a reply to: theMediator
again, that isn't possible, because the assets belong to a different entity
than the one which sold them. Add to that the fact that they are
not based in the US, and so while you may tax individual sales, you cannot tax the foreign arm of the entity, since it is not on US soil.
All foreign companies can easily skirt the US tax code by inflating their import costs.
Imagine you own a company that makes computer games; call it "mind games", and you are based in New York.
So you go to Ireland, and set up an Irish corporation, with a US owner (you), entitled "mind games Ireland". Then you order the USA corporation to
sell everything but its copyrights to the Irish company. Now, suppose your game CDs had cost $10 each to manufacture, and you sold them for $110 in
the USA---a $100 profit. So you owed $39 in corporate taxes.
Once you move to Ireland, then your "MindGames Ireland" company still makes the CDs for $10. But now it sells them to MindGames USA for $109 each.
So the US company only shows a net $1 profit. And since corporate tax is calculated on your net profit only, it basically cut your tax bill by over
That is over-simplified, of course, but it gives you a flavor of the profits to be realized, and how tax-structuring can be far more lucrative than
actually reforming your profit-making structure. It is usually easier to cut taxes rather than to cut costs.
Lots of companies whitewash their profits this way. Practically every automaker. The foreign ones build a few body plants in the US, but all the
fillings come from their factories back in the home country, and cost all of the US sales' profits.
Even the "American" auto companies do this. Their US sales represent a minority of total revenue; and most of that money gets paid to suppliers
overseas. The suppliers are indeed foreign companies, who all coincidentally have US owners, who also own the US car company that is their paper
I know of a case where a manufacturer was making a product in the USA, shipping the product to Asia to have the "made in USA" stickers peeled off,
then re-selling them back to the US corporation. The expense of doing so "ate up all the profit", and the US company paid only a small corporate
tax. The Asian company (based in Dublin) was making record profits. The IRS made them stop, but they had gotten away with it for at least 4 years
before being called out. At which point they simply moved their whole manufacturing process overseas. They didn't move offshore until the IRS made