Taxes Driving U.S. Corporations to Shutter

Posted on January 7, 2015January 7, 2015 by Denise Simon

No wants to change the tax code and no one wants to allow U.S. currency offshore to be repatriated so…

U.S. Stands to Lose Billions From Corporate Tax Inversions

One Estimate Puts Lost Tax Revenue at Close to $20 Billion Over a Decade

How much revenue does the U.S. Treasury stand to lose from corporate tax inversions? It is difficult to say precisely, but one estimate puts the figure at close to $20 billion. Calculating how much the U.S. Treasury would lose is nearly impossible because of a dearth of reliable tax data from companies’ public filings and the variables in how companies can structure their businesses, tax experts say. One way companies seek to reduce their U.S. tax bills by reincorporating overseas is to transfer pretax income from their U.S. operations to their foreign parent companies through intercompany debt, says corporate tax consultant Robert Willens. But it is difficult to know how large of an impact that will have for a given company because of limits on how much interest companies can deduct from their taxable income. There is also a risk that companies act too aggressively attract scrutiny from the Internal Revenue Service. Another variable is the cash many companies keep overseas to avoid U.S. taxes. The cash only becomes taxable once it is brought back to the U.S. to pay dividends to shareholders or is used for other purposes. But companies don’t always disclose how much cash they bring back home or when.

Some companies say they were never going to repatriate the cash anyway, so they aren’t depriving the U.S. tax base of revenue by moving out of the country. Report: 1 million corporations closed, 60,000 a year; taxes blamed America has lost 1 million corporations since their height during the Reagan era, in part driven out of business by the industrialized world’s highest corporate tax rate, according to a new report from the nonpartisan Tax Foundation. The just-issued research revealed that the number of traditional “C” corporations has fall to a “historically low level” and wiped out the corporate tax base, resulting in the federal government relying much more on individual income taxes to fund its operation. “There is now more net business income taxed under the individual income tax system than the traditional corporate tax code, a trend that does not appear to be stopping any time soon,” said the report provided to Secrets. It said that corporate closings have recently picked up steam and now 60,000 a year are shut down. A driver in the loss of traditional corporations has been the ever-rising corporate tax rate, an issue Washington has been ducking for years. The Tax Foundation said that many corporate titans have taken matters into their own hands by restructuring as “pass through” operations which allows profits to be taxed at lower individual rates. “More than 60 percent of U.S. business profits are now taxed under the individual income tax code rather than the corporate tax code, which explains why the U.S. collects a relatively small amount of tax revenue from corporations despite having the developed world’s highest corporate tax rate,” said the foundation. “Although this kind of do-it-yourself tax reform is beneficial to the overall economy because it lowers the tax burden on business investment, something is nevertheless lost,” said Tax Foundation Chief Economist William McBride in a statement. “Pass-through businesses do not offer the same ability to invite investment from thousands of shareholders or easily transfer shares. That means the decline of the traditional corporate sector represents an economic distortion that is hobbling American industrial capacity and job growth. No other developed country has such a distorted business sector,” he added.

Report: 1 million corporations closed, 60,000 a year; taxes blamed

America has lost 1 million corporations since their height during the Reagan era, in part driven out of business by the industrialized world’s highest corporate tax rate, according to a new report from the nonpartisan Tax Foundation.

The just-issued research revealed that the number of traditional “C” corporations has fall to a “historically low level” and wiped out the corporate tax base, resulting in the federal government relying much more on individual income taxes to fund its operation.

“There is now more net business income taxed under the individual income tax system than the traditional corporate tax code, a trend that does not appear to be stopping any time soon,” said the report provided to Secrets.

It said that corporate closings have recently picked up steam and now 60,000 a year are shut down.

A driver in the loss of traditional corporations has been the ever-rising corporate tax rate, an issue Washington has been ducking for years.

The Tax Foundation said that many corporate titans have taken matters into their own hands by restructuring as “pass through” operations which allows profits to be taxed at lower individual rates.

“More than 60 percent of U.S. business profits are now taxed under the individual income tax code rather than the corporate tax code, which explains why the U.S. collects a relatively small amount of tax revenue from corporations despite having the developed world’s highest corporate tax rate,” said the foundation.

