Getting a handle on inversion

first_imgIn recent years, a number of U.S.-based corporations with significant international holdings have shifted their headquarters overseas in an attempt to lower their tax bills. At 35 percent, the U.S. nominal corporate tax rate is highest among member nations in the Organization for Economic Cooperation and Development (OECD). The maneuver is known as tax inversion. Officials in the Obama administration have described it as unpatriotic, and are weighing an executive action aimed at limiting the economic benefit. Harvard Business School’s Mihir Desai is an expert on tax policy, international finance, and corporate finance. His work has explored the design of tax policy in a globalized setting, the links between corporate governance and taxation, and the internal capital markets of multinational firms. Desai, the Mizuho Financial Group Professor of Finance, is also a professor at Harvard Law School, and a research associate in the public economics and corporate finance program of the National Bureau of Economic Research.Desai spoke with the Gazette via email about the factors driving the practice of tax inversion, and also provided links to research around the topic.GAZETTE: What is a tax inversion?DESAI: “Simple” inversion involves taking a typical corporate structure and inverting it — a U.S. parent company and its subsidiary in a low-tax jurisdiction switch positions. Such a transaction largely leaves U.S. operations and foreign operations unchanged, but changes the nationality of the parent company. Such transactions can have two tax-related benefits. First, the U.S. employs a worldwide tax system on its citizens and corporations so that income earned globally is subject to tax, after credits for foreign taxes paid, in the U.S. As such, an inversion promises to remove future non-U.S. income from U.S. taxing jurisdiction so that foreign income only faces local taxes. Second, the new transaction may enable corporations to remove income from the U.S. more readily than they did before, via intracompany financings. In a study of the initial wave of these transactions co-authored with Jim Hines, we found that both motives were operative.The more recent spate of these inversions (PDF) is more complex and more substantive. After the enactment of anti-inversion legislation in 2004, corporations must find a foreign partner with an appropriate domicile and merge with them, in the process changing their domicile to the partner’s domicile, in order to access these benefits. Recent transactions have involved some of our largest companies, reflecting the growing incentives to undertake such transactions.GAZETTE: What is spurring the trend in inversions? The New York Times reported that 22 companies have announced an inversion since 2011, why?DESAI: The growing frequency and magnitude of these transactions are a manifestation of the changing incentives facing U.S. corporations. On two critical dimensions, the U.S. corporate tax regime is a significant outlier — we employ a worldwide regime and our statutory rate is amongst the highest in the OECD. In the last five years, our exceptionalism has become more pronounced as the U.K. and Japan switched away from a worldwide system. The U.K. cut their rate by 10 points and the third quiver of Abenomics [economic policies advocated by Japanese prime minister Shinzō Abe] features corporate rate reductions. In short, the rest of the world has moved significantly to lower their rates and moved away from the worldwide regime while we haven’t. Aside from these policy changes, there are secular changes in the nature of global firms which also drive these transactions. For example, non-U.S. markets are more important than ever and firms employ more intellectual property (which can easily be relocated) than before. Finally, corporations have figured out how (PDF) to splinter their headquarter functions across multiple jurisdictions, ensuring that they can have many homes.These transactions are just the most visible manifestation of these underlying changes. Our current corporate tax regime has led to distortions throughout the incorporation, investment, and financing decisions of corporations. First, U.S. corporations have enormous cash balances that are largely overseas (because taxes are only due upon repatriation), locking out funds that could be used for domestic investment. Second, U.S. corporations become targets of mergers that are motivated by relocation incentives, increasing the possibility that higher-wage headquarter jobs are relocated. Third, enormous resources are directed toward non-value-creating tax arbitrage activities. And entrepreneurs and venture capitalists can anticipate the burden of being a U.S. corporation and exercise their flexibility at inception to avoid these consequences.Most importantly, the incentive to invest in the U.S. is reduced. Given that rising wages for American workers is the clear economic priority today, reforming this system to encourage more domestic investment, which makes our workers more productive, is the most important policy priority. While it is tempting to characterize corporate tax reform as a sop to big business, we know that the burden of the corporate tax is borne by shareholders, workers, or customers. And much of the available evidence points to the majority of the burden being borne by workers, a result that is intuitive when one compares the relative mobility of capital, labor, and products. The excellent work done by my colleagues Michael Porter and Jan Rivkin on U.S. competitiveness also highlights how important tax reform is to advancing the desirability of the U.S. as a destination for investment.GAZETTE: How does what companies in developing nations pay in taxes actually compare to what companies pay in the United States? Is it accurate to say that the United States has the world’s highest corporate tax rate?DESAI: The current system is the worst of all worlds — we have a very high statutory rate (the rate faced by the last dollar of profit) by comparison to the OECD and an average rate (the rate reflecting taxes paid relative to income) that is within the norm of the OECD. The high statutory rate leads to perverse income relocation incentives and can distort investment decisions on the margin while we actually collect amounts that are significantly less than promised by those statutory rates. Similarly, we employ a worldwide regime that is byzantine in its complexity, but we actually raise little revenue from it. Other than allowing for dueling political rhetoric that is somewhat grounded in fact — e.g., “U.S. corporations face some of the highest (lowest) rates in the