companies paying taxes offshore, hiring off shore..buy their stuff?

Society Business and Career
1

Whats the view on companiesd which are incoportaed in some tax haven even though most of their work is in US…and then start outsourcing tons of jobs to other countries… what do u think about supporting those companies.

are they being good corporate citizens when they dont add to the taxes here, and are not supporting jobs here? why should we be the consumer only?

I know they have a multiplier effect on the economy overall because their ops and sales here provide for jobs, and put money in circulation..but it seems a little bit odd right?

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My views are biased, obviously, cz I am in the middle of these things. I believe it is the responsibility of the lawmakers to define what the appropriate laws are. It is the responsibility of the companies to abide by those laws.

Now if a company is abiding by all the laws, and using these same laws to save money (taxes), increasing the value of their shareholders (profits) by outsourcing and, in general, is doing well, I am not the one to criticize them for being bad citizens for taking their work overseas.

Other consumers may feel differently. For example, they may want to buy only American-made products. This is fine. This is their choice. And if a large number of consumers make this choice, the company(ies) may infact change their business model (fat chance, though, cz consumers enjoy all these savings for cheaper products). There are companies like Bill's Khakis whose primary selling point is that they make it all in the US. Good for them.

3

Fraudz,

I think the two issues are distinct and unique.

Tax avoidance is an age old trick to increase the bottom line with no true value creation. What ever loophole is cited eventually gets slammed shut and the company has to fess up to a higher tax rate eventually. You can argue that the management of the company is obligated to earn whatever is possible for the shareholders so long as it is legal. Usually however there is a large boondogle factor involved. Got to have all the shareholder meetings in Bermuda? What a shame!

Globalization by outsourcing jobs does however create real value. The product is produced cheaper. First Tiawan, then Japan, then China and India, next wherever there is cheap reliable labor. The effect on Taiwan and Japan have been remarkable. The standard of living increase to both has been asounding over the past 40 years. But now they have become consumer societies, not producing societies. The net effect is that driven productive politically stable societies can thrive while others flounder and the consumer societies are the engine that drives the world wide search for the most productive people. Of course we are now beginning to see what an "information and services" society is like. We are way beyond the industrial revolution!

Just imagine when China turns the corner from a producing society to a consuming one! How many third world countries will be put to work providing for the Chinese! Or the Indians? Ultimately this drives peace. Counties with nothing left to lose will continue to fight. Countries that have a lot to lose will embrace peace lest the backslide into oblivion. That is indeed value...

4

I, ofcourse, have an opinion on everything...
Current times is not the time to think of a country. The way communication is spreading like wild-fire we can't keep thinking local boundaries. I know its affecting US economy, but its actually always been there. Somebody posted in a different thread how India is gaining back the business that it lost over 200 yrs ago when British took over. What with outsourcing, offshore banking etc. businesses have been doing tax-theivery all over the world, all thru time. How do you think Nazis got away with Swiss accounts, and Paki officials have become bilionaires over the last 50 yrs! Off-shore is the answer for the con-men. In the end it all equalizes!

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O.G. I am in agrrement with you. we have to depend on innovation to keep us going...and yes as countries liek china step up and their consumers start buying and the production moves even further to other places..its a dynamic situation.. but while things are being moved, and innovation is getting a foothold here..the people who are not changing with the times are affected big time.

I keep getting into these discussions with people around me, those in manufacturing jobs, and a number in service industry have strong views as there are direct implications to them.

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Fraudz,

In the 60's made in Taiwan or made in Japan meant cheap and unreliable. By the 80's a Toyota or a Honda was more reliable than a Ford. Jobs going offshore is nothing new. For some reason we had no idea that high technology would follow this model. Arrogance. To assume that Indian IT was not as sharp as the US was just plain stupid. Lead follow or get out of the way.

Best story I have heard lately is a Us hospital that is emailing xrays to India to be read by an Indian Radiologist. A US radiologist makes 300k plus. The Indian doc makes 25k. easy choice here, but the American radiologists never saw THAT coming!

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OG agreed. not good news for radiologists..

just liek manufacturign was cheap in japan..it kept moving to other cheaper places, with the developed countries creating new jobs.

what do u think is on the horizon? also.. i suppose it gets tougher to go for a new career for someone who has been in the same career for ages, like some of the manufacturing guys.

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Temporarily a cheap dollar will forstall any further exodus of manufacturing jobs. Certain semiconductor companies will now be able to compete on a price basis, particularly with Japan and some euro based manufacturers. Heavy equipemnt and farm goods will also be helped.

In the long run though there is no relenting in the outflow of manufacturing jobs, so long as there is any corner of the earth with a reliable willing and trainable work force.

