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Friday, 25 July 2014 06:30

Obama Finally Reads the Riot Act to Corporations Who Abandon the US to Save Taxes

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It took six years, but President Barack Obama finally used his bully pulpit to chastise US corporations who abandon this country to save taxes.

On June 30, BuzzFlash at Truthout posted a commentary, "Unpatriotic US Corporations Increasingly Move Headquarters Overseas to Decrease Taxes." As BuzzFlash noted then:

According to [The Chicago] Tribune, "Walgreen joins a small but growing number of U.S. multinationals contemplating inversions to lower their tax burden." The Tribune includes a chart of businesses that have moved their headquarters to other countries for tax avoidance purposes (on the second page of the Internet article) - and it is a legal net revenue increasing strategy. It is also noted that "fresh waves of companies have moved or are considering moving to avoid taxes."

....Among the many hypocritical ironies, given this trend of US companies becoming technically non-US companies, are the implications for the Citizens United Supreme Court ruling. How can a non-US company have the rights of a US citizen if it is incorporated in another country?

Apparently the president, who has been rather cozy with Wall Street and US corporations for six years, felt a rare gust of populist disdain for businesses that abandon the US to decrease their taxes. He robustly expressed his scorn on July 24, first in a speech at a technical college in Los Angeles and then in a CNBC interview. 

Obama specifically cited Ireland as a country that has encouraged US corporations to use the process known as "inversion" to legally move their headquarters for purposes of tax avoidance. The Irish Times reported on the president's remarks:

In his administration’s most high-profile attack on a practice known as “inversions” that more and more US companies have recently used to reduce their taxes, Mr Obama said in a speech in California that US corporations were exploiting an “unpatriotic tax loophole” by moving their head offices overseas in takeovers of smaller foreign companies....

What we are trying to do is to say that if you simply acquire a small company in Ireland or some other country to take advantage of the low tax rate [and] you start saying, ‘we are now magically an Irish company’, despite the fact that you might have only 100 employees there and you have got 10,000 employees in the United States, you are just gaming the system,” he said. “You are an American company.”

In his speech at a Los Angeles college, he said that these companies were technically renouncing their US citizenship, even though most of their operations were in the US.

I don’t care if it’s legal – it’s wrong,” he told an audience. “You don’t get to choose the tax rate you pay. These companies shouldn’t either.”

The Irish Times also noted, "In an extraordinarily strong rebuke of US multinationals, he said some have called these firms 'corporate deserters.'

That may be the strongest rhetoric that Obama has uttered concerning the pseudo-patriotism of US corporations who love to wrap their marketing in the flag while re-incorporating overseas to boost profits and stock prices. The BuzzFlash commentary about Walgreen's included an estimate from a stock analyst, as quoted in The Chicago Tribune, that if the Walgreen company proceeds with overseas inversion incorporation, it "would cost U.S. taxpayers $2.35 billion in the first three years after the transaction."

Because US companies avoid paying their fair share of taxes, using the inversion and other tax schemes, the US debt - which pro-corporate elected officials complain about - rises.

In his interview with CNBC about the inversion tax avoidance strategy, Obama almost sounded as if he were channeling Elizabeth Warren:

What I'm saying is that companies thrive in the United States in part because they benefit from the best university system in the world, the best infrastructure-- although I'd like to see us do a little better on infrastructure. You know, there are a whole range of benefits that have helped to build companies, create value, create profits. For you to continue to benefit from that entire architecture that helps you thrive, but move your technical address simply to avoid paying taxes-- is neither fair-- nor-- is it-- something that's going to be good for the country over the long term. And this is basically taking advantage of tax provisions that are technically legal-- but I think most people would say if you're doing business here, if you're basically still an American company, but you're simply changing your mailing address in order to-- avoid paying taxes-- then you're really not doing right by the country-- and by the American people.

During Warren's campaign for the Senate, one of her most noted comments emphasized that corporations are built on an infrastructure of services, transportation and education, among other hidden subsidies provided by the public commons.

Apparently, President Obama finally got the message.

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