Open Eyes Opinion
Unfortunately for the US, this trend of “Inversion” is likely to continue.
The argument put forth by some politicians regarding the corporate
nominal tax rate versus the effective tax rate is a valid point.
In that respect it may seem that the Burger King move to Canada is not
a substantial tax savings.
However, the BK merger goes beyond the tax savings gained by relocating to Canada.
The merger will end the US taxation on BK’s revenue from world wide operations and
that will be a substantial savings.
That is a big incentive for other US based MNC’s to re-evaluate the benefit of
headquartering in the United States.
I suspect, that one concern that is not being openly discussed is that corporations
do not trust the current US government — they may be afraid of their business being
overregulated and/or nationalized. Also, they may be detecting a pattern of “selective prosecutions” when
the government levies corporate fines and penalties.
There is also the possibility that the corporations are disgusted with government wasteful
spending of tax revenue inside of the US and the expatriation of billions of those tax dollars
to foreign countries with little or no audit trail.
If you want an eye-opener scrutinize the State Departments “read outs” from January to
August of this year — how many billions of tax dollars have been pledged to
countries on the African Continent. Maybe, US corporations believe that this is not
the “highest and best use of tax revenue” derived from their corporate profits.
They may consider that US nation building should be a priority.
Inversion will create a big sucking sound being emitted from the US banking system.
Do you think that these MNC’s departing the US is going to leave billions in the
US banks drawing negative interest?
This will drop straight down to loss of disposable income for the US citizen.
The loss of corporate tax revenue will have to be replaced — probably by increased
individual income taxes or the creation of new consumption taxes. I imagine the
first desperate move would be higher federal taxes on gasoline followed by a long
line of government revenue generated by esoteric confiscation of citizen wealth.
The US, directly or indirectly, is importing millions of unemployed individuals
that immediately are absorbed into the “Welfare Borg”. They need the big bucks
to support this ever increasing monster drain on federal tax revenue.
The US leaders will probably react to this trend of inversions by creating new
regulations, laws, penalties, etc. — like they did with high wealth US citizens
giving up their US citizenship and ‘booking out’ of the United States.
(Alternate tax scheme for expatriated individuals)
Will a knee jerk reaction from national leaders overstep legal boundaries?
Are they going to create legislation that limits the mobility of corporations?
Will this set a precedent and trickle down to increased capital controls and
restrictions on mobility of private US citizens?
We, in the US, will start hearing on the mainstream media news, that is pipe-lined from
capitol hill, that inversion is an atrocious unpatriotic act. This will incite the masses of
the unthinking to declare they will boycott the products of the exiting corporations.
I imagine this boycott will be short lived, with Burger King — Americans love their
adipose tissue building diets.
I have been doing a little sentiment analysis of the average US citizen’s
reaction to corporations leaving the US to reduce their tax liability.
My Question: Please answer yes or no
Q. Do you think it is unpatriotic for corporations to seek out tax reducing strategies?
A. Yes, it is unpatriotic
My response, OK — You are a great patriot—do your patriotic duty next time you
file your federal tax returns and do not claim any deductions or exemptions.
Their response, an empty stare and a deer caught in the headlight facial expression.
The questions that we should be asking — is what can we do to create incentive
for corporations to stay in the United States and entice ‘foreign direct investment’ in the US?
What is the ‘commonality of purpose’ of high wealth citizens looking for ‘capital preservation’ by expatriating or setting up offshore trusts? … greed or fear of predatory Government tax policies? (Distribution of Wealth)
The US government is always obsessed with the end results of a problem and avoids addressing the causative factors.
Three (G) a Brazilian global investment firm acquired Burger King in year 2010.
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