{"id":5495,"date":"2014-08-29T19:30:06","date_gmt":"2014-08-29T19:30:06","guid":{"rendered":"http:\/\/juniorminingnews.com\/?p=5495"},"modified":"2014-08-29T19:30:38","modified_gmt":"2014-08-29T19:30:38","slug":"corporations-join-droves-renouncing-us-citizenship","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=5495","title":{"rendered":"Corporations Join Droves Renouncing US Citizenship"},"content":{"rendered":"<p><strong>By Nick Giambruno<\/strong><br \/>\n<a href=\"http:\/\/www.caseyresearch.com\/go\/v787p-2\/CSW\" target=\"_blank\">Senior Editor, InternationalMan.com<\/a><\/p>\n<p><img decoding=\"async\" loading=\"lazy\" class=\"alignright size-full wp-image-5496\" src=\"http:\/\/juniorminingnews.com\/wp-content\/uploads\/2014\/08\/money160.jpg\" alt=\"money160\" width=\"160\" height=\"137\" data-id=\"5496\" \/>Don\u2019t be surprised to lose if you don\u2019t make an effort at being competitive.<iframe loading=\"lazy\" src=\"http:\/\/trk.caseyresearch.com\/f\/?content_id=973&amp;code=CSW&amp;editorial=corporations-join-droves-renouncing-us-citizenship-1\" width=\"1\" height=\"1\" frameborder=\"0\"><\/iframe><\/p>\n<p>And if you go out of your way to make yourself less competitive, <em>expect<\/em> to lose.<\/p>\n<p>If that sounds like simple common sense, that\u2019s because it is.<\/p>\n<p>But it\u2019s also exactly what the US has been doing for years \u2014 enacting tax policies that sabotage its global economic competitiveness.<\/p>\n<p>It\u2019s like trying to get in shape for a marathon by going on an all-McDonald\u2019s diet. (Speaking of McDonalds, <a href=\"http:\/\/www.caseyresearch.com\/go\/v78hm-2\/CSW\" target=\"_blank\">check out this funny video spoof<\/a> of what their commercials should really look like.)<\/p>\n<p>Here are two major reasons why the US is lagging in the global economic marathon:<\/p>\n<ol>\n<li>The US has the <strong>highest effective corporate income tax rate<\/strong> in the developed world (see chart below).<\/li>\n<\/ol>\n<ol>\n<li value=\"2\">Unlike most other countries, which only tax domestic profits, the US taxes the earnings of foreign subsidiaries of US companies when the money is transferred back to the US. This has had the effect of US corporations keeping over $1.9 trillion in retained earnings offshore to avoid the crippling US corporate income tax.<\/li>\n<\/ol>\n<p style=\"text-align: center;\"><img decoding=\"async\" style=\"width: 600px; height: 602px;\" src=\"https:\/\/d24g2nq85gnwal.cloudfront.net\/images\/140716image1.jpg\" alt=\"\" \/><\/p>\n<p>These \u201cworst in the developed world\u201d tax policies are clearly hurting the global competitiveness of American companies.<\/p>\n<p><!--more-->Being deemed a \u201cUS Person\u201d for tax purposes is like trying to swim with a lifejacket made of lead.<\/p>\n<p>It should come as no surprise that an increasing number of productive people and companies are seeking to shed this burden so they can keep their heads above water.<\/p>\n<p>At this point, it\u2019s more than just a trickle \u2014 it\u2019s an established trend in motion.<\/p>\n<p>And I don\u2019t see anything that would reverse it. On the contrary, given the political dynamics \u2014 ramped-up spending on welfare and warfare policies, as well as an \u201ceat the rich\u201d mood \u2014 taxes have nowhere to go but north. And that means the exodus will continue.<\/p>\n<h3><strong>Three Cheers for Walgreens<\/strong><\/h3>\n<p>Over the past couple of years, dozens of high-profile US companies have moved abroad (or seriously considered it) to lower their corporate income tax rate and to access their offshore retained earnings without triggering US taxes.<\/p>\n<p>Among them are Medtronic, Liberty Global, Sara Lee, and Omnicom Group \u2014 the largest US advertising firm \u2014 to just name a few.<\/p>\n<p>Earlier this year Pfizer, one of the world\u2019s largest pharmaceutical companies, sought (but was ultimately rebuffed) to move abroad, which would have cut its tax bills by as much as $1 billion a year.<\/p>\n<p>The strategy these companies are using is known as an inversion. It\u2019s where a US company merges with a foreign company in a jurisdiction with lower taxes and then reincorporates there. Current US law allows for this if the foreign shareholders own at least 20% of the combined company (though some are trying to raise the minimum to 50%).<\/p>\n<p>Now, despite the howls and shrieks from upset politicians and the mainstream media about these companies being \u201cunpatriotic\u201d and \u201cun-American,\u201d they\u2019re doing absolutely nothing illegal. Inversions are totally acceptable within the current rules of the US Tax Code.<\/p>\n<p>Chuck Grassley, a Republican senator from Iowa has said, \u201cThese expatriations aren\u2019t illegal. But they\u2019re sure immoral.\u201d<\/p>\n<p>I beg to differ.<\/p>\n<p>Why would anyone want to give the destructive bureaucrats in DC a penny more than is legally required? As far as I\u2019m concerned, not only is there nothing wrong with going where you\u2019re treated best, there&#8217;s also an ethical and moral imperative to starve the Beast.<\/p>\n<p>And now the latest high-profile company to consider putting the Beast on a diet is Walgreens.<\/p>\n<p>Walgreens is considering reincorporating in Switzerland as part of a merger with Alliance Boots, a European rival. The net effect for would be to reduce Walgreens\u2019 tax rate to 20%, down from around 31% now. The move is estimated to save around $4 billion over the next five years.