world” — this system has no winners.GAZETTE: President Obama has called companies that use inversion “unpatriotic.” Could you envision a type of backlash against these corporations by U.S. consumers?DESAI: While I share the frustration over these transactions, the use of the term “unpatriotic” always makes me cringe, given its historic use. Jawboning them into staying may well be effective in the short run, particularly for consumer-facing companies. But, it does little for improving the underlying situation more broadly.The political turn that is required is the one that occurred in the U.K., where the departure of several corporations led to significant reform founded on the idea that firms that succeed globally are a source of national economic well-being. Being home to such companies has important economic benefits and, moreover, penalizing their foreign operations is not consistent with the economic facts. In work co-authored with Fritz Foley and Jim Hines, we show that firms expanding abroad also expand domestically, undercutting the common intuition that global expansion by firms comes at the expense of domestic interests. While there will always be examples of harm done to domestic interests, it does not appear to be the case on average, and indeed, one can quickly intuit why working for a globally successful company (or university, for that matter) expands the opportunity set of workers and managers. Domestic headquarters, R&D activity, and export activity can all benefit from firms that are flourishing abroad. So the broader political issue (PDF) is to avoid a new form of protectionism and to embrace the idea that being home to globally successful organizations is a good thing.GAZETTE: Can you foresee reforms to address these issues? What kind of corporate tax reform would be desirable?DESAI: In the very short run, there will be a great temptation to pass legislation that targets these specific transactions by disallowing mergers unless the foreign partner is much larger and/or the resulting merged entity is managed abroad. As I indicated in recent testimony (PDF) to the Senate Finance Committee, such efforts give rise to unintended consequences. By “increasing the bar” on the transactions that will qualify as mergers, such laws — as with the anti-inversion legislation in 2004 — may simply lead to more substantive transactions with consequences that are adverse to American interests.  Additionally, my colleague Steve Shay has suggested there are regulatory actions that one could take without legislation that would help, particularly toward the threat of our tax base eroding.There is a fair amount of consensus about where we should end up, so I’m optimistic that we’re close to significant reform.  It is important to acknowledge that the better long-run solution is a movement to a consumption tax base with progressivity implemented in a variety of ways, à la the Graetz Plan (PDF). Given current political realities, my proposed changes stay within the frame of the current corporate tax and are revenue-neutral.First, switch to a simple territorial regime (where income only faces local taxes) from the current worldwide regime. As described above, the current system is generating little revenue and causing numerous distortions. Moreover, taxing only profits earned within one’s borders, rather than globally, has a sound theoretical justification. Worldwide regimes with credits for foreign taxes paid were historically motivated by the intuition that foreign direct investment involves one-for-one substitution between domestic and foreign destinations and that productivity differences across firms don’t exist. Under these conditions, a worldwide regime ensures that investment is only guided by pretax factors. In fact, several decades of scholarship on multinational firms has highlighted that heterogeneity in firm productivity is central and the research mentioned above suggests that foreign and domestic activity can be complementary. With these conditions, it becomes much more desirable that tax systems leave the identity of owners unchanged to ensure that the most productive firms flourish, a result ensured if local taxes are the only taxes faced by firms.  Efforts to incorporate alternative minimum taxes within territorial regimes should be avoided as they are effectively backdoors to a worldwide system.Second, drop the corporate rate to 16 to 18 percent to ensure that we are within the norm of OECD rates for the foreseeable future. Such a reduction will sharply limit unproductive profit relocation activity motivated by large statutory rate differences. Of course, these first two changes will cost us tax revenue. The corporate tax is not a great tax relative to other fiscal tools, but I still think it’s important to fund these changes within the context of business income. Two additional changes will accomplish that in a productive way.Third, corporations that pay the corporate tax (so-called C-Corps) now represent less than half of all business income, down from over 80 percent in the late 1980s. There has been tremendous growth in pass-through entities as legal and financial engineers have figured out ways a) to shoehorn partnerships into the requirements for publicly listed companies and b) to divide corporate income into operating income and property income to avail themselves of pass-through entities. As a result, corporate taxes are increasingly paid only by publicly listed multinational companies and there is a large untaxed business base. Charging a relative modest tax on these entities would level the playing field across organizational forms and raise considerable revenue.Fourth, aligning the way firms report profits to capital markets and tax authorities would both raise considerable revenue and restore credibility to the corporate tax system. We have a parallel universe for reporting profits to tax authorities which, unsurprisingly, means that it is not uncommon for some of our best-known firms to routinely report large profits to capital markets while reporting limited profitability to tax authorities. Ultimately, the economic position of shareholders and tax authorities are the same — they are claimants on pretax corporate profits. Ensuring a relatively common notion of profits that piggybacks on the considerable advances made by the accounting profession will raise revenue and make it less likely that corporations are seen to be paying limited taxes while reporting considerable profits to shareholders.As I said, I’m optimistic — these inversion transactions will hopefully highlight just how broken things are and that’s the first step in getting to a better system.last_img read more

