|
I had my
suspicions, but the numbers are still a surprise – and help explain the “unexpected”
robustness of 2005 tax receipts.
kwc American Companies
Repatriate Massive Sums Earned Abroad In nine months,
American companies have repatriated 210 billion dollars of foreign earnings.
And, according to estimates, that sum could reach 350 billion between now and
year-end. The companies are taking advantage of an amendment voted in on the
sly by Congress in 2004, as part of a law on the creation of American jobs. It
allows companies to transfer earnings realized abroad and reinvest practically
free of taxes. When the text was
adopted, right in the middle of the Presidential campaign, it was a question of
proving the administration's desire to combat outsourcing. President George
Bush had signed it on October 22, ten days before the election. The law allows
American companies to pay 5.25% taxes on profits repatriated to the
United States instead of a theoretical 35%. This gift is only available for a year. To
Unexpected Effects It's not certain that the hundreds of
billions of repatriated dollars will create many jobs. On the other hand, they
have already had two unexpected effects: they are feeding the wave of mergers
and acquisitions on Wall Street and are supporting the American currency. The
350 billion dollars represent over half the American trade deficit and
facilitate its financing. According to a study
by the International Strategy & Investment Group firm, 91 big groups have indicated that they want
to take advantage of the law. At first, they waited to know how the Treasury
Department was going to apply the law, but for the last several weeks,
announcements have multiplied. Most of these companies have taken great care
not to specify how they will use this money, contenting themselves with
announcements that they will pay down their debt and invest. Bank J.P. Morgan, one
of the law's "promoters," deems that the repatriation of profits will
allow 1% extra growth in the American economy during the next two years. It
estimates that around 120 billion dollars will be used to finance new investments
and create 500,000 jobs. For the moment, no project of that kind has been
announced. On the contrary, Colgate-Palmolive indicated in July that it wanted
to repatriate 800 million dollars and, at the same time, close a third of its
factories and eliminate 4,450 jobs. To enjoy the tax
advantage, the companies must supply the Treasury Department with a proposed
utilization of the funds approved by their Boards of Directors. The law does
not allow them to use the repatriated monies for stock repurchases, dividend
payments, or management remuneration. But since there is no a posteriori control, the companies do
whatever they want. For the moment, the healthcare, high technology, and consumer goods
sectors are the ones that have made the most use of the new text.
Companies like Pfizer, Merck and Hewlett-Packard - which have announced their
intention to repatriate respectively 36.9,
15, and 14.5 billion dollars. Other well-known names include Johnson
& Johnson, IBM, Intel, Dell, PepsiCo. American companies pay
very little taxes. According to the latest figures available, revenues from
taxes on corporate earnings represented barely 7.4% of Federal tax revenues in 2003, compared to a peak of
52% in 1952. Between 1995 and 2003, they went down by 16%. In theory, corporations
are taxed at 35% of their earnings. In reality, by taking advantage of very
complex legislation that contains many hidden loopholes, of a system of
favorable provisions and tax havens, they pay much less. According to a study
by the General Accounting Office - Congress's investigatory arm - 45% of companies with more than 250 million
dollars of capital did not pay a cent in taxes between 1996 and 2000. During
the same period, according to Citizens for Tax Justice, the ten companies with
the highest profits (Microsoft, General Electric, IBM, General Motors ... )
paid on average only 8.9% of
earnings in taxes. Translation: t
r u t h o u t French language correspondent Leslie Thatcher. Article found at http://www.truthout.org/docs_2005/100605H.shtml Original at http://www.lemonde.fr/web/article/0,[EMAIL PROTECTED],[EMAIL PROTECTED],0.html |
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