Should foreign companies pay taxes?

[wittgenstein]

Recently Republicans defeated a bill that would have helped the heroes of 9/11. Why? Because it had an amendment in it that said that the help would be paid for by eliminating a tax loop hole for foreign corporations that do business in the US. Many foreign companies incorporate in tax haven countries to avoid tax on income earned in the U.S. Should foreign companies pay taxes on money earned in the US?

 

[Alfi]

Recently Republicans defeated a bill that would have helped the heroes of 9/11.

What bill would this be?

Should foreign companies pay taxes on money earned in the US?

The corollary question, Should US companies pay taxes on money earned on foreign soil?

 

[drankin]

I'm with Alfi. Not enough information.

 

[wittgenstein]

"To pay the bill's estimated $7.4 billion cost over 10 years, the legislation would have prevented foreign multinational corporations incorporated in tax haven countries from avoiding tax on income earned in the U.S. Bill supporters said that would close a tax loophole; Republicans branded it a corporate tax increase."
FROM
http://www.foxnews.com/politics/2010/07/30/new-york-lawmakers-spar-failed-aid-sick-responders/"
I'll rely on fox news this time. Perhaps they are not "fair and balanced". However, I defy anyone to say that fox has a liberal bias!

 

[Proton Soup]

geeze, yet another 9/11 payout?

how about you tax freedom fries to pay for it?

 

[Cyrus]

The better question is, how much direct money into our economy will be lost of if implementing such a tax policy causes international businesses to leave.

 

[russ_watters]

"To pay the bill's estimated $7.4 billion cost over 10 years, the legislation would have prevented foreign multinational corporations incorporated in tax haven countries from avoiding tax on income earned in the U.S. Bill supporters said that would close a tax loophole; Republicans branded it a corporate tax increase."

Any details on what that actually means? That's just telling you the political rhetoric from both sides, not what the legislation actually does.

 

[CRGreathouse]

I'd also like details, both on what the bill does and what the standard practice is for foreign countries.

 

[Jack21222]

The better question is, how much direct money into our economy will be lost of if implementing such a tax policy causes international businesses to leave.

Since a tax is just on profits, it would be stupid for a company to leave one of the biggest economies in the world for not turning a larger profit than without the tax. This won't tax any company into taking a net loss. If a company routinely trims its profitable operations, it won't survive as a company for long.

But I agree with everybody else, I'd like more information.

 

[Vanadium 50]

So I was intrigued by how Republicans could kill a bill without a majority, so I looked into it.

First, let's answer the question in the title. Foreign companies can and do pay taxes. These taxes are negotiated by treaty between the governments in question, and the basic idea is one of equal treatment: Volkswagen should not have a substantially different tax burden for selling cars in the US than Ford does for selling cars in Germany. If the US were to raise taxes on VW, we could expect Germany to raise taxes on Ford.

Now, what does this bill actually do? I tried to read it, and read the floor actions, and it seems that the actual beneficiaries are hospitals. What it does is allow NY hospitals to be reimbursed for 9/11 patient care at a higher rate than the government reimburses other patients at the same hospitals or patients at different hospitals. It apparently funds this by imposing taxes in ways that by treaty the US said that it wouldn't. (Reminder - in the US treaties are ratified by the Senate, not the House, and bills have to pass both houses to become law)

Why could a minority block this? Because the House leadership put this bill forward under "suspension of the rules", which requires a 2/3 vote to pass. This is usually done for non-controversial actions like proclaiming National Omelette Week.

Why did they do this? I don't know, but the cynic in me suggests that House leadership didn't really want this bill to pass - a retaliatory "tax war" would certainly interfere with President Obama's plan to double exports and would in all probability plunge the country back into recession. Putting it through under rules that require a 2/3 majority let them give the GOP a black eye and paint them as uncaring.

 

[wittgenstein]