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Chelsea on verge of £35m deal, John Terry set for Villa move and more GOSSIP!

first_imgHere are the top transfer-related stories in Thursday’s newspapers…Chelsea are close to signing Tiemoue Bakayoko from Monaco for £35million, which could prompt Nemanja Matic to leave for Manchester United. Blues boss Antonio Conte has made it clear he wants Bakayoko, 22, who made his debut for France last month. (Daily Mail)Chelsea target Alex Sandro will have to ask to leave Juventus before they accept any offer from the Premier League champions. Chelsea have had an initial £45million offer rejected while Juventus have opened discussions about a new deal for the Brazilian left back. (Daily Mail)Diego Costa is ready to dig his heels in and stay at Chelsea until he seals his dream move back to Atletico Madrid. The Spain striker’s ready to go head-to-head with boss Antonio Conte by refusing to move to anyone but his old club. (Daily Star)John Terry is seriously considering a £60,000-week deal to join Aston Villa. Terry is pondering whether to reject offers from Premier League clubs in favour of trying to help Steve Bruce’s side challenge for promotion. (The Sun)Craig Shakespeare is plotting a £25million move for Manchester City striker Kelechi Iheanacho, as Leicester prepare to spend big this summer. (Daily Telegraph)Leicester City are weighing up their options after being told they would need to more than double their £10m bid for West Brom defender Jonny Evans before any deal could be considered. (Leicester Mercury)Manchester City’s bid to sign Kyle Walker will drag on into next week as Tottenham Hotspur dig their heels in over the price for the England right-back. The two clubs have been locked in talks this week and City have been frustrated by Spurs’ valuation, which is close to £50million. (Independent)Rafa Benitez is set to land Brazilian star Fernando from Manchester City. The Newcastle chief has identified him as his first major signing since winning promotion to the Premier League. City want £8million for the former Porto man but Benitez believes he can land his target for only £5m to give his squad a huge lift. (The Sun)Benfica star Anderson Talisca has not agreed a move to Manchester United, according to his agent Jesse Carvalho. (Daily Express)Arsenal are now demanding £20million for Wojciech Szczesny. Juventus have seen a cheeky £4m bid turned down for the Polish keeper who has spent the last two seasons on loan at Roma. (Daily Mirror)And here are the latest talkSPORT.com headlines…?Sassuolo are hoping star Domenico Berardi will snub interest from Tottenham and stay putNewcastle United target Pepe Reina has been offered a new contract by Napoli which contains a £4m release-clause for clubs outside of ItalyJuventus have made a £40m offer for Chelsea target Federico Bernardeschi, according to reports in ItalyHuddersfield Town are set to beat Leicester City and West Brom to the £11.5m signing of Montpellier striker Steve Mounielast_img read more

