collective action problem, and each corporation should be expected to do what's in the best interest of the country instead of the corporation. Nice logic you got there

You know like those before us who died doing what was not in their best interest because they cared about their country. Like those soldiers in Normandy coming off the beach knowing the were probably going to get cut down but running forward anyhow.

A person can be motivated by a lot of things, protecting loved ones, country, and in some cases will even sacrifice themselves for the good of the country. A corporation has a singular primary goal, to maximize profit within the bounds of the laws. Other goals come after that. Apparently you don't understand what exactly a corporation is.

 

[PokerGuy]

Did you not read the post you quoted and replied to? I don't shop at those places.. Wow what is going on with people?

That's what I said was one of the two ways of "fixing" the problem. If everyone did what you say you're doing, the problem would simply go away. We (collectively) do not, so we are the problem.

 

[emperus]

So when we're talking about people like the clintons using loopholes while advocating more taxes, then it's a collective action problem.... but when we're talking about evil corporations, it's no longer a collective action problem, and each corporation should be expected to do what's in the best interest of the country instead of the corporation. Nice logic you got there

A person can be motivated by a lot of things, protecting loved ones, country, and in some cases will even sacrifice themselves for the good of the country. A corporation has a singular primary goal, to maximize profit within the bounds of the laws. Other goals come after that. Apparently you don't understand what exactly a corporation is.

I don't advocate loopholes. But there is an argument that if it's there why not use it. When it means renouncing your citizenship. Then yes. That means you solely value money over the US and could care less about the US.

 

[PokerGuy]

But there is an argument that if it's there why not use it. When it means renouncing your citizenship. Then yes. That means you solely value money over the US and could care less about the US.

So you're saying use loopholes if they are there, unless you have to renounce citizenship, in which case they are bad. See my earlier posts about the singular primary goal -- corporations don't have emotional attachment to anything. They act within the law to maximize profit. Some even act outside the law because they calculate it to still be beneficial to do so. The bottom line is that they are rational actors, doing exactly what you'd expect rational actors to do.

 

[FerrelGeek]

Walgreens management didn't want to do the inversion but got pressured into it by missing quarterly earnings and because of strong leverage applied by several large shareholding funds acting in concert. It's always a good idea to let fund managers run your company...I mean they're really on the lookout for it's long term health.

And those investment funds are full of 401K/IRA holders, and possibly some pension funds as well.

Investment managers have driven corporate behavior for years.

 

[FerrelGeek]

The better question is what will Democrats do.

What they always do - whine, blame other people, bleed people who work for a living dry, print money.

 

[zephyrprime]

The solution to this problem is simple. Tax all companies the same regardless of where the are domiciled. So, Toyota and Ford would be taxed the same for all business done in the US. Business done elsewhere would not be taxed or could be taxed by the relevant foreign countries. The only problem is, doing this would require all other countries to do the same in order to prevent double taxation.

 

[K1052]

And those investment funds are full of 401K/IRA holders, and possibly some pension funds as well.

Investment managers have driven corporate behavior for years.

When you have different hedge guys in concert applying pressure to get a short term pump by way of action that could blow back on the company's long term prospects I'm not so inclined to chalk that up to the usual fund management-company relations. My recollection is that a major US retailer hasn't tried such an inversion yet...even if so most defiantly not with this level of public attention focused on them.

 

[Darwin333]

Yes, that is the point. They are doing what is in their best interest to maximize money. They could give a rats ass what is in the best interest of the US and not make as much money. That is patriotism. You know like those before us who died doing what was not in their best interest because they cared about their country. Like those soldiers in Normandy coming off the beach knowing the were probably going to get cut down but running forward anyhow.

Do you take any deductions on your taxes?

 

[FerrelGeek]

When you have different hedge guys in concert applying pressure to get a short term pump by way of action that could blow back on the company's long term prospects I'm not so inclined to chalk that up to the usual fund management-company relations. My recollection is that a major US retailer hasn't tried such an inversion yet...even if so most defiantly not with this level of public attention focused on them.

It has changed more to reflect what you stated; the general funds may indeed be better than they used to be. But I do agree with you on the damage this does to corporate planning. This was one of my pet peeves back in the 80s. Corporations do try to engage in long-term planning, but that planning can be greatly hampered due to their living to appease the stock market every 90 days.

 

[Cozarkian]

Upon further research, this whole issue is about repatriation of income. The U.S. tax system works like this:

1. Non-U.S. companies are taxed (up to 35%) based on earnings in the U.S. They do not pay taxes on foreign income that is brought to the U.S.

2. U.S. companies are taxed (up to 35%) based on earnings anywhere in the world. However, they can delay the tax on foreign earnings if they choose not to bring the money back to the U.S. They are also given a tax credit based on foreign tax paid.

Let's apply the above to hypothetical, assuming Walgreen's operates stores in Switzerland and Switzerland has a 20% corporate tax rate.

If Walgreens is a U.S. company, it pays 35% on U.S. earnings and 20% on Swiss earnings. Then, when it transfers the Swiss earnings to the U.S., it pays the U.S. an additional 15% (35% - 20%). If Walgreens chooses, instead, to use the Swiss earnings outside the U.S., it pays 0% on their earnings.

If Walgreens is a Swiss company, it still pays 35% on U.S. earnings, and it still pays 20% on Swiss earnings. However, if Walgreens chooses to use the money earned in Switzerland to expand its U.S. operations, it pays the U.S. 0% on those earnings, instead of 15%.

Here's an article explaining the above briefly: http://taxfoundation.org/blog/basic-lesson-us-s-corporate-income-tax-system

And here's the organization that actually produced the report on which the story was based: http://www.americansfortaxfairness.org/walgreens/

If you read the official report, it is relying on estimates by reputable companies of Walgreen's anticipated one-year tax savings, and then extrapolated that to $4 billion over 5 years. However, the reference articles are by subscription only and the report makes no effort to explain how the companies estimated the 1-year tax savings; probably because an explanation that Walgreen's is still paying full taxes on its revenue from U.S. stores would undermine the purpose of the report.

edit: In a way, this article is actually about the IRS policy of discriminating against U.S. citizens by charging them more in taxes than they charge non-U.S. citizens for the exact same activities. Granted, that might make sense for an individual citizen, who has additional benefits that non-citizens lack (like the right to vote), but there is no such additional value in being a U.S. corporation.

 

[Engineer]

Don't like it...simple...don't shop there.

 

[PokerGuy]

Don't like it...simple...don't shop there.

That's ultimately the best answer. Until and unless the public holds the company to account by 'voting with your wallet', the overall benefit to the country / citizens doesn't get into the decision making process. By attaching a real bottom line cost to decisions that harm the country, you force companies to re-think their strategy and make better decisions.