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Banks Cash In on Mergers Intended to Elude Taxes


DealBook Column
Jamie Dimon, the chief executive of JPMorgan Chase, recently said, “I love America.” Lloyd Blankfein, the chief executive of Goldman Sachs, wrote an opinion article saying, “Investing in America still produces the best return.”

Yet guess who’s behind the recent spate of merger deals in which major United States corporations have renounced their citizenship in search of a lower tax bill? Wall Street banks, led by JPMorgan Chase and Goldman Sachs.

Investment banks are estimated to have collected, or will soon collect, nearly $1 billion in fees over the last three years advising and persuading American companies to move the address of their headquarters abroad (without actually moving). With seven- and eight-figure fees up for grabs, Wall Street bankers — and lawyers, consultants and accountants — have been promoting such deals, known as inversions, to some of the biggest companies in the country, including the American drug giant Pfizer.

Just last week, President Obama criticized these types of transactions, calling the companies engaged in them “corporate deserters.” “My attitude,” he said, “is I don’t care if it’s legal. It’s wrong.” He has suggested legislation, and Senator Carl Levin, the Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations, has proposed to make it more difficult for an American company to renounce its citizenship — and tax bill — by merging with a smaller foreign competitor.

Ivytalk wrote:If the corporate income tax rate -- currently the highest in the world -- is cut to a more competitive level, the "inversion" problem will take care of itself.

Thank you, Jack Lew.

LeadBolt wrote:
Closing loop holes and lowering rates is better policy than temporary tax manipulations such as bonus depreciation.

Pwns wrote:

LeadBolt wrote:
Closing loop holes and lowering rates is better policy than temporary tax manipulations such as bonus depreciation.

What I've been saying for a while. It's nuts that we have some corporations paying almost nothing and others have to pay some of the highest rates in the world.

The only losers will be people employed by large departments that do nothing but figure out the taxes of the corporation they work for.

LeadBolt wrote:

Pwns wrote:
What I've been saying for a while. It's nuts that we have some corporations paying almost nothing and others have to pay some of the highest rates in the world.

The only losers will be people employed by large departments that do nothing but figure out the taxes of the corporation they work for.

That sounds a lot like what Romney proposed in the 2012 election. Certainly it couldn't be correct if he was defeated, right?

LeadBolt wrote:

Pwns wrote:
What I've been saying for a while. It's nuts that we have some corporations paying almost nothing and others have to pay some of the highest rates in the world.

The only losers will be people employed by large departments that do nothing but figure out the taxes of the corporation they work for.

That sounds a lot like what Romney proposed in the 2012 election. Certainly it couldn't be correct if he was defeated, right?

kalm wrote:

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

AZGrizFan wrote:

LeadBolt wrote:
That sounds a lot like what Romney proposed in the 2012 election. Certainly it couldn't be correct if he was defeated, right?

No way. No how.

Ibanez wrote:

AZGrizFan wrote:
No way. No how.

All I remember is " broaden the base" and ""binders full of women".

kalm wrote:

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

Ivytalk wrote:

kalm wrote:

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

houndawg wrote:

Ivytalk wrote: And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

Sometimes life isn't fair.

Baldy wrote:

kalm wrote:

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

Here we go again...

Yes, and how many hundreds of billions of dollars does it cost, and how many billions of man hours does it take for these evil corporations to become tax compliant?

Ivytalk wrote:

kalm wrote:

But our rates should be higher due to the many advantages our system and markets bring. 'Merica!

And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

kalm wrote:

Ivytalk wrote: And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

By all means, post the study. And why you're at it, find one that includes compliance costs to support Baldy's point.

I agree with much of what you've said here. In the meantime, why not close our markets to these companies or drill them to bring the product back in? They've long benefited from America, if they don't want to be responsible citizens, don't let the door hit you in the ass.

kalm wrote:

Ivytalk wrote: And I can cite you a 2014 study by the "in the tank for big business" Tax Foundation that shows that US effective marginal corporate tax rates are the highest in the world, and you'd undoubtedly retort with your "rabidly anti-corporatist" Citizens for Tax Justice survey that points out alleged flaws in the Tax Foundation study. The mindless conk-donk, nyaa-nyaa, JellyBelly "who's got the bigger graph" debate goes on. The point is that not all businesses can take advantage of the loopholes -- pardon me, "tax expenditures" -- that enable the "average" to descend to the level represented by your graph. Ergo, they are stuck with the statutory default rate, or close to it. I'm saying, reduce the rate and eliminate the loopholes. Inversions will disappear, as will the hedge fund programs that bet on them.

By all means, post the study. And why you're at it, find one that includes compliance costs to support Baldy's point.

I agree with much of what you've said here. In the meantime, why not close our markets to these companies or drill them to bring the product back in? They've long benefited from America, if they don't want to be responsible citizens, don't let the door hit you in the ass.

AZGrizFan wrote:

kalm wrote:
By all means, post the study. And why you're at it, find one that includes compliance costs to support Baldy's point.

I agree with much of what you've said here. In the meantime, why not close our markets to these companies or drill them to bring the product back in? They've long benefited from America, if they don't want to be responsible citizens, don't let the door hit you in the ass.

That's $1.863 TRILLION dollars....which is, indeed, hundreds and hundreds of billions.

According to the National Taxpayer Advocate, there were 4,428 changes to the Internal Revenue Code between 2001 and 2010, including an estimated 579 changes in 2010 alone. The tax code averages more than one change per day. The resulting complexity creates hidden compliance costs between $215 billion and $987 billion annually. To put this in perspective, total revenue collected by the federal government in 2012 was $2.5 trillion.

LeadBolt wrote:

Pwns wrote:
What I've been saying for a while. It's nuts that we have some corporations paying almost nothing and others have to pay some of the highest rates in the world.

The only losers will be people employed by large departments that do nothing but figure out the taxes of the corporation they work for.

That sounds a lot like what Romney proposed in the 2012 election. Certainly it couldn't be correct if he was defeated, right?