Connect with us


Real World Economics: Global corporate taxes are a good step



Real World Economics: When good intentions go bad

Usually, international finagling among rich people and corporations to minimize paying taxes, legally or illegally, is not visible to the eye.

Edward Lotterman

Occasionally it is. On a trip to Switzerland, my wife and I went for lunch in the neighboring country of Liechtenstein. We started in Chur, a pleasant regional Swiss city in the Rhine Valley. An impulsive query of a hotel clerk told us that all we needed to do to visit another country was to drive 20 miles on the freeway, turn right at the big McDonald’s sign, cross the bridge, one left, one right and we would be in the business heart of Vaduz, tiny Liechtenstein’s capital.

A neat town the size of Redwood Falls, its only notable difference from a Swiss burg was a zone of six or eight blocks on two streets jammed with small, neat office buildings closely adjoining others. Each had small brass plaques next to the doorbell, 20 in one case. Such are the Liechtenstein “headquarters” of hundreds of international businesses.

I had seen similar plaque-bedecked buildings in Barbados on a much smaller scale. Yet I don’t think I’ll see any in Sioux Falls, although the South Dakota Legislature is drumming up analogous businesses.

All this relates to a positive recent development: the agreement among 130 countries to coordinate taxation of corporations, including a minimum global tax of 15 percent. This may reduce the legal contortions so benefitting brass plaque engravers.

Let’s step back a bit: The general problem is the world has some 200 countries, each sovereign over laws seen as best benefiting the country’s and its citizens’ and residents’ needs. This can include earning a few million dollars or euros by writing laws that allow businesses in other countries to in turn save billions in taxes. This is little different from Liberia and Panama offering near-regulation-free registration of commercial ships for a modest price.

There are thousands of businesses, mostly incorporated, that do legitimate business in multiple countries. There are thousands of rich people too. Naturally they try to minimize taxes owed. This can include juggling funds between countries to lower total taxes owed or paid.

This can be, and usually is, legal — at least within the letter of the law. This is “tax avoidance,” and is little different from what accountants might tell any of us.

There also is “tax evasion,” or fraud, in which laws are broken. Sometimes this is from otherwise legitimate businesses. Other times it’s hiding dirty money garnered from government corruption, criminal activity or simple personal crime.

The global agreement just reached aims to reduce avoidance strategies by legal companies, not crime, but the incentives and mechanisms for legal avoidance overlap those for illegal acts.

For example, Minnesota’s own Medtronic has its “legal headquarters” in Dublin, Ireland, even though its “operational headquarters” remains in Fridley. Johnson Controls is another major U.S. business nominally headquartered in Ireland. And hundreds of other corporations still legally based from this country have subsidiaries in Ireland. This has been part of the Celtic boom that propelled Ireland from poverty to prosperity.

Many also may have wholly-owned subsidiaries in Liechtenstein, Panama, Bermuda the Bahamas or similar havens. Frequently these have some innocuous name that gives no indication of the true owner. Transfers between subsidiaries of one corporation across several countries can move money so that low or even zero income taxes are paid.

In 2017, Google reportedly moved $22 billion in income to a Dutch company that transferred it to an Irish company, but one with a subsidiary in Bermuda. Bermuda has no tax on income. The Bermuda entity can “loan” funds back to Google’s home office in California, funds on which no U.S. corporate income tax was ever paid. All of the entities involved were owned 100 percent by Google and under their exclusive control.

So how does one transfer money in this way? Usually, it is through an old dodge known as “transfer pricing” already common and legal when much multinational business was in manufacturing.

For years, my favorite surplus machinery outlet in south Minneapolis had dozens of metal skids marked “Return to Ford, Taubate BR.” The St. Paul Highland Park Ford plant used four-cylinder engines produced in one of Ford’s Brazilian factories. Ford do Brasil is a separately-chartered Brazilian corporation owned entirely by the Michigan-based parent.

So when Ford-Brasil sells to U.S. Ford, money must change hands, but at what price per engine? There is no market price for these as there is for the soybeans Cargill trades, for example.

Set this transfer price high and it increases Ford profits in Brazil but reduces them in the U.S. Ford as a whole has more income here and less in Brazil. Price the engines low and Ford’s Brazil profits drop but those of U.S. Ford rise.

There are limits to this with physical products. One engine is not worth $1 million nor is it worth $100. But with software or intellectual property or pure service-based businesses, the sky’s the limit. What does one subsidiary charge another for design of an implanted medical device, but not the actual device? Writing advertising and designing logos for hamburger wrappers? Writing code for a search engine or social media? Accounting and legal services?

