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Obama's administration tax plan could make havoc in IT

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Hi all,

The new Tax Plan being prepared by Obama's administration looks highly polemical (Obama Announces $210B Tax Plan Based on 'Loopholes'), as article says "Congress is expected to resist significant portions of Obama's plan", and it is no wonder. Here is what I don't like:

* The pretext of fighting tax havens is an awfully biased argument: while there clearly are tax hells, France being the worse (2009 Tax Misery & Reform Index) where taxes are clearly too high, no one is sensibly able to ever define what a tax heaven is. For example the lowest taxes country ever is Quatar with a tiny 12% corporate income and no other tax at all since they rely on their oil incomes to (very well) live, which can sensibly be called good management, why is Quatar never attacked as a tax heaven? The argument of tax heavens is obviously biased since beginning, always promoted by countries which tax the most, especially France.

* It is not stated in this article above but I am almost sure, because I heard it elsewhere on radio, that one of the main arguments, perhaps by Obama himself, is "these US companies which make profits abroad don't pay any tax at all", which would be a blatant lie: all US companies making profits abroad pay of course taxes... abroad. The only foreign earned profits which may be US taxed are the ones retrieved back in US, which is logical since US companies of course have some excellent honest reasons to keep profits abroad in foreign currencies (building new foreign assets in local currency without any change fee, keeping a reserve of valuable foreign currencies to resist cyclic crisis, etc...) so shouldn't pay to US taxes when US wasn't involved by any way in the profit making since it was made abroad. The only way to tax profits made abroad by US companies is either to double-tax them since they have already been taxed abroad or to denounce dual-taxing treaties which were designed as a fair way to prevent it.

* The arguments about avoiding offshore to help local job creations in US are obviously biased, article above even stating "existing law makes it possible to pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, New York", which is a gigantic absurdity: when US companies create subsidiaries abroad to deal with a local market, they of course like any company, hire skilled people matching the needs of this market, so locally, except for some expatriates who will report to mother US company. US companies in India don't attempt to hire Indians in US for their Indian market, despite there are plenty Indians in US, they hire them locally, like any other company of any other country. Who could decide and sort out whether an abroad hire is unfair offshoring practice from US point of view or fair local market practice from foreign point of view (and they can be both), except the company itself? How any civil officer could ever sensibly evaluate the difference?

* As article above states, this plan is expected to generate $210 billion in 10 years, but "Over a decade, $210 billion would make a modest dent in a federal deficit expected to swell to $1.2 trillion in 2010", which is 17.5% of expected gains against the planned federal deficit, which is itself a wicked Keynesian plan of very doubtful utility since all Keynesian plans till now have always dampened but much prolonged the crisis, in particular Hoover's action during the great depression (Five Myths About the Great Depression ). It is clearly ridiculous to take the risk of over-taxing companies in a globalized context to cover a small part the expenses of a likely useless gigantic Keynesian tax surge.

* The worse part is: could anyone prevent the US companies to open a new head abroad where it is less taxed, Canada for example, and transform their ex US head into a foreign branch, thus becoming foreign companies? US government would never dare to do anything against ex US companies because of the millions of local US employees, and as many companies make most of their profits outside US they could easily afford it. If for example Cisco or HP or Oracle became Canadian companies, who would ever care apart governments and taxing systems, and would their local US business ever change by any way? Of course not, in a globalized context no one cares any longer in the public the nationality of a company because the local branch or subsidiary hires mainly local people and behaves whatever like a local company. In clear US companies, especially the big ones, could decide being overtaxed as US companies is not worth it and could become foreign companies. The loss of prestige and taxes could be catastrophic for US.

Best regards.
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Too much of a good thing. I admit I tend to post over-long myself, but that was more text than I could do justice to reading off the screen, and I can't honestly critique its accuracy from what I did comprehend.

However, I got a somewhat different impression when I heard the news. Badly-quoted, part of what Obama said when announcing this initiative was something like "There's a building in the Bahamas that claims to be headquarters for over 18000 US companies".

I do know specifically that Black and Decker announced that they were moving their corporate offices to Bermuda several years back, and it was very specifically to dodge US taxes, not because they had a major stake in Bermuda for its own sake.

So as I (mis?)read the idea, it wasn't to penalize companies with extensive overseas operations, but rather to dis-incentivize (I can't believe I said that!) specific tax dodges. with a possible side order of attempting to level the playing field where there might be an artificial advantage to opening a factory in another country because the present tax system rewarded offshoring in a sort of reverse-tariff effect.

Of course, we all know what road is paved with good intentions, and any actual bills that end up in front of the president will probably be "improved" to the point where they include a cruise ship channel to be built from Cleveland to Albuquerque, but I'm not going to get too exercised about it just yet. There are some abuses that need correcting (and undoubtedly, fixing them will lead to a whole new set of abuses). But the outraged screams of the masses so far impress me about as much as a bunch of RJR scientists getting up and declaring that there's no need to make it illegal for kids to buy cigarettes. Sometimes I get the impression that people will get noisier about defending artificial privileges than they will about defending their basic rights.
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