# Offshore profit shifting and the u.s. Tax code **URL:** \ **Category:** Great Debates\ **Created:** [October 4, 2012, 1:54pm UTC](https://boards.straightdope.com/t/offshore-profit-shifting-and-the-u-s-tax-code/636687 "2012-10-04T13:54:19Z")\ **Posts on this page:** 8\ **Page:** 1
**Author:** ![Simple\_Mind](https://avatars.discourse-cdn.com/v4/letter/s/7cd45c/32.png) [@Simple\_Mind](https://boards.straightdope.com/u/Simple_Mind)\ **Post date:** [October 4, 2012, 1:54pm UTC](https://boards.straightdope.com/t/offshore-profit-shifting-and-the-u-s-tax-code/636687/1 "2012-10-04T13:54:19Z")
STATEMENT OF SENATOR CARL LEVIN (D-MICH) BEFORE U.S. SENATE PERMANENT SUBCOMMITTEE ON INVESTIATIONS ON OFFSHORE PROFIT SHIFTING AND THE U.S. TAX CODE September 20, 2012 America stands on the edge of a fiscal cliff. This challenge lends new urgency to a topic this subcommittee has long investigated: how U.S. citizens and corporations have used loopholes and gimmicks to avoid paying taxes. This subcommittee has demonstrated in hearings and comprehensive reports how various schemes have helped shift income to offshore tax havens and avoid U.S. taxes. The resulting loss of revenue is one significant cause of the budget deficit, and adds to the tax burden that ordinary Americans bear. U.S. multinational corporations benefit from the security and stability of the U.S. economy, the productivity and expertise of U.S. workers and the strength of U.S. infrastructure to develop enormously profitable products here in the United States. But, too often, too many of these corporations use complex structures, dubious transactions and legal fictions to shift the profits from those products overseas, avoiding the taxes that help support our security, stability and productivity. Full article: [http://publicintelligence.net/hsgac-corporate-offshore-profits/](http://publicintelligence.net/hsgac-corporate-offshore-profits/) Why is this not in the news??? ---
**Author:** ![Snnipe\_70E](https://avatars.discourse-cdn.com/v4/letter/s/b5a626/32.png) [@Snnipe\_70E](https://boards.straightdope.com/u/Snnipe_70E)\ **Post date:** [October 4, 2012, 2:16pm UTC](https://boards.straightdope.com/t/offshore-profit-shifting-and-the-u-s-tax-code/636687/2 "2012-10-04T14:16:01Z")
The complaint about off shore and over see’s movement has been in the news for years. Enough so it only need a little explaining what that statement means. Now if I understand the chart right that is displayed MS is paying 1.2B on 3B of sells or 40% in one example and 2.8B on 9B of sales or 33.3% sounds like no advantage to move. It also sounds like the main advantage is saving ontaxes, and that is an advantage. But the are also addvoiding one of the strenghts of this country, labor. Just saying. ---
**Author:** ![dracoi](https://avatars.discourse-cdn.com/v4/letter/d/90db22/32.png) [@dracoi](https://boards.straightdope.com/u/dracoi)\ **Post date:** [October 4, 2012, 4:53pm UTC](https://boards.straightdope.com/t/offshore-profit-shifting-and-the-u-s-tax-code/636687/3 "2012-10-04T16:53:35Z")
The problem with an issue like this is that it requires a technical discussion of nuances, but everyone wants to take each point and exaggerate it to some extreme. I’ll just make one quick comment on the graph of corporate tax as a percentage of total revenue. This only measures C Corporation. S Corporations, partnerships and sole proprietors pay tax on a 1040 return. S Corporations are particularly significant because they are growing in popularity. [Wikipedia](http://en.wikipedia.org/wiki/S_corporation)says: > [@](#): > > S corporations, which are now the most common corporate entity, numbering over 3 million in 2002, up from about 750,000 in 1985. So as the number of S Corporations grows, the amount of income taxed on a 1040 return grows, and the percentage of income taxed on C Corporations 1120 forms shrinks. The graph does not prove that corporations are off-shoring jobs or getting tax breaks from doing so. Oh, one more quick comment: Microsoft probably does its R&D in the US because we have an R&D credit, which reduces the taxes it pays on its US profits. ---