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This week in the ‘Woods

first_imgMen’s soccer returnsMen’s soccer (0-1-1) opened its season Thursday with a 4-2 loss on the road at Mendocino. On Friday Redwoods fought to a 2-2 tie against Chabot. Redwoods will stay on the road for its next two games, at Cabrillo and at Football, before playing its home opener on Sept. 13 against Contra Costa.Women’s soccer wins openerAmy Reyes scored two goals in the women’s soccer opener against Napa Valley, Friday at CR.Reyes was the leading goal scorer for Redwoods in the 5-0 win. …last_img

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Forever Young Long Wine and Dark Auburn Mix Number 33AS350 Ladies Wavy Style Fashion Wig : Very flattering

first_imgForever Young Long Wine Red and Dark Auburn Mix Number 33AS350 Ladies Wavy Style Fashion WigGorgeous and sexy tresses with softness, shine, voluminous bodyA tousled quality that gives this hair a touch of fashion glamourMade of best quality Kanekalon Synthetic hairSo soft and silky it feels and moves like real human hairSuit most face shapes Very flattering SummaryReviewer Nathalie DuboisReview Date2019-09-24 10:34:38Reviewed Item Forever Young Long Wine Red and Dark Auburn Mix Number 33AS350 Ladies Wavy Style Fashion WigRating 4.4 / 5  stars, based on  19  reviews Colors so so, guess it’s a question of taste. Would have loved it more in copper or full on wine red. Love this wig but cut it down as was very long and looks nicer as a bob on me. But very natural looking and a stunning colour, wish i could get my own hair the same colour. Love the style and the colour, arrived within the timescale in good condition. Just having a problem of trying to fit it, needs practise. A little different from the photo but ok. Love this wig Posted on September 24, 2019Author Nathalie DuboisCategories Hair PinsTags Forever Young Great colour and very flattering style Nice plastic wig with a shine to it. I do drag on a semi professional basis and this is perfect. This wig was very nice got some great colours in it. I spayed it with dry shampoo to make it smell more real, it looks real on, very pleased. Beautiful you just have to wash and style to your face. Fantastic price, amazing quality, i would definitely recommend this itemit’s a beautiful piece, very realistic, lovely shine, keeps it’s curls, beautiful. Very nice wig but think it maybe i little too shiny for wearing as all day style and wanted to know can u use hair straighteners on this wig?. Can’t grumble for the money perfect addition to a fancy dress outfit. The wig is very easy to wear. A beautiful colour and supprisingly realistic. I’ve worn this wig to a couple of parties now over the last 12months and it’s kept it’s style very well. Great colour and very flattering style. last_img read more

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PDM budget to finance ideas from KPMG Tourism Report Two developments touted

first_imgFacebook Twitter Google+LinkedInPinterestWhatsApp Facebook Twitter Google+LinkedInPinterestWhatsAppTurks and Caicos, April 6, 2017 – Providenciales – Major Developments in tourism sector are expected to be rolled out in the coming months and will be in keeping with the recommendations put forward by the KPMG TCI Tourism Strategy Report completed and published since 2015.Tourism Minister Ralph Higgs showed obvious disdain for the former administration’s failure to implement any of the recommendations of the report.  Higgs said the PDM Administration is now ready to at least tackle the ‘low hanging fruit’ for transformation of the sector.  “For the first time since the introduction of the KPMG report, we have made funds available for the implementation of that report. So as soon as the budget is passed we will roll out a calendar of events carrying out the Change Document, consistent with the recommendations of the KPMG report”The minister in presenting the his ministry’s accomplishments in the PDM government’s First 100 days in office press conference, announced several projects on the cards including the Royal Reef Project, which is said to be in its final phases. The project is expected to benefit residents of North and Middle Caicos, whom the minister reminded were not forgotten by his administration.   Tourism is awaiting the sign off for the Royal Reef Project from investors and stakeholders, and he urged the developers to move quickly on their final plans.Royal Reef had been stalled and is expected to make a rebound and bring much needed employment opportunities to residents of the country’s two largest islands. Minister Higgs confirmed also that  approval was met for the development of a Boutique and Hotel in North Caicos.Meanwhile, plans include the creation of a future terminal in Sandy Point as discussed with the Ports Authority. It is expected that an Environment Impact Assessment will come first for the Sandy Point area. The minister says its aim is to quote “give relief to persons who use those channels for boating and shipping purposes” that there would be no negative environmental effect on the pristine waterway in North Caicos.Story by: Kimberly Ramkhalawan#MagneticMediaNews#twodevelopmentsforNorthCaicos#KPMGtourismreport Related Items:#KPMGtourismreport, #magneticmedianews, #twodevelopmentsforNorthCaicoslast_img read more