<\/p>\n<p>What really has the politicians scared is that inversions have started to snowball.<\/p>\n<p>The <em>New York Times<\/em> quoted an international tax lawyer stating that \u201cit takes one company with enough public recognition to start [a] domino effect.\u201d<\/p>\n<p>Walgreens could be the company that triggers a domino effect. If Walgreens were to move, it would gain a significant competitive advantage against its rivals. CVS, Walgreens\u2019 main competitor, paid a 34% tax rate in recent years. Can CVS really compete with Walgreens if the latter is paying 20%?<\/p>\n<p>Probably not. And that will only lead to more inversions.<\/p>\n<h3><strong>Another Way to Starve the Beast<\/strong><\/h3>\n<p>Remember, US companies are not globally competitive because of these two unique burdens:<\/p>\n<ol>\n<li>The US has the <strong>highest effective corporate tax rate<\/strong> in the developed world.<\/li>\n<\/ol>\n<ol>\n<li value=\"2\">Unlike most countries, which only tax domestic profits, the US taxes the earnings of foreign subsidiaries of US companies when the money is transferred back to the US.<\/li>\n<\/ol>\n<p>We have already seen how inversions can reduce #1, but they also offer huge benefits in terms of #2.<\/p>\n<p>Reincorporating abroad allows companies to permanently avoid paying US taxes on foreign earnings. It also allows companies to access their retained earnings offshore in ways they couldn\u2019t before without triggering punishing US taxes.<\/p>\n<p>Medtronic, for example, has accumulated $20.5 billion of untaxed earnings in foreign subsidiaries. By reincorporating abroad, Medtronic can access that money without getting slapped with US corporate income taxes, which would save it billions.<\/p>\n<p>For companies like Medtronic and Walgreens, reincorporating abroad seems like a no-brainer.<\/p>\n<p>Contrary to the government propaganda, the villains in this story aren\u2019t the companies seeking to diversify abroad to remain globally competitive. The villains are clearly the spendthrift politicians who enact these \u201cworst in the developed world\u201d tax policies, which create very compelling incentives for these companies to leave the US.<\/p>\n<h3><strong>It\u2019s Not Just Companies Saying Sayonara<\/strong><\/h3>\n<p>While the US should be enacting policies that make it attractive for productive people and companies to come to the US \u2014 rather than driving them away \u2014 don\u2019t hold your breath for positive change. It\u2019s more likely that nothing but more taxes and regulations are coming.<\/p>\n<p>But as we have seen with companies like Medtronic and Walgreens, companies have options too.<\/p>\n<p>And it\u2019s not just multibillion-dollar corporate entities that have options. Individuals operating on a modest scale can also reap enormous benefits by diluting the amount of control the bureaucrats in DC (or any country) wield over them. International diversification is the solution.<\/p>\n<p>You do this by moving some of your savings abroad with offshore bank and brokerage accounts, physical gold held abroad, owning foreign real estate, and establishing an offshore company or trust.<\/p>\n<p>Obtaining a second passport is an important part of the mix as well.<\/p>\n<p>You probably can\u2019t take all of these steps, and that\u2019s fine. Even taking just one will go a long way to reducing your political risk and giving you more options. In many cases, you don\u2019t even have to leave your living room.<\/p>\n<p>Think of it as your own personal insurance policy against an out-of-control government.<\/p>\n<p>However, things can change quickly. New options emerge, while others disappear. This is why it\u2019s so important to have the most up-to-date and accurate information possible when formulating your international diversification strategy. That\u2019s where <em>International Man<\/em> comes in.<\/p>\n<p>To keep up with the best strategies, you might want to check out our <a href=\"http:\/\/www.caseyresearch.com\/go\/v784n-2\/CSW\" target=\"_blank\"><em>Going Global<\/em><\/a> publication, where they are discussed in great actionable detail.<\/p>\n<div id=\"xvMdV95u77zU\" style=\"clear: both;\"><em>This article,\u00a0<a href=\"http:\/\/www.caseyresearch.com\/go\/v787p-2\/CSW\" rel=\"permalink\">Corporations Join Droves Renouncing US Citizenship<\/a>, was originally published at <a href=\"http:\/\/www.caseyresearch.com\/go\/v78sq-2\/CSW\">caseyresearch.com<\/a>.<\/em><\/div>\n","protected":false},"excerpt":{"rendered":"<p>he US has the highest effective corporate income tax rate in the developed world.  Unlike most other countries, which only tax domestic profits, the US taxes the earnings of foreign subsidiaries of US companies &#8230;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/5495"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5495"}],"version-history":[{"count":4,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/5495\/revisions"}],"predecessor-version":[{"id":5500,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/5495\/revisions\/5500"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5495"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5495"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5495"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}