Multinationals have been repatriating billons, legally, and paying paltry duties
U.S. multinationals are finding ways to repatriate billions of dollars in overseas profits without incurring a 35% U.S. tax rate, according to this Bloomberg News story in the San Francisco Chronicle. Cisco has been very vocal about the need for the U.S. to dramatically lower its tax rate on foreign profits before Cisco and other multinationals invest it here.
Failing to do so is and will continue to hamper the U. S. economy because there will be no incentive to bring it back into the U.S., Cisco asserts. The current tax practice is depriving the U.S. economy of a trillion dollars in profits made overseas, Cisco and others contend.
Yet, many are bringing it back while sidestepping the heavy domestic taxation, the Chronicle reports, and doing so legally:
Merck & Co. Inc. brought more than $9 billion from abroad without paying any U.S. tax to help finance its acquisition of Schering-Plough Corp. last year, securities filings show… Pfizer Inc. imported more than $30 billion from offshore in connection with its acquisition of Wyeth last year, while taking steps to minimize the tax hit on its publicly reported profit…Disclosures in Switzerland and Delaware by Eli Lilly & Co. show the pharmaceutical company carried out many of the steps for a tax-free importation of cash after its roughly $6 billion purchase of ImClone Systems Inc. in 2008.
Aided by a group of tax attorneys, accountants and investment bankers, U.S. companies are routinely repatriating hundreds of billions of dollars in foreign earnings and paying a paltry amount of taxes, according to a USC law professor quoted in the Chronicle story. These companies avoid about $25 billion a year in federal income taxes, according to the USC professor.
If they can do it, so can Cisco. Cisco has about $30 billion in profits stashed overseas. And CEO John Chambers was among the 20 CEOs that recently met with President Obama to discuss ways to reinvigorate the U.S. economy. As expected, Chambers and the other CEOs requested a tax “holiday” so they could repatriate the foreign profits and invest them here to help stimulate the economy.
But previous tax holidays failed to boost the economy, as intended. And it’s now apparent that Cisco and other multinationals really don’t need that holiday, or tax reform on overseas profits – all they need is a council of tax savvy lawyers, bankers and accountants.
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