l****z
发帖数: 29846 | 1 By JOHN D. MCKINNON And SCOTT THURM
More big U.S. companies are reincorporating abroad despite a 2004 federal
law that sought to curb the practice. One big reason: Taxes.
Companies cite various reasons for moving, including expanding their
operations and their geographic reach. But tax bills remain a primary
concern. A few cite worries that U.S. taxes will rise in the future,
especially if Washington revamps the tax code next year to shrink the
federal budget deficit.
"We want to be closer to where our clients are," says David Prosperi, a
spokesman for risk manager Aon AON -0.23% plc, which relocated to the U.K.
in April.
Aon has told analysts it expects to reduce its tax rate, which averaged 28%
over the past five years, by five percentage points over time, which could
boost profits by about $100 million annually.
Since 2009, at least 10 U.S. public companies have moved their incorporation
address abroad or announced plans to do so, including six in the last year
or so, according to a Wall Street Journal analysis of company filings and
statements. That's up from just a handful from 2004 through 2008.
The companies that have moved recently include manufacturer Eaton Corp., ETN
-0.72% oil firms Ensco International Inc. ESV -1.41% and Rowan Cos., RDC +0
.09% as well as a spinoff of Sara Lee Corp. called D.E. Master Blenders 1753.
Eaton, a 101-year-old Cleveland-based maker of components and electrical
equipment, announced in May that it would acquire Cooper Industries PLC,
another electrical-equipment maker that had moved to Bermuda in 2002 and
then to Ireland in 2009. It plans to maintain factories, offices and other
operations in the U.S. while moving its place of incorporation—for now—to
the office of an Irish law firm in downtown Dublin.
When Eaton announced the deal, it emphasized the synergies the two companies
would generate. It also told analysts that the tax benefits would save the
company about $160 million a year, beginning next year.
Eaton's chief executive, Alexander Cutler, has been a vocal critic of the
corporate tax code. "We have too high a domestic rate and we have a
thoroughly uncompetitive international tax regime," Mr. Cutler said on CNBC
in January. "Let's not wait for the next presidential election" to change
the rules.
The moves by Ensco and Rowan, which operate offshore oil rigs, show how one
company's effort to lower its tax rate can spur other shifts.
In moving from Dallas to the U.K. in 2009, Ensco followed rivals such as
Transocean Ltd., RIG -1.47% Noble Corp. and Weatherford International Ltd.
WFT -3.55% that had relocated outside the U.S. The company said the move
would help it achieve "a tax rate comparable to that of some of Ensco's
global competitors."
In fact, Ensco's tax rate has declined. In the second quarter, the company
said its "effective tax rate" was 10.5%, down from 19% in 2009. The savings:
more than $100 million a year.
Around the time of Ensco's move, Rowan executives fielded questions from
investors and analysts about their own tax rate. In February, Rowan answered
the questions, announcing plans to move to the U.K. from Houston. "We're
able to be competitive, with a low effective rate," says Suzanne Spera, the
firm's director of investor relations.
Fear of such moves is what prompted Congress to pass the 2004 law, which was
backed by Democrats and some Republicans and included exceptions that some
firms and advisers have sought to exploit.
In June, the Internal Revenue Service tightened an exception that had
allowed companies to move to countries in which they have substantial
business activities. It will not prevent moves through a merger, such as
Eaton's.
Lawmakers of both parties have said the U.S. corporate tax code needs a
rewrite and they are aiming to try next year. One shared source of concern
is the top corporate tax rate of 35%—the highest among developed economies.
By comparison, Ireland's rate is 12.5%.
The Obama administration has proposed lowering the rate to 28%, while
Republican rival Mitt Romney has proposed 25%.
Critics of the tax code also say it puts U.S. companies at a disadvantage
because it taxes their profits earned abroad. Most developed countries tax
only domestic earnings.
While executives would welcome a lower tax rate and an end to global
taxation, some worry their tax bills could rise under other measures that
could be included in a tax-overhaul package.
U.S. multinationals often pay far less than 35% because of various breaks,
including the option of deferring the payment of U.S. taxes on foreign
earnings until they are brought to the U.S. Those companies could pay higher
taxes under Obama administration proposals to limit the benefits of
deferral. Rowan cited that potential change in announcing its move.
Obama administration officials play down the significance of the recent
company moves and say their proposals would encourage companies to stay in
the U.S.
In his State of the Union speech in January, President Barack Obama said
that "it's time to stop rewarding businesses that ship jobs overseas, and
start rewarding companies that create jobs right here in America."
Some companies worry that lowering the general corporate tax rate would
require eliminating tax breaks for specific firms or industries. Even
without a tax-code overhaul, Congress could eliminate some tax breaks to
reduce the deficit.
For companies that leave the U.S., the appeal of lower taxes "is still there
, but people now are also getting more concerned about where tax reform is
going," says Bret Wells, a University of Houston law professor.
Still, several key lawmakers hope to rewrite the tax code to give companies
an extra incentive to stay in the U.S.
Tax reform needs to "put American businesses in the best position to compete
in the global economy while adding U.S. jobs." said Sen. Max Baucus (D.,
Mont.), the Senate Finance Committee chairman, in a recent statement.
And House Ways and Means Chairman Dave Camp (R., Mich.) said in a recent
statement that "comprehensive tax reform that lowers rates and transitions
the U.S. to a territorial approach that is used by our global competitors is
critical to making America a more attractive place to invest and hire." | l****z
发帖数: 29846 | 2 A 2004 law? Hmmm, who has a majority in both houses of Congress and held
the White House in 2004?
Oh yeah, the GOP. You can't pin this one on the Democrats, guys. The GOP
controlled both the legislative and executive branches, so they own this one
. |
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