“Although this kind of do-it-yourself tax reform is beneficial to the overall economy because it lowers the tax burden on business investment, something is nevertheless lost,” said Tax Foundation Chief Economist William McBride in a statement.

“Pass-through businesses do not offer the same ability to invite investment from thousands of shareholders or easily transfer shares. That means the decline of the traditional corporate sector represents an economic distortion that is hobbling American industrial capacity and job growth. No other developed country has such a distorted business sector,” he added.

Then comes Congress with threats:

The Senate’s chief tax writer, Ron Wyden, wants U.S. companies looking to move abroad for a lower tax bill to understand one thing: “[T]hey won’t profit from abandoning the U.S.”

The Democrat’s comments, made in a Wall Street Journal op-ed last week, came amidst a spate of proposed mergers between major American companies and foreign rivals that would end up in their reducing their U.S. tax bill.

The proposed merger that’s gotten the most attention of late: The so far unsuccessful bid by Pfizer (PFE) for British pharmaceutical maker AstraZeneca (AZN).

Today, a U.S. company can move to a more tax-friendly country in a process known as “inversion” if the foreign partner owns more than 20% of the stock in the merged entity, among other requirements.

Wyden wants to raise that threshold to at least 50%, and he would like to make such a provision retroactive to May 8, 2014.

16th Hole, Obama Signs onto North Korea Sanctions

Posted on January 2, 2015January 2, 2015 by Denise Simon

When it came to the alleged hack of Sony by North Korea, as there is still great dispute over the origins of the hackers, Obama criticized Sony for their decisions and later called the matter ‘cyber-vandalism’.

Today, the second day of the new year, Obama today signed more sanctions on North Korea.

HONOLULU (AP) — The U.S. is imposing sanctions on North Korea in retaliation for the cyberattack against Sony Pictures Entertainment.

President Barack Obama signed an executive order on Friday authorizing the sanctions. Although the U.S. has already sanctioned North Korea over its nuclear program, these are the first sanctions punishing Pyongyang for alleged cyberattacks.

The Obama administration says the sanctions affect three North Korean entities, including a government intelligence agency and a North Korean arms dealer. The U.S. is also sanctioning 10 individuals who work for those entities or the North Korean government.

Those sanctioned are barred from using the U.S. financial system, and Americans are prohibited from doing business with them.

The White House says this is just the first part of the U.S. response to the Sony incident.

H/T Zeke Miller…

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Official statement:

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Obama is Selective on Human Rights Violators

Posted on December 31, 2014December 31, 2014 by Denise Simon

If Barack Obama was really true to his words, why not take on North Korea. The DPRK has operated gulags for 50 years where atrocities are beyond description and on par with Daesh (Islamic State).

‘Starvation food rations, forced labor, routine beatings, systematic torture and executions put the North Korean camps in the ranks of history’s worst prisons for political offenders. Originally modeled on the Soviet gulag, the North Korean camps have developed distinctive features of their own for which no terminology has yet been devised. Particularly horrifying is the incarceration of entire families, including children and grandparents, in order to isolate them from society and punish them because of their relationship to family members accused of political crimes. Rooting out “class enemies for three generations” was specifically ordered by Kim Il-sung, which at times has led to comparisons with Nazi death camps. An equally horrifying practice distinctive to North Korea is forced abortion regularly carried out and in the most brutal manner on women prisoners who illegally crossed the border into China, became pregnant by Chinese men and were forcibly repatriated to North Korea. In cases where the pregnancy is too advanced, guards beat the infants to death or bury them alive after they are born. Still another point of departure in North Korea is that all the residents of the kwan-li-so are denied any correspondence, visits or life saving parcels from family and friends. They are totally incommunicado.’

• Ahn Myong-chol, a former guard, reported that all three of the kwan-li-so at which he worked had isolated detention facilities in which many prisoners died from mistreatment, and that at Kwan-li-so No. 22 there were so many deaths by beatings from guards that the guards were told to be less violent.

• Former Prisoner # 37 was beaten at the Onsong An-jeon-bu police facility during his six month interrogation prior to being tried and sentenced to Chongo-ri kyo-hwa-so for smuggling food back and forth from China.