For years, McDonald’s, using the “double-Irish with a Dutch sandwich” ploy so beneficial to Google, moved franchise-fee income versus corporate overhead to lower taxes. It’s all legal, and corporate transfers between subsidiaries based in myriad locations will remain legal. Countries will retain control over their own tax laws, subject to the new provision that a multinational business will have to pay a 15 percent tax on corporate profits to some country. There inevitably will be hitches, but “progress, not perfection” applies here.

The recent ”Pandora papers” leak revealed how South Dakota changed its laws governing trusts at the dictation of law firms specializing in such work, so as to make it a favorable location for them to be established in that state. As for Liechtenstein or Bermuda, there is nothing illegal about this. But in both cases, such favorable rules can attract illegal money as well as legal. A U.S. state or a sovereign nation may gain economic activity and employment, but society on a global whole loses.

google news


Biden re-election poll shows dismal 22% support; Harris even worse at 12%



Biden re-election poll shows dismal 22% support; Harris even worse at 12%

The numbers are cringeworthy — 22% and 12%.

That’s the support for President Biden and his VP Kamala Harris in an I&I/TIPP poll that asked who would you vote for in the 2024 election. Even if you doubt the veracity of all this polling, these are poor numbers.

The only good news for Biden, the survey adds, is “no favorite has emerged among the large field of potential challengers to run against Biden in the 2024 primaries.”

But the sinking survey results are not out of the norm. A Wall Street Journal poll out Tuesday pegged Biden’s approval rating at a dismal 41%. Rasmussen had it at 42%.

Congress, however, was at 22% in the Journal poll, but that’s another story.

“It’s undeniable. Joe Biden is hurting in the polls right now and it’s due to a number of factors,” said Erin O’Brien, associate professor of political science at UMass Boston.

Those factors, she said, include the nagging pandemic, soaring inflation, lingering doubts about Biden’s foreign policy chops after the botched pullout from Kabul and lingering legislation.

The Journal adds that with Biden flatlining in the polls, he won’t be in a position to help Democrats fighting to keep their jobs in the midterms.

This comes as Democrats hold a slim majority in the House, where the split is 221-213, and in the Senate, at 50-50, but with Harris as the tiebreaker.

Support for former President Donald Trump remains strong among those loyal to him, so that also could be reflected in the polling that shows Biden needs to rebound or it will be too late to get much done in the second half of his tenure.

Now Biden faces a new challenge.

He held a video conference Tuesday with Russia’s Vladimir Putin over Russian troops heading toward the Ukrainian border.

Just hours before the call got underway, the Associated Press reported that Ukrainian officials charged Russia was continuing to escalate the crisis by sending tanks and snipers to war-torn eastern Ukraine to “provoke return fire.”

Republicans are watching to see how Biden fares, considering how poorly his administration handled withdrawal from Afghanistan.

It’s all showing in the polls, with the Journal adding 63% of voters said the country had gone off-track, with just 27% saying the nation was on the right course. Some 61% said the economy was headed in the wrong direction.

google news
Continue Reading


Cam Talbot shines as Wild top Oilers 4-1 for seventh straight win



Cam Talbot shines as Wild top Oilers 4-1 for seventh straight win

EDMONTON — The last time Cam Talbot faced the Edmonton Oilers, he was throwing punches at center ice with Oilers goaltender Mike Smith in an infamous brawl in a Battle of Alberta between the Calgary Flames and Oilers, two seasons ago that made highlight reels all across North America.

On Tuesday night, Talbot made the highlight reel for all the reasons he’s paid for. Stopping pucks.

The former Oilers goaltender was spectacular, making 38 saves as the Wild beat Edmonton 4-1 at Rogers Place.

Joel Eriksson Ek, Marcus Foligno, Victor Rask and Dmitry Kulikov tallied for the Wild, while Jesse Puljujarvi scored the lone marker for the Oilers as Minnesota extended its win-streak to seven games, while the Oilers have dropped three straight contests.

The Wild improve to 18-6-1 and remain in top spot in the Central division.

“I’ve been back in this building a couple of times, but never got the start,” Talbot said. “It’s nice, this place will always have a place in our heart, we started our family here and it was a great building to play in and I still have a lot of great friends here. It’s one of those things where you look to come back here every time and it’s even more fun when you get a big win.

“I can’t say enough about the way we closed out the game. You don’t want to have lulls in the game, but give the guys credit, they just found a way to battle and win the hockey game.”

The Wild’s special teams haven’t been great this season, but they clearly won the special teams battle against Edmonton, which boasts the league’s best power play and its penalty kill is in the top-5.

Minnesota scored once on the power play and denied the Oilers potent power play on all five of their opportunities.

“Our penalty kill was outstanding tonight, I can’t say enough about them,” said Talbot, who is 2-0 in three appearances since being dealt away from the Oilers two seasons ago. “We weren’t giving them those Grade A chances that they’re accustomed to, and with the statistics coming in you wouldn’t think the power-play match-up would favor us, but we got a big one (power play goal) early, and our penalty kill did a great job, so give our special teams a ton of credit tonight.”

