This time regarding American businesses merging with overseas companies and moving to that overseas lower corporate tax environment. This improves profits for the businesses’ owners, never mind that. It reduces revenue for the Know Betters in our Government.
The new [Treasury Department] rules, the government’s third wave of administrative action against inversions, will make it harder for companies to move their tax addresses out of the US and then shift profits to low-tax countries….
The aggressive nature of this latest round also comes
from a Treasury Department that has expressed frustration at the limits of its own powers in curbing these transactions.
Because Know Betters always want more power. It’s not mete that the plebes and commoners should be in their way. Here’s the gist of these rulers’ latest power grab:
The rules have two main parts…. First, the government would go after what it calls “serial inverters,” large companies created through multiple inversions or takeovers of US companies. The government would disregard US assets acquired by such companies over the previous three years.
To reap the full benefits of inverting, the US company’s shareholders should own between 50% and 60% of the merged entity, which requires a partner of carefully calibrated size.
Because business decisions concerning the details of a merger are better made by the Know Betters of Government than they are by the owners and managers of the businesses involved.
Treasury’s second action would limit what is known as earnings stripping, a practice that follows many inversions and other cross-border acquisitions that helps lower companies’ effective tax rates.
Inverted companies—in fact, all non-US-based companies—can lend money to their US subsidiaries. Those moves create deductible interest in the US, reducing the income subject to the 35% US corporate tax rate and shifting income to a lower-taxed jurisdiction.
Because business leaders can’t be allowed to honor their fiduciary duties to the business’ owners by looking to maximize profit and to maximize revenue left in the business’ hands. No, not when doing that runs counter to the demands of Know Betters for ever more money for Government.
Jack Lew, author of the rules in his capacity as Treasury Secretary had this bit of disingenuosity in defense of his latest stab:
After an inversion, many of these companies continue to take advantage of the benefits of being based in the United States—including our rule of law, skilled workforce, infrastructure, and research, and development capabilities—all while shifting a greater tax burden to other businesses and American families[.]
Never mind that inversions could better be discouraged by lowering our existing corporate tax rates to internationally competitive levels, and which thereby would shift no burden to other businesses and American families. Lowering taxes is anathema to a gang that sees tax revenue as another path to their political power. (Certainly, Treasury can’t lower tax rates on its own, but Lew is carefully silent on this matter.)
Elections have consequences, folks.