**Author:** ![Simple\_Mind](https://avatars.discourse-cdn.com/v4/letter/s/7cd45c/32.png) [@Simple\_Mind](https://boards.straightdope.com/u/Simple_Mind)\ **Post date:** [October 4, 2012, 10:39pm UTC](https://boards.straightdope.com/t/offshore-profit-shifting-and-the-u-s-tax-code/636687/4 "2012-10-04T22:39:34Z")
Why and how are they allowed to do so whereas we as ordinary Citizens are being prosecuted for evading taxes, are the facts in the report true and if so why is there no revolt against it, like “Boycott Wallstreet” ? ---
**Author:** ![AHarris](https://avatars.discourse-cdn.com/v4/letter/a/bcef8e/32.png) [@AHarris](https://boards.straightdope.com/u/AHarris)\ **Post date:** [October 4, 2012, 11:07pm UTC](https://boards.straightdope.com/t/offshore-profit-shifting-and-the-u-s-tax-code/636687/5 "2012-10-04T23:07:42Z")
> [@Simple\_Mind](#): > > Why and how are they allowed to do so whereas we as ordinary Citizens are being prosecuted for evading taxes, are the facts in the report true and if so why is there no revolt against it, like “Boycott Wallstreet” ? Why should a company have to pay US taxes on income not generated in the US? Whether corporations are gaming the system by moving income/assets offshore that should be claimed in the USA is an issue for the auditors to sort out. If you live outside of the USA, you can claim the Foreign Earned Income deduction: [http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion](http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion) At 95K for 2012, more than half of US taxpayers wouldn’t pay US taxes after claiming it. Also, if you pay taxes to many foreign countries, you can also deduct that as well. ---
**Author:** ![SmartAlecCat](https://avatars.discourse-cdn.com/v4/letter/s/67e7ee/32.png) [@SmartAlecCat](https://boards.straightdope.com/u/SmartAlecCat)\ **Post date:** [October 5, 2012, 12:00am UTC](https://boards.straightdope.com/t/offshore-profit-shifting-and-the-u-s-tax-code/636687/6 "2012-10-05T00:00:59Z")
We agree it is [Perfectly Legal](http://perfectlylegalbook.com/), but does [this maneuver](http://www.bloomberg.com/news/2010-10-21/google-2-4-rate-shows-how-60-billion-u-s-revenue-lost-to-tax-loopholes.html) sound like something we should continue to allow? ---
**Author:** ![Simple\_Mind](https://avatars.discourse-cdn.com/v4/letter/s/7cd45c/32.png) [@Simple\_Mind](https://boards.straightdope.com/u/Simple_Mind)\ **Post date:** [October 5, 2012, 12:15pm UTC](https://boards.straightdope.com/t/offshore-profit-shifting-and-the-u-s-tax-code/636687/7 "2012-10-05T12:15:25Z")
I believe that this way of avoiding taxes is very common, we have all the time incidents of tax fraud in Europe and even the middle class has a lot of money stashed away on Swiss, Belgian, or Lichtenstein Bank accounts and the Governments are trying to caught them but has not much luck. ---
**Author:** ![Damuri\_Ajashi](https://avatars.discourse-cdn.com/v4/letter/d/898d66/32.png) [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)\ **Post date:** [October 5, 2012, 3:40pm UTC](https://boards.straightdope.com/t/offshore-profit-shifting-and-the-u-s-tax-code/636687/8 "2012-10-05T15:40:53Z")
I have no problem with tax planning with treaty countries (countries with whom we have a tax treaty in place so that we synchronize our taxes and share information) I have a problem when companies use non-treaty jurisdictions (AKA tax havens). The fact that some islands in the caribbean are home to so many patents on things developed here in the US is purely tax motivated.