The Oilers have been notoriously slow starters out of the gate, giving up the first goal in 14 of the team’s first 23 games, and the Wild made it 15 as Eriksson Ek scored a power-play marker just 1:11 into the contest.

They went up 2-0 just 6:03 later as Foligno buried a cross-ice feed from Matt Dumba.

Edmonton’s high-octane offence, led by superstars Connor McDavid and Leon Draisaitl got rolling in the second period as they put all kinds of pressure on the Wild, who continue to play without top defenseman and captain Jared Spurgeon, but the Oilers were only able to cut their deficit in half, despite outshooting Minnesota 20-6 in the middle frame.

“They played really well in the second period, but we really liked our regroup and how we played in the third period. We did a lot of real, real good things,” said Wild coach Dean Evason. “They’re going to get shots and to not give that second and third gritty ones to them. Obviously Draisaitl and McDavid are special players. They’re going to get their opportunities to shoot pucks, but it’s that second and third one, that not only did Cam do a good job of smothering, but our second forward, we got pucks the heck out of that area, so they didn’t have more opportunities like that.”

Talbot made several big saves in the second period. He robbed Draisaitl with a left pad save as the former Hart Trophy winner tried to beat him with a one-timer, backdoor. In the final minute of the period, he stretched out to make a right pad save off of Tyson Barrie, who was wide open in the slot.

But his best save came early in the third when he dove across to deny Darnell Nurse of the tying goal.

“I knew that he was there, but obviously you have to stay patient with the guy in the slot first,” recalled Talbot. “But our guy did a good job of going down and taking away the lower part of the net, and I was able to see the pass right away and I knew Nurse was down there and I just tried to get everything in front of it.”

Moments after the big save off Nurse, the Wild scored on a delayed penalty as Victor Rask scored his fourth goal of the season to give Minnesota some breathing room and then Kulikov showed off some slick hands on a breakaway goal to give the Wild a 4-1 lead with 5:03 remaining to put the game away.

google news
Continue Reading


Ellison: State, localities reach agreement on distributing $300M in opioid settlement



Ellison: State, localities reach agreement on distributing $300M in opioid settlement

Minnesota moved another step closer this week to unlocking roughly $300 million from a settlement with Johnson & Johnson and the three major U.S. drug distributors in connection to the nation’s opioid painkiller addiction crisis.

Attorney General Keith Ellison announced Monday that the state had reached an agreement with Minnesota counties and cities on how to distribute the state’s share of a pending $26 billion national settlement agreement. The state and local governments had to reach an agreement by Jan. 2, 2022, in order to maximize the amount they receive from the national settlement.

Municipal governments will receive 75% of the settlement funds while the state will receive 25% to help pay for opioid addiction treatment and prevention. The most recent estimate from Ellison’s office projects Minnesota state and local governments will receive $296 million over the next 18 years.

The settlement agreement with Johnson & Johnson and the “big three” drug distributors — Cardinal, McKesson and AmerisourceBergen — is just one of several fronts in ongoing nationwide litigation against drug makers, marketers and wholesalers in connection to an epidemic of opioid painkiller addiction across the U.S.

The settlement stems from investigations by state attorneys general from across the U.S. into whether the distributors failed to screen and stop suspicious drug orders, and whether Johnson & Johnson misled patients and doctors about the addictive nature of opioid painkillers.

The U.S. Centers for Disease Control and Prevention estimates 38 people died a day in 2019 of prescription opioid overdoses, totaling about 14,000 deaths. Lawsuits filed against drug makers such as Purdue Pharma, the maker of OxyContin, estimate hundreds of thousands of Americans died of opioid painkiller overdoses between 1999 and 2015, while millions became addicted. About 5,500 Minnesotans died as a result of the addiction crisis, Ellison said.

In a statement issued with Ellison’s announcement, Pat Baustian, president of the Coalition of Greater Minnesota Cities and mayor of Luverne, noted the addiction epidemic’s “devastating impact on families and communities throughout Greater Minnesota,” and expressed appreciation for the state’s efforts to cooperate with local governments on distributing the funds.

“Although no amount of money can make up for the loss of life, the funding from these national settlement agreements will help our communities provide services and resources to address this crisis,” Baustian said.

The state settlement fund will be overseen and distributed by the Opioid Epidemic Response Advisory Council, according to Ellison’s office. Under current state law, the state opioid abatement fund distributes to local governments, but the agreement between the state and local governments requires the parties to change the law in the 2022 legislative session, according to Ellison’s office.

The local government abatement fund created by the settlement money will be allocated to all counties that participated in the settlement. It will also include municipalities that have a population of 30,000 or more, have a public health department or filed a lawsuit against the defendants in the settlement.

google news
Continue Reading