• Seo Jin was beaten so badly with wooden staves at the Onsong Bo-wi-bu interrogation center, and again at the Musan Bo-wi-bu interrogation center, that she could hardly walk. After transfer to the Musan An-jeon-bu detention facility, she was beaten by younger women guards when she objected to her third vaginal examination. And she was kicked on the legs and beaten on the back by guards at the Oro Kyo-yang-so penitentiary No. 55 when she did not keep up the required pace in her prison labor.

• Former Prisoner # 31 was whipped with a belt by male guards at the Onsong Bo-wi-bu interrogation facility, and severely beaten on her legs and back when, because of severe malnutrition, she was unable to maintain the pace of her prison labor.

• Bang Mi-sun was severely beaten on her legs with a wooden stave because she could not keep up with the work pace at the Musan An-jeon-burun ro-dong-dan-ryeon-dae mobile labor brigade owing to injuries she suffered while trafficked in China prior to her repatriation. Infection from this beating left her partially crippled. At the Musan An-jeon-bu pre-trial detention ku-ryu-jang, she and other prisoners were required to sit motionless for days, with fellow detainees forced to beat other detainees who moved.

For more testimony, documents and photos click here for the report.

Ed Schroeder’s Military Intelligence Report: North Korean Defector Details ‘Human Experiments’

by ****

Im Cheon-yong says that witnessing mentally and physically handicapped children being used in chemical weapons tests carried out by the North Korean military was the last straw.

An officer in North Korea’s special forces, Im had reservations about the nation in which he was living, and the regime that he served to the best of his abilities, but the “special training” he was required to undergo at a military academy in North Pyongan Province for the regime’s elite troops helped to convince him that he needed to defect.

“If you want to graduate from this academy, you need to learn how to confuse the enemy without revealing your own forces, how to carry out assassinations, how to use chemical weapons and so on,” he said.

‘The regime does this because it insists to their people that North Korea is heaven on Earth,’ says Shigemura

“And then we have what they call ‘field learning’. For the biological and chemical warfare tests, we needed ‘objects’,” he added. “At first, they used the chemical agents on mice and showed us how they died. Then we watched the instructors carrying out the tests on humans to show us how a person dies. I saw it with my own eyes,” Im claimed.

He said he got repulsed by what he had witnessed and managed to get over the border into China and arrived in South Korea in the mid 1990s. Now 50 years old, Im is a prominent advocate of the regime change in Pyongyang and president of both the Soldiers’ Alliance for Free North Korea and The Fellowship Foundation for Freedom.

Abuse of citizens

Some North Korea experts say that Im’s experiences tally with other defectors’ tales of abuse of citizens of the world’s most isolated state. Some of that testimony was shared with the United Nations’ Commission of Inquiry before it issued its damning report on the state of human rights in the North in February.

“There are too many of these stories now for them not to be true,” Toshimitsu Shigemura, a professor at Tokyo’s Waseda University, and an authority on North Korean affairs, told DW. “There were reports in the past but it was difficult to confirm them, but the testimony that is emerging now is consistent and from numerous sources,” he added.

“Anyone who goes to Pyongyang will notice that there are no disabled people about at all,” he said. “We now know that they are being taken away as children and incarcerated in special camps. The regime does this because it insists to their people that North Korea is heaven on Earth, and there can be no disabled people in paradise,” he said.

But Kim Myong-chol, executive director of The Centre for North Korea-US Peace, dismisses Im’s claims.

“It is the same nonsense,” he told DW. “This guy – and plenty of others like him – are just looking to make money by attracting the attention of South Korea and the US. That is why they make these lies up. People like him know nothing about the real North Korea and all they care about is making money from their lies.”

Experiments on humans

‘The authorities buy disabled children from their parents for a few kilograms of rice,’ claims Im

According to Im, experiments on humans date back to the late 1960s and one of the first facilities used for chemical and biological weapons tests on humans was constructed on the military controlled island of Mayang-do, just off the east coast port of Sinpo, which is also North Korea’s most important submarine base. A second facility was subsequently constructed on an island off the west coast of the peninsula, while a third is in operation alongside a political prison camp outside the city of Hyanghari, the defector claims.

“They use anthrax bacