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Tax patriots . . . and scoundrels
Washington Times ^ | 5/02/02 | Richard W. Rahn

Posted on 05/02/2002 12:16:20 AM PDT by kattracks

Edited on 07/12/2004 3:53:13 PM PDT by Jim Robinson. [history]

During the past few weeks, some members of Congress have called corporate executives unpatriotic for moving the legal home of their companies to low-tax foreign countries. The implication is that the business people and their tax lawyers are scoundrels, and countries with low tax rates are evil tax havens. But do the charges hold up? If Webster's dictionary correctly defines a patriot as "a person who loves, supports, and defends his or her country and its interests," the answer is clearly "no."

(Excerpt) Read more at ...

TOPICS: Editorial; Government
KEYWORDS: taxreform

1 posted on 05/02/2002 12:16:20 AM PDT by kattracks
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To: *Taxreform

2 posted on 05/02/2002 12:23:26 AM PDT by Libertarianize the GOP
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To: kattracks
That's great as long as these corporations don't also take their production jobs with them. The DemonRats will never figure out that capitalism abhors taxation - as do most free people. If the government wants to see the tax rolls get larger, then maybe they should consider a flat tax system - it even works for Russia.
3 posted on 05/02/2002 12:35:22 AM PDT by 11B3
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To: 11B3

maybe they should consider a flat tax system - it even works for Russia.

Be careful, you might get what you are asking for:


August 10, 2000


Alexander Chmelev and Evgeny Astakhov

Baker & McKenzie, Moscow Office


Sent by BISNIS, U.S. Department of Commerce,, Tel: 202-482-2293.  BISNIS sends this report as a courtesy to the U.S. business community. This is not to be construed as endorsement or sponsorship of any information or group.

On August 5, 2000, Russian Federation President Vladimir Putin signed into law four chapters of Part Two of the Russian Federation Tax Code and Federal Law No. 118-FZ ôOn the Implementation of Part Two of the Russian Federation Tax Code and Amendments to Certain Federal Laws on Taxationö (the "Implementation Law").  The chapters of the Tax Code signed into law by the President are Chapter 21 - VAT, Chapter 22 - Excise Taxes, Chapter 23 - Personal Income Tax, and Chapter 24 - Unified Social Tax.  These four Chapters and the Implementation Law were officially published in Rossijskaya Gazeta on August 10, 2000, and, with few exceptions, will become effective on January 1, 2001.

The most sweeping changes introduced into the Russian tax system by this new legislation are as follows:

1.         VAT (Chapter 21 of the Tax Code)

Although Chapter 21 of the Tax Code does not change VAT rates or the general VAT structure, it contains numerous provisions, which will significantly affect most businesses in Russia.  Most notably, Chapter 21 substantially modifies the "place of service" rules, which generally determine whether for VAT purposes a particular transaction has occurred in Russia and is, therefore, subject to Russian VAT.  Effective from July 1, 2001, Chapter 21 also will treat export sales to CIS countries in the same way as sales to all other foreign countries, and will exempt them from VAT.  On the downside, Chapter 21 will repeal a number of long-standing and important VAT exemptions, including an exemption for license fees for the use of intellectual property (such as, patents, copyrights, and trademarks), and will significantly narrow the VAT exemption for pharmaceuticals.

2.         Personal Income Tax (Chapter 23 of the Tax Code)


Chapter 23 of the Tax Code will replace the current progressive tax rates ranging from 12% to 30% with a flat tax rate of 13%.  This 13% rate will apply to almost all categories of income earned by individuals who are Russian tax resident.  A 30% rate will apply to dividends, and to any Russian source income received by individuals who are not Russian tax resident.  A 35% rate will apply to income from gambling, lottery prizes, deemed income from low-interest or interest-free loans, certain insurance payments, and excessive bank interest.

3.         Unified Social Tax (Chapter 24 of the Tax Code)

Chapter 24 of the Tax Code will replace the existing employersÆ contributions to four separate social benefit funds (which currently are imposed at an over-all rate of 38.5%) with one unified social tax.  This unified social tax will have a regressive tax scale from 35.6% to 2% of an employee's salary with the lowest rate applicable to the portion of an employeeÆs annual salary in excess of 600,000 Rubles (approximately US$22,000 at the current exchange rate). It should be noted that under the Implementation Law, as a transition rule, the lower rate of this tax will be 5% rather than 2% during 2001.

4.         Excise Taxes (Chapter 22 of the Tax Code)

As a countermeasure to reducing rates of other federal taxes, Chapter 22 of the Tax Code provides for an increase in excise tax rates for gasoline and other oil products by almost 300%.  It also provides for a less dramatic increase of excise tax rates for tobacco products and certain passenger cars.

5.         The Implementation Law

a.         Turnover Taxes

Effective from January 1, 2001, the Implementation Law repeals the Housing Fund Tax of 1.5% and reduces the Road Users Tax from 2.5% down to 1% and completely repeals the Road Users Tax effective January 1, 2003.   These taxes are imposed on gross sales and have been among the most onerous taxes on business in Russia. 

b.         Regional Tax Concessions

The Implementation Law reconfirms the right of regional authorities to provide tax exemptions for the regional portion of federal taxes retroactive to April 1, 1999. This reconfirmation resolves an issue that arose in 1999 as to whether the regional portion of profits taxes could be reduced pursuant to regional incentive laws.

c.         Profits Tax Rate

Apparently in compensation to local budgets for the cancellation of turnover taxes, the Implementation Law authorizes municipal governments to introduce an additional "municipal" profits tax of up to 5% of a taxpayer's taxable profits.  Thus the maximum overall profits tax rate may be increased from 30% to 35%.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)

4 posted on 05/02/2002 1:26:59 AM PDT by ancient_geezer
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To: kattracks
Thanks for this great find, kattracks.

This is now the 5th article that I have seen on this subject over the last couple of weeks.  It seems that the press is finally beginning to take notice of the capital flight that Action America has been warning of for years.  The problem is that when capital flight reaches a level high enough to get the attention of the press, the resultant publicity only serves to alert more of the wealthy to the problems causing capital flight, which in turn, causes capital flight to increase to even higher levels.  That increase in capital flight then becomes news itself and causes even greater capital flight.  That increase in capital flight then becomes news itself and... well you get the picture.  It effectively becomes a snowball.

Yet, the above article only addresses corporate capital flight, which as the article points out, is not really a serious problem, since it actually serves to reduce prices and increase wages.  The critical problem is that for almost a decade, the number of wealthy individuals who are leaving has been on a constant rise.  But, unlike corporations that leave jobs in the United States when they expatriate, individuals are forced to take all of their wealth and the jobs that it creates offshore with them or risk it being confiscated by the IRS under the Health Insurance Portability and Accountability Act of 1996 (26 USC 877(a)(1)).

That law claims the right of the United States government to tax the income of expatriate Americans for 10 years after they renounce US citizenship and have become citizens of another country.  So, if the expat leaves any assets in the United States, he can expect to have it confiscated for taxes.  Therefore, the new expats just don't leave anything of value behind to be confiscated.

But now, our excedingly benevolent lawmakers, in their infinite knowledge, are trying to pass laws to tax the foreign profits of foreign corporations.  It isn't bad enough to be the only country in the world that taxes the offshore income of both its citizens and corporations.  Now people like Senator Charles Grassley (R-IO) and Representatives Richard Neal (D-MA) and Scott McInnis (R-CO) have the unmitigated gaul to suggest that we are now supposed to tax the foreign sourced income of foreign companies.

That is without a doubt, the most absurd concept that I have ever heard.  Even Bill Klinton didn't have the brass kahones to propose that one.  Notice that two of the leaders in that power grab are Republicans.  It's time to ignore party affiliation and start voting power hungry autocrats like Grassley, Neil and McInnis out of office at the earliest chance.

Here are the links to the other 4 articles on this subject:

Also, check out the article "Tick-Tick-Tick - The Economy Bomb" on the Action America web site for more info and data pertaining to capital flight.


The wealthy are leaving in alarming numbers!

The only way to stop it is to make the USA more attractive than offshore jurisdictions to both business and individuals.  That means passing the National Retail Sales Tax.


5 posted on 05/02/2002 2:41:12 AM PDT by Action-America
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To: Taxman;Principled;ancient_geezer,bigun,Taxreform
This Washington Times article needs some attention. It's killer and it shows just how far the Democrat and Republican establishment in Congress is prepared to go to protect their power base. It also points out that when those corporations move offshore, it actually allows those corporations to lower prices to become competitive and raise pay to US workers, both of which stimulate the economy.

This post needs some action.


6 posted on 05/02/2002 9:58:33 PM PDT by Action-America
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To: Action-America
7 posted on 05/02/2002 10:11:42 PM PDT by Libertarianize the GOP
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To: Action-America
It also points out that when those corporations move offshore, it actually allows those corporations to lower prices to become competitive and raise pay to US workers, both of which stimulate the economy.

Uh huh, like Nike, Ford, GM. Just think of those high wages for the employees of Cooper, (well the ones who still have jobs) the makers of Crescent wrenches and Halo lighting among others. Let's not forget to mention Stanley Products (now made in China) probably noticed their lower prices too.