Finance, construction, retailing, consulting, services, drugs, medicine, research, education and other portions of the economy will always be US based as there is no reasonable alternative. Obviously goods have to get in and our of the US, so transportation, logistics, shipping, packaging and other industries are very interesting. Personally I would think that the same skills used to plan and execute a manufaturing peocess could easisly be applied to an advanced logistics system. Inventory costs money, and to the extent companies are turning inventory 7 or 8 times per quarter like Cisco, the supply chain guys are as important as the manufacturing guys.

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madhanee. i sought your opinion because of your work in the public sector. How is this viewed over there because cities get impacted due to loss of tax revenue and jobs.

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Re: companies paying taxes offshore, hiring off shore..buy their stuff?

[QUOTE]
*Originally posted by Fraudz: *
Whats the view on companiesd which are incoportaed in some tax haven even though most of their work is in US...and then start outsourcing tons of jobs to other countries... what do u think about supporting those companies.

are they being good corporate citizens when they dont add to the taxes here, and are not supporting jobs here? why should we be the consumer only?

I know they have a multiplier effect on the economy overall because their ops and sales here provide for jobs, and put money in circulation..but it seems a little bit odd right?
[/QUOTE]

IMO, there is absolutely nothing wrong with US companies looking for more favorable tax jurisdictions to reincorporate or incorporate subsidiaries. Nor is there anything wrong with trying to find locations where they can have their goods manufactured cheaper.

I hate to get back to basic economic theory, but it might be helpful to do so. That companies find the need to do such things indicates that our governmentally imposed tax system and social welfare state has warped the theory of capitalism in the Ayn Rand conception in ways to screw things up. If you force companies to pay wages that are out of whack with the economic value derived from the services the employees provide and/or you take away (tax) profits in an amount that makes return on capital invested too low based upon economic risk analysis, then companies have only two choices: 1 is to close up shop or 2 is to find a different and more hospitable place to conduct certain business operations.

The key for lots and lots of countries is to develop economic and political stability plus internal security sufficient to convince companies that money they invest in infrastructure and offshore business ventures is secure against coups, sabatoge, inflation, devaluation of currency, etc. If the risk of loss from these kinds of things is reduced and you give them favorable tax treatment and a ready supply of cheap labor, you've got the recipe for an economic boom at the expense of countries that don't have as hospitable an environment.

I can't remember what huge high tech computer company it is but several years ago, they made a huge investment to relocate major operations to Northern Ireland. They could only do so because the bombings and terror campaigns had been abated to an extent where they saw enough stability to justify this move. The government gave them substantial tax incentives and an educated cheaper labor supply was available. The company benefited in higher profits and the people of Northern Ireland benefited from the business relocation.

A lot of bleeding hearts always jump up and down decrying slave wages and taking advantage of the poor and destitute in the countries they relocate to. While the wages, hours and conditions of work would never be tolerated in the US, to the people and the country involved, the wages, hours and conditions of work are quite often multipliers better than what was previously available to them. What the bleeding heart politicians are really doing though is championing the cause of their own supporters (often unions) at the expense of the business owners. The only reason they express care and concern for the fact some guy in Mexico is getting paid only $2 a day is because some union member is losing a job in which his/her wage was artificially inflated to $20 per hour. At some point, you simply price yourself out of the labor market.

I have no doubt that because of the economic and political stability found in America combined with an educated and abundant work force, companies would gladly pay some kind of a premium in taxes to carry on business here. The trick is not making the premium you are demanding from businesses too high. In many, many segments of our economy, we have made our country non-competitive with other parts of the world.

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ahh another ayn rand fan. I think Atlas Shrugged should be made mandatory reading for everyone ..along with hitcherhikers guide by douglas adams..one makes you think, other makes u challenge reality and relax :)

I agree that our tax structure has forced people, and not just corporations to find tax shelters anywhere. So where does the responsibility lie? Our govt which needs to examine what the net impact of this is and act accordingly..right?

now as far as jobs goign offshore, I really dont see issues with call centers, development houses etc, because the workers get a fair shake at the wages. Having been in some factories producing stuff for large apparel companies, I would say that the conditions are horrible. From a social responsibility perspective its predatory. Companies who are moving a stitching center from US to a third world country do not have to forget about the workplace safety and workplace conditions that are acceptable. Fine, find cheap labour..but dont abuse them. Anyhow that is a diff topic.

Coming back to the impact of jobs moving offshore, until there is a replacement does it not impact the buying power of the avewrage consumer..or the confidence to go spend? so the manufacturers may be putting cheaper products in the shops, but if consumers are not sure of their job situation they will not buy.

The other part of this is, do we need a better training-retraining aproach in place, there could be new opportunities but one has to get trained for that. It is different for a young web developer who sees that he has decreasing opportunities and move into another area e,g, database admin work, but for an older factory worker, it may be tougher to reinvent himself.

