Companies Dodge $60 Billion in Taxes Even Tea Party Condemns

[Toro]

Tyler Hurst swiped his debit card at a Walgreens pharmacy in central Phoenix and kicked off an international odyssey of corporate tax avoidance.

Hurst went home with an amber bottle of Lexapro, the world’s third-best selling antidepressant. The profits from his $99 purchase began a 9,400-mile journey that would lead across the Atlantic Ocean and more than halfway back again, to a grassy industrial park in Dublin, a glass skyscraper in Amsterdam and a law office in Bermuda surrounded by palm trees.

While Forest Laboratories Inc., the medicine’s maker, sells Lexapro only in the U.S., the voyage ensures most of its profits aren’t taxed there -- and they face little tax anywhere else. Forest cut its U.S. tax bill by more than a third last year with a technique known as transfer pricing, a method that carves an estimated $60 billion a year from the U.S. Treasury as it combines tax planning and alchemy. (See an interactive graphic on Forest’s tax strategy here.)

Transfer pricing lets companies such as Forest, Oracle Corp., Eli Lilly & Co. and Pfizer Inc., legally avoid some income taxes by converting sales in one country to profits in another -- on paper only, and often in places where they have few employees or actual sales. ...

Tea Party Signs

The anti-tax activists of the national Tea Party movement haven’t put transfer pricing on signs in their demonstrations, yet it deserves attention, said Mark Skoda, chairman and founder of the Memphis Tea Party.

“I find the issue of corporations paying no tax or little tax in the United States, when the majority of their operations are here, problematic,” Skoda said in an interview. “The problem is that this is sort of the level of micro that people don’t look at.” ...

$1 Trillion Offshore

U.S. companies amassed at least $1 trillion in foreign profits not taxed in the U.S. as of the end of last year, according to data compiled by Bloomberg. That cumulative total, based on filings by 135 companies, increased 70 percent over three years, from $590 billion in 2006.

While some of the offshore earnings reflect sales abroad, much of the growth results from expanding use of transfer pricing, said Martin Sullivan, a tax economist who formerly worked for the Treasury Department and Arthur Andersen LLP.

The system allows for creating paper transactions between subsidiaries of the same company to allocate expenses and profits to selected countries. For instance, when technology firms license their patents to offshore subsidiaries in low-tax countries, profits from sales overseas are booked to the foreign units, not the U.S. parents. The tax savings add to profits.

“A very significant part of this accumulation of profits offshore is the artificial shifting of profits using transfer pricing,” said Sullivan, now a contributing editor to the trade publication Tax Notes. “There’s been a significant increase in its aggressiveness over the past decade.”

Companies Dodge $60 Billion in Taxes Even Tea Party Condemns - Bloomberg.com

 

[Neubarth]

Since profits drive innovation, how much should drug companies be taxed?

Hell, if Liberal Republican governor Schwarzenegger (His name actually means Black "******" so he must have had a Moor as an ancestor there in Austria.) could get his hands on the drug companies, you could be certain that he would tax them ninety percent of their profits. We are lucky that he can't.

 

[Truthmatters]

Enough to recover the cost of their use and maintainace of our infrastructure which they benfit from greatly