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» Hatrack River Forum » Active Forums » Books, Films, Food and Culture » Unless 50% of Workers are in US, Corps lose Status as a US Corp...

   
Author Topic: Unless 50% of Workers are in US, Corps lose Status as a US Corp...
Alcon
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I came across the idea posted in a comment on a New York times article. It intrigues me. I have no idea how globalized corporations work - so I have no idea what benefit they get from being a US Corporation. What would prevent them in this case from bolting en-mass to incorporate in some other country? How exactly does that work? Aren't most corporations already incorporated in multiple countries?

An idea that gets floated a lot is that we should lower the corporate tax rate for companies that keep jobs here in the US. This poster suggested raising the tax rate for companies that take jobs out of the US - using the stick instead of the carrot in effect. But how much of a stick can you use with global corporations? What is there to keep them in the US? Do we get to tax foreign corporations that operate in the US?

I honestly just have no clue what the rules are here enough to understand what may or may not be effective. I wonder if some Hatrackers do understand the way these things work well enough to explain it to me. Anyone?

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Mucus
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I'm not too familiar with these rules either, but I'm wondering if that would actually affect anything. It is my understanding that many corporations use subsidiary corporations when functioning in different countries and these subsidiaries are separate in terms of taxation anyways.
http://en.wikipedia.org/wiki/Subsidiary

For example, the TD Bank (in Canada) owns TD Ameritrade and TD Bank (in America) which should operate as American corporations. The law wouldn't seem to affect their status and it wouldn't have the jurisdiction to affect the parent either.

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fugu13
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quote:
Aren't most corporations already incorporated in multiple countries?
No. Most corporations, by far, are owned by a small number of people (typically one), and employ very few people (none of whom are overseas).

Both of the proposed "carrot" and "stick" approaches are silly. We could get rid of the problem in general by structuring our taxation so the technical location a corporation is "based" in is irrelevant -- then there's no tax revenue lost or gained by corporate rearrangement.

As for the idea that jobs are "lost" by such rearrangements, that is a long-held fallacy. What's more, it is trivial to show that most measures to "retain" jobs in those situations will just dissuade companies from establishing positions they might want to move elsewhere in the US in the first place.

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