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Atlas Shrugged is my favorite of the Rand novels. I agree that it ought to be required reading in every introduction to Economics class at the university level. Unfortunately, I don't think the defense of capitalism rates high in our leftist leaning citidals of higher learning.

** "I agree that our tax structure has forced people, and not just corporations to find tax shelters anywhere. So where does the responsibility lie? Our govt which needs to examine what the net impact of this is and act accordingly..right?" **

Right. But I think the "act accordingly" aspect means to back away from enacting intrusive governmental regulations and easing tax burdens. An economic system should be viewed as an adaptable, dynamic organism that evolves over time of its own based upon events. The worst thing you can do is to interfere with the adaptation. If the natural evolution is that steel jobs will be lost in the US and gained somewhere else, you don't try to stop the job loss by artificial means. The goal ought not be to preserve the status quo which is nothing other than a snapshot picture of events at a specific time. A healthy system will adapt to the loss of steel jobs in the US by creating some other jobs in some other sectors that we might not even be able to conceive of today.

When this philosphy results in some major upheavals in particular industries, I agree that our social responsibility should be in training and retraining. Whatever we spend in training/retraining will come back to us many times over as the new more productive industries flourish in an environment where they find a plentiful well trained workforce. There should be a much closer relationship between government and business to identify these emerging industries and to develop the work force we predict will be needed. Too often, the liberal Democratic philosophy treats business as the enemy, promotes the rich vs. poor argument in elections, and sees business as the trough from which they can offer their constituency a free lunch in exchange for their vote.

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MV

I think we agree on all major points. except one..and I believe ther eis just a little bit of difference in what we are seeing.

it is on the topic of "act accordingly". I dont mean an intrusive govt hand in day to day workings, but just like we adjust our monetary and fiscal policy.. not to maintain status quo but to bring about the right set of changes, just like states provide tax breaks..etc etc. I think overall the direction should be managed more strategically..and to some extent it is being done but i believe more can be done in this area.

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[QUOTE]
*Originally posted by Fraudz: *
I think overall the direction should be managed more strategically..and to some extent it is being done but i believe more can be done in this area.
[/QUOTE]

I tell you that IMO the body that is least able to strategically manage the economy (and most other things) are politicians (be they state legislators or the US Congress). In Nevada, our legislature meets every two years. There is a collective sigh of relief when they adjourn after a session and everyone knows that it'll be another 18 months or so before they can damage anything else.

I did suggest a government/business partnership though that maybe could help with strategic planning, training and retraining of workers, etc. And to this extent, I agree with you.

The problem with politicians is that the only thing they are concerned about is getting votes. If you've got a district with a lot of unionized auto workers in it, you will get elected by promising them that you will protect their jobs no matter what. Even at the expense of the overall economy. The second guy who tells them that half of them better get used to the fact that they will lose their jobs over the next 4 years and that he will get the money to retrain them will surely lose. The reality is that the long term interest of the workers, their children and the entire country is better served by the second guy.

15

MV

agree with the politicians part.. the pathetic condition the tax code is in just exemplifies it.

however, there are some intelligent ppl..like greenspan..maybe a group that is unrelated in this manner. the fed res system etc can make recommendations for overall economic direction in a deeper level than they are being asked to do right now.

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Amen to the FED. We can all thank our lucky stars that the FED has been relatively insulated from the politicians and can formulate policy more or less based upon non-political events. Can you imagine if either the White House or Congress had the power to directly manipulate monetary policy. :eek:

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I would like to imagine it froma really high building, atleast i could then just crash thru the window and end my misery then rather than prolonging it and seeing “freedom fries” makers mentally torture me to death.

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MV,

I really don't agree with the tax avoidance offshore however. I have seen these things a thousand times. Some slick Big 5 (it used to be 8 in the old days) accounting firm checks in with the CFO, and today they are pushing thier offshore consulting deal. They charge the company 100k for a feasability study, and of course it is great. They then go to the board and say that they will reorg your company, but it will be a mil in fees to do. Board chuckles and says "gee all those company reimbursed trips to the Caymans". The task takes months of management effort to get all the paperwork filed and quietly make the move. Meanwhile issues such as shareholder rights, corporate liability, go out the window. Further the management is so distracted by the effort they forget about the core product while they collect big bonuses and pat themselves on the back for being such slick business people.

On Wall Street the analysts notice that the tax rate went down, but they also notice that revenue did not grow either, and they down grade the stock. Two years later the loophole they jumped through is slammed shut, or they are closed out of some bid by being located offshore.

In short I have never seen a well run company having to resort to this kind of trickery. It is usually the mark of bad or corrupt management that marks those who do htis kind of thing. It is generally not in th interest of shareholders in non-tax issues, and wall street could care less and does not value the company more highly.

Never mind that companies like Stanley get terrible press and have to backtrack anyway.....