We all know that big companies search for loopholes in the tax code, but sometimes you read a case that just questions the whole system. Apparently there is a new fun practice called Transfer Pricing in which with very flittle foreign investment, you can bounce your companies profits through other nations that have light taxes. It literally takes a financial transaction in America and transfers the profits to another country. It’s a miracle every hot dog stand in Battery Park hasnt figured a way to game this.
Off shore banks have now become metaphysical.
Jesse Drucker writes for Bloomberg News,
After an economic bailout in which the U.S. government lent, spent or guaranteed as much as $12.8 trillion, the Obama administration faces a projected budget deficit of $1.5 trillion this year. In February, the administration said it would target some of the techniques companies use to shift profits offshore — part of a package intended to raise $12 billion a year over the coming decade.
Losing $60 Billion
That’s only about a fifth of the $60 billion in annual U.S. tax revenue lost to thousands of companies’ income shifting, according to a study published in December in the National Tax Journal by Kimberly A. Clausing, an economics professor at Reed College in Portland, Oregon.
The lost revenue could pay the federal government’s share of health coverage for more than 10 million uninsured Americans, such as Hurst — more than a third of the people who will gain insurance under the health-care overhaul passed in March. The administration’s proposed tax on certain financial institutions would take almost seven years to generate $60 billion.
“Transfer pricing is the corporate equivalent of the secret offshore accounts of individual tax dodgers,” said Sen. Carl Levin, a Michigan Democrat and chairman of the Senate’s Permanent Subcommittee on Investigations, in a statement to Bloomberg News. Levin has overseen hearings on tax shelters including those sold to wealthy people by KPMG LLP. “Now that progress has been made in addressing offshore tax abuse by individuals, transfer pricing is an issue that deserves scrutiny.”
David Lightman and Kevin G. Hall write for McClatchy
WASHINGTON — The Senate took strong steps Thursday to fix a key cause of the recent financial crisis, approving measures to limit the ability of Wall Street firms to shop around for favorable ratings from now-discredited credit rating agencies.
Lawmakers approved two rating-agency amendments to a sweeping overhaul of financial regulation, despite objections from Senate Banking Committee Chairman Christopher Dodd, D-Conn.
Moody’s Investors Service, Standard & Poor’s and Fitch Ratings were all key players in the nation’s financial meltdown, giving blue-chip ratings to complex mortgage-backed bonds that turned out to be junk.
A McClatchy investigation last October revealed how Moody’s and its competitors sold out investors by trading their ratings for huge fees that came from rating complex deals.
Sen. Al Franken, D-Minn., offered an amendment aimed at putting an end to this Wall Street behavior that passed on a bipartisan 64-35 vote.
“They shop around for their ratings. They select those agencies that tend to offer them the best ratings, and threaten to stay away from rating agencies that are too tough on them,” Franken said.
From Timothy Egan in the May 5 New York Times‘ Opinionator:
On energy, amnesia is the American way. Things lumber along, 300-million-year-old fossil fuels are pulled from deep inside the kingdoms of desert despots and shipped to our shores. It’s slow-motion suicide, of sorts, to the planet — and I’m no worse or better than anyone else who uses oil for everyday comforts — but we don’t see the wounds until a spill brings it all home.
Totally. As you may remember from our About Us page,
Santayana said: “Those who do not learn from history are doomed to repeat it.” This may be truer for America than anywhere else, because we pride ourselves on dismissing the past, moving forward, progress. In America, the past just gets in the way, and has to be torn down like an old building.
We think this time is different. This time, the past has blocked our way, and is threatening to tear us down instead. We chronically bubble our economy, import our energy and use it inefficiently, and waste our water resources.
Egan is absolutely right when he says:
Suddenly, alarms are sounded. Brows are furrowed. Promises are made. This time, with fears that the Gulf spill will be even larger than the one in Alaska, lessons will be learned, yesiree. But soon enough, we’ll go back to planting trees on Earth Day, feeling good about recycling — Hooray for us! We’re green and cool — while resuming the old routine. That is: a nation with five percent of the earth’s population consuming about 23 percent of the world’s oil output, glug, glug, glug.
That’s what we said:
But crisis is nothing new to Mankind: every couple of generations, the same portents of Apocalypse gather – only to be swept under the carpet when the warnings of imminent destruction are perceived to be from the radical fringe, crying wolf.
Let’s face the music and dance.
But don’t fret! You and Timmy are the lucky ones – now there a lot more ways to make things go.
Analysts are arguing today as to the cause of a major sell off in the stock market that took place yesterday May 6, 2010. Suggestions range from the Greek debt crisis all the way to a trader mistake who typed B for billion, when he meant to type M for million. At one point DOW had lost nearly 1000 points causing a rush of buyers to move in and snatch up the low prices. Whatever the cause yesterday, The massive movement reminded everyone that the Market is prepared to behave like a swarm of angry bees at the drop of a hat. Here’s some of the buzz from the trading floor.