Friday, May 24, 2013

More On The Corporate Tax Dodge

Corporations have become so skilled at avoiding taxes that governments will have to ramp up their skills to protect their own interests and those of other tax payers.  One of the latest forms of tax avoidance is described in this article.  A large US drug company acquired a much smaller drug company in Ireland.  The company then incorporated the merged organization in Ireland which has a much lower corporate tax rate.

OECD us working on ways to stop this race to the bottom by countries that use low tax rates to attract or retain corporations that have no real interests beyond those of their shareholders and top executives.  Alternatively, governments can increase taxes on the shareholders who have benefited from the corporate tax dodge.  Dividends and capital gains should be taxed as ordinary income.  Individuals might decide to move their residence to low tax states but that is not likely to happen.  France recently raised the tax rate on high income earners and many threatened to leave the country.  Only a few of done so.  John Galt is not what he is cracked up to be.  He really is dependent upon those around him and he actually likes the country in which he has been raised.  He just hates to pay taxes as long as they can be shifted to those with less political power.

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