How about those high wage Mexican workers making $30.00 dollars a day building $25,000 + Volkswagens. Now it seems Mexico is no longer cheap enough either. Manufacturers are now fleeing Mexico for parts unknown.. (no wonder the Mexicans are fleeing their country)

The article "points out" what it "allows", yet it doesn't have proof or examples of anything "allowed" actually ever being a fact.

8 posted on 05/02/2002 10:50:25 PM PDT by lewislynn
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To: lewislynn;Taxreform;Taxman;Principled;ancient_geezer;bigun

"Uh huh, like Nike, Ford, GM. Just think of those high wages for the employees of Cooper..."

Lewy, Lewy, Lewy.  There you go again getting all mixed up on what the article was all about.

I'm not sure about Nike, but Ford and GM are US incorporated companies that still pay tax on ALL of their worldwide income.  The Washington Times article was talking strictly about US incorporated companies that are reincorporating offshore, but leaving their existing US operations in the US.

Companies like Transocean, a drilling company that relocated first from Delaware to Texas (Houston) and then eventually to Cayman Islands, did nothing more than move their company incorporation home.  They still maintain all of the US facilities and US jobs that they did before the reincorporation.  It was nothing more than a paperwork shuffle.  I know people who work for them and they have told me that benefits that had been getting worse, improved significantly, only a few months after the reincorporation.  Once the company was able to compete on an equal footing with other offshore companies, they did what most companies that are flush do - they rewarded their employees.  They have also been able to drop the cost of their services to be more competitive in the market.

I just used that one example, because I am familiar with it, but the list of similar outcomes is long.  The companies that they are talking about are not moving jobs out of the United States.  Just repeat to yourself:

It's only a paperwork shuffle...  It's only a paperwork shuffle...  It's only a paperwork shuffle...

The problem that you are getting it mixed up with is companies moving their manufacturing offshore because it is not practical to pay US minimum wage to someone who does nothing more than put shoelaces in tennis shoes.  Those companies are not trying to escape an abusive tax system with that kind of move.  It's a different federal regulation that they are trying to get around - the ridiculous minimum wage.

Offshore reincorporation is NOT the same thing as manufacturing flight.  Let's hear it again - just one more time and breathe slowly.:

It's only a paperwork shuffle...  It's only a paperwork shuffle...  It's only a paperwork shuffle...


9 posted on 05/03/2002 1:08:02 AM PDT by Action-America
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To: Action-America; Taxreform
You are perzactly correct, Action-America.

Here you go.

The Center for Freedom and Prosperity is hard at work on this issue as we speak. They probably can use some financial and grass roots assistance. Tellem the "Taxman" sent you.

10 posted on 05/03/2002 11:16:15 AM PDT by Taxman
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To: Action-America
Oh gee, I'm sorry. Did I misrepresent the intent of one of your corporate gods?....

Some move offshore to avoid taxes from the country that got them where they are...and some move offshore to exploit the labor that built them...and some move offshore for both.

Unlike you, I don't worship at their alter, I couldn't care less what they do.

11 posted on 05/04/2002 8:57:38 AM PDT by lewislynn
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To: lewislynn;Taxreform

"Some move offshore to avoid taxes from the country that got them where they are..."

Once again, you reveal your inability to understand multifaceted issues.  Granted that many US based companies may be successful, due in part to their operating in the United States.  But, the other side to that coin is that the United States is great in large part, due to those same corporations that have provided millions of jobs and built the infrastructure of this great nation.

It's a two-way street.  But more and more, in recent years, the government is doing everything that it can to make that street a one-way street, with all money and operations controlled by Washington.  Is it really any wonder that many US companies are choosing to dissolve that partnership, having discovered that their greedy partner can no longer be trusted?

Whether they are moving their operations offshore to obtain relief from our punitively high minimum wage requirements that make it hard to be competitive or they are just reincorporating offshore to obtain relief from our unreasonable and unique worldwide income tax that makes it hard to be competitive, it comes down to the fact that their partner has turned on them.

People and companies that grew up in the United States don't just pick up and move out of the land of milk and honey without a d@#n good reason.  Hundreds of companies and hundreds of thousands of wealthy Americans are leaving every year.  They aren't doing so on a whim.  They are making a very tough choice.  And, the reason that they are making that choice is that their government (their partner) has turned on them and is now demanding more and more out of the partnership and they now find that they have no other choice than to seek relief offshore.

It's sad that it has come to this.  Those people and companies that are fleeing the United States are no more unpatriotic than those who fled England's repressive taxes and religious persecution hundreds of years ago.  The only difference is that now it's happening it what used to be "The Land of Opportunity".

Maybe it's true that what goes around comes around.


12 posted on 05/04/2002 10:58:27 PM PDT by Action-America
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