"Since a tax is just on profits, it would be stupid for a company to leave one of the biggest economies in the world for not turning a larger profit than without the tax."
Jack21222
I agree. That shows that the Republicans did not want the tax loop hole to close, for less than patriotic reasons. Their loyalty is to the international companies, not the US.
The bill would have closed the loop hole that says that a corporation with its headquarters in a tax haven country does not have to pay taxes on profits made in the US. The money collected would be used to help the 911 heroes.I honestly do not know how to explain the bill more. Tho this info on the periphery may help.
---------------------
"Until the 1950s, tax havens were used to avoid personal taxation but since then jurisdictions have come to focus on attracting companies with low or no corporate tax. Centres which focus on providing financial services to corporations rather than private wealth management are more often knows as offshore financial centres.
This strategy generally relied on double taxation treaties between large jurisdictions and the tax haven, allowing corporations to structure group ownership through the smaller jurisdiction to reduce tax liability. Although some of these double tax treaties survive, in the 1970s, most major countries began repealing their double taxation treaties with micro-states to prevent corporate tax leakage in this manner."
from
http://en.wikipedia.org/wiki/Tax_haven
The obvious question is," did the U.S.A repeal its double taxation treaties?" See site below!
http://www.finweb.com/taxes/the-double-taxation-treaty-of-america.html"
Therefore, many foreign corporations do not pay taxes on profits made from operating in the U.S.A."
------------
"Putting it through under rules that require a 2/3 majority let them give the GOP a black eye and paint them as uncaring. "
Vanadium 50
The Dems did not want the Republicans to add many many amendments that would have made the bill a farce. Perhaps you are right and the Dem's put a "poison pill" into the bill that they knew the Republicans would reject. However, the "poison pill" is the proviso that international corporations must pay taxes on profits they made from US. OK. It's like the Dems said , " we want the 911 heroes to be taken care of. However, we will add an amendment that says that murder should be illegal." * Now, one could say that the Dems were being cynical manipulators because they knew their opposition was against a proviso banning murder. They knew their opposition would never go for that. They knew their opposition was immoral and set them up for a political fall. I'll grant you that.
Yes, letting international corporations rip us off is not as bad as murder. However, my analogy still makes my point.
*
I admit that the analogy is not perfect. Closing the loop hole to fund the 911 heroes makes sense. Banning murder ( tho a good thing) is unrelated to the plight of the 911 heroes.
---------
If the Republicans had done the right thing they would have thought," I'm against murder and I want to help the 911 heroes. I will only look bad if I vote against either of those things. I will not play into the Dem's game."
Unfortunately, the Republicans do not want to prevent the international corporations from ripping us off.
It usually comes as a shock when a person realizes that many foreign ( and many domestic companies) pay no US tax at all! It should also come as a shock that the majority of Republicans believe that foreign companies should not pay taxes on profits made in the USA!
They are even willing to sacrifice the 911 heroes on the alter of no taxes on foreign corporations!

 

[wittgenstein]

"What it does is allow NY hospitals to be reimbursed for 9/11 patient care at a higher rate than the government reimburses other patients at the same hospitals or patients at different hospitals. "
Vanadium 50
I agree. The bill is about the rescue workers of 911, not about anyone else getting aid.

 

[wittgenstein]

Yes! I've been seeing other sites! This is from FRDB and explains the situation succinctly.
"basically it went down like this:
dems: we should extend our support of rescue workers on 9/11
repubs: it'll cost too much, no
dems: okay, well, here - close this tax loophole, that'll cover the costs
repubs: that... um... no!"
prideandfall

 

[wittgenstein]

"The corollary question, Should US companies pay taxes on money earned on foreign soil? "
Obviously," YES".
Unfortunately, countries no longer get fair compensation for the profits they give the international corporations. Government is superfluous in the running of the world. Unless, you could fairly argue that puppets are necessary in carrying out policy.
Republicans argue about "big government". People agree because they know that the government just does what wall street and the international corporations tell them to do. The Republicans then tell the public that the way to lessen the power of big government is to increase the power of the international corporations and wall street!

http://www.youtube.com/watch?v=h27HRNm_r4U"

 

[heusdens]

Recently Republicans defeated a bill that would have helped the heroes of 9/11. Why? Because it had an amendment in it that said that the help would be paid for by eliminating a tax loop hole for foreign corporations that do business in the US. Many foreign companies incorporate in tax haven countries to avoid tax on income earned in the U.S. Should foreign companies pay taxes on money earned in the US?

My country, the Netherlands, seems to play an important role in that, as about 10% of world profits (8000 billion dollars yearly, I have read) on paper is being made in the Neherlands (by mailbox offices), while the real production takes place somewhere else. We have been reproached of being a tax-heaven. This is of course some consequence of the ruling neo-liberal doctrine, that also has a grip on dutch politics (and which got us into this banking and financial crisis).

So this is to say, I would say definitely yes. Companies need to be taxed in the country where they effectively and demonstrably make their profits, and they should have no escape routes to get away with that by administratively book those profits in some other country which has less taxation. I would call such practices fraudulous, and should be stopped and treated like any tax cheat or tax evasion, and punished severely.

But it can only be done properly on an international scale by setting up a new tax agreement on such policies.

 

[wittgenstein]

http://abcnews.go.com/WN/us-firms-dodge-billions-taxes-moving-profits-overseas/story?id=10641219
FROM the above site.
"The U.S. corporate tax rate is 35 percent, while Bermuda has no corporate tax. Last year, sales of Lexapro generated more than $2 billion in revenue.
"It's a nearly 100 percent American company in terms of where it does its sales," said Drucker. "Yet the majority of their profits show up overseas."