Knowledge To Negotiate: 07/01/2019

It’s another election season in the U.S. If you pay attention to the Obama marketing campaign you will hear them place the blame on companies like Bain Capital who was simply run by Mitt Romney his opposition. They are claiming that companies like Bain destroy companies and drive jobs off-shore. While I’m no lover of either applicant I believe that people need to understand facts.

What is Bain Capital? They are a private asset management firm. This means that they make investment on behalf of their customers. They also want people to think that it is companies like Bain that will be the reason behind the problem. The primary cause of the problem is something that may be resolved by the existing administration and house and senate, but no attempt has been designed to solve it. In business when you yourself have a problem you don’t try to treat the symptoms, you look for the root cause.

In this case the root cause for the decline of manufacturing and service jobs in the us rests with the U.S. Corporate Tax Rate and tax laws and regulations. It is those rates and laws which have allowed both individuals and companies to implement aggressive tax management programs to avoid paying U.S. Taxes. If companies like Bain helped drive outsourcing and offshoring, it was fueled by intense tax management that has been allowed by the U.S. Corporate taxes rate and tax laws and regulations that only congress and the administration can change. How pervasive is aggressive tax management? An article in the brand new York Times last year said that 55% of the U.S, Corporations paid nothing in one or even more years more than a seven-year span.

Income taxes. There are more plenty. How did companies like Cisco get forty billion dollars in off-shore accounts? How did Apple get sixty-four billion in off-shore accounts? How does Google pay only a 2.5% effective taxes rate in the U.S.. Why do we allow over 8,000 hedge money who can manipulate the price of what Americans pay for everything to be domiciled in the Cayman Islands where there is absolutely no tax. It is the tax rate that has powered companies to outsource and create off-shore companies where earnings are made beyond your U.S.

In doing aggressive tax management careers have been lost and its all been perfectly legal. The question voters should be asking the incumbents is excatly why haven’t they done anything to improve this and change the tax rates and close the loopholes that could help bring jobs back? All the rhetoric about fees that they move out every four years only talks about personal taxes when you have major U.S.

Billions of dollars pay a far less percentage than individuals. For folks that use these legal loopholes I don’t blame them, I blame the Congress and administration for allowing such loopholes to exist in the first place and to can be found for as long as they have existed. What do After all when say “tax management strategies”?

  • Your partner or certain other family are not residing in your house
  • SBA Microlenders (loans up to $50,000 for any business purpose)
  • Nov. 2016
  • Graphical analyses (reading graphs & tables)

A company has products produced in locations where the labor is lower cost. They will have a subsidiary company located in a taxes haven or low taxes country purchase those products. That subsidiary adds significant overhead and revenue to the product so the majority of the profit the business will make accrues in that low or no tax country. Then they sell that product at what’s called the “transfer price” to all the company’s subsidiaries around the world like the company’s U.S.

For the gains they make in those taxes havens they pay no tax. To the U.S. Company the purchase of the product at the transfer price is a cost of the nice. They will add their local overhead and profit as part of their selling price. This creates the problem where the net gain on the sale of that product that gets taxed in the U.S.

The remaining revenue, so long as it’s kept off-shore, is never subject to U.S. Tax. To repatriate that profit, a ongoing company is subject to a ten-percent taxes. That tax is as high as some countries corporate tax rate. What that tax rate does is create a negative incentive for those companies to bring money back into the USA to invest. That’s the reason U.S. Companies have approximately nine trillion dollars in earnings seated beyond your U.S. Companies will have services provided by subsidiaries located in taxes havens or lower tax rate countries. For example Ireland has a corporate tax rate of only ten-percent versus the U.S.’s thirty-five percent.

When they sell services to the U.S. That profit accrues in that country, not the U.S. Towards the U.S, subsidiary the purchase of these the ongoing services can be an expenditure. With the significant overhead and profited put into the ongoing service they purchase, this reduced the profits the U.S. That’s another real way they drive down their effective tax rate. For international shipment of commodities such as oil, the cargo may be sold a genuine quantity of that time period while that item is within transit. Every one of the profits from those sales, since they are occurring in international waters, are international sales aren’t taxable.