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Barros Schelotto The BocaRiver final will be eternal

first_imgManager Guillermo Barros Schelotto, revealed just how important a Boca vs River Copa Libertadores final will be for the world of football.The Boca-River Copa Libertadores final is fast approaching next Saturday, manager Guillermo Barros Schelotto wanted to give us an idea of how he is feeling right now as one of the two managers for this historic game.La Bombonera Stadium will open its doors on Saturday for the first leg of a two-match final, which will give us an idea of the magnitude that a game like this has around the world.We are truly convinced that Schelotto is right about one thing, none of us are ready to live an experience such as this one and there is a lot of expectation building up around this final.There are even reports from renowned journalist Martin Liberman, that confirm Russian president Vladimir Putin, considering the options of possibly traveling to Argentina for one of the two matches.Barros Schelotto is already mentally preparing for such a monumental task, a game in which both squads arrive at the very top of their game and they should decide which of both squads is worthy of playing the Club World Cup against Real Madrid in December.But most importantly, this final will decide which is both squads is the absolute king of the American Continent.Un lujo hablar con un entrenador que pronto estará en España. Guillermo Barros Schelotto: “Es la final eterna contra el rival eterno” https://t.co/du2fTpZLIU vía @marca @BocaJrsOficial— Diego Pico (@D_pico_) November 8, 2018The Boca Juniors manager offered an interview to Marca, where he discussed the importance of this match: “Playing this final is a huge merit for both Boca and River,” said Guillermo.“Facing these two matches won’t be an easy task for either of us, it will be a very close couple of games.”“I have no idea if this will be similar to what happened between Real Madrid and Atletico Madrid in the two Champions League finals, but it has the potential to be very similar.”“Reaching a final like this is truly incredible… and it’s even more incredible having River Plate as the rival. In every single sense imaginable, from the build-up it musters until the importance that is a great final such as this one.”“We have reached this point, but we still haven’t won anything. Boca Juniors always demands victory and we have a worthy rival that always demands the same.”“This goes far beyond what we feel and any expectation, imagining what it would be like is very complicated because it’s never happened before. The fact that it’s a Boca-River Copa Libertadores final is very special indeed,” he added.River Plate v Boca Juniors - Copa CONMEBOL Libertadores 2018Match Preview: River Plate vs Boca Juniors Boro Tanchev – September 1, 2019 It is time for one of the most intense derby games in the world, as River Plate and Boca Juniors go head-to-head tonight at 22:00 (CET).Habla Guillermo Barros Schelotto en la previa de la primera final de la Libertadores contra River pic.twitter.com/O7yFOpHtPd— Augusto Cesar (@Augustocesar22) November 7, 2018You have to understand that this will be a final against our most hated historic rival, reaching this stage against the biggest rival ever is simply fantastic for both Boca and River.Both clubs have managed to defeat incredibly competitive Brazilian clubs. Even though the Argentina National Team hasn’t done great things, this final speaks very well about the state of football in our country.More than the competition or that one of both clubs will lose this final, I believe this is a very positive thing for Argentina as a country.This is just as if Barcelona and Real Madrid played a Champions League final. The stadium is not that important, any of both clubs can win as a visitor and a local.What we need to do is try to get an advantage during the first match because doing that at La Bombonera makes things very different for the second match, but I really don’t think that having the first match at home will influence the final result for this final.Rivals that have this much history at this level, makes me realize that none of both have a real advantage.📊 Un superclásico mundial | Para la primera final de este sábado se duplicó la cantidad de solicitudes de acreditaciones de prensa y hubo pedidos de medios de más de 25 países para darle cobertura al evento.👉 Todos los detalles en https://t.co/DzXTrvsQ0o pic.twitter.com/bzw94av1So— Boca Jrs. Oficial 🏆🏆 (@BocaJrsOficial) November 9, 2018Who do you think will win the Copa Libertadores final between Boca Juniors and River Plate? Please share your opinion in the comment section down below.last_img read more

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