Updated April 28, 2014 – with comment from the Isaac Brock Society:
If you haven’t seen the article referenced in the above tweet, you should read it and perhaps comment. There is clearly an “IRS Discount” associated with any U.S. person or entity. They just aren’t worth as much as other people. Sad but true.
The Readers Digest version is:
Corporations are simply merging with non-U.S. companies to end “US person” status. Too bad individuals can’t marry non-U.S. citizens and end their status of U.S. citizenship. This is a fascinating article.
Holy Grail objective is described as follows:
Executives at a California chip maker, Applied Materials, highlighted a number of advantages in announcing a merger recently with a smaller Japanese rival, but an important one was barely mentioned: lower taxes.
The merged company will save millions of dollars a year by moving — not to one side of the Pacific or the other, but by reincorporating in the Netherlands.
From New York to Silicon Valley, more and more large American corporations are reducing their tax bill by buying a foreign company and effectively renouncing their United States citizenship.
“It’s almost like the holy grail,” said Andrew M. Short, a partner in the tax department of Paul Hastings, which advises a number of American corporations on deals. “We spend all of our time working for multinationals, thinking about how we’re going to expand their business internationally and keep the taxation of those activities offshore,” he added.
It includes quotations from a familiar cast of characters:
“The impact in any one year may not be material, but the cumulative impact over time adds up,” said J. Richard Harvey, professor at the Villanova University School of Law. “Over time, more multinationals may want to expatriate or invert, and we could wake up in 10 or 20 years and it might be a meaningful number.”
I encourage you to get over there and add your comments to one spectacular comment from yet another familiar character:
This problem has a solution so simple and obvious that I stand in awe that Congress has not fixed it long ago. There are three necessary actions:
1. Replace the US territorial taxation systems with the international norm of territorial taxation. Exactly what the Simpson Bowles commission recommended.
2. Make US corporate tax rates competitive with those of our international trade competitors No new company with an ounce of financial sense would locate their world headquarters in the US with its high corporate tax rates world-wide taxation policy.
3. Replace the totally-unique US system of citizenship-based taxation with the universally-accepted world norm of residence-based taxation so that American companies can have American boots on the ground capturing markets for our competitively priced products. With 16 separate IRS tax publications containing 7,334 pages of instructions plus 667 pages of tax forms strictly for US citizens who live and work abroad, PLUS FBAR reports and with the the recently-enacted FATCA legislation, it has become impossible for middle-class US citizens to survive abroad unless he renounces US citizenship. So this makes it necessary for US companies to hire foreign mercenaries to sell our exports abroad, which is a total failure. That’s why the US has a job killing $715 billion trade deficit while most of our high-wage competitor countries have job creating trade surpluses.
Right on Roger!
Not even corporations can tolerate being “U.S. persons” anymore. Interestingly, Congress is aware of this:
That flurry caught the attention of Congress, and Senators Charles E. Grassley and Max Baucus proposed legislation to further curtail inversions. “These corporate expatriations aren’t illegal,” Mr. Grassley said in 2002. “But they’re sure immoral.”
“Immoral”? Being called “immoral” by Grassley is like being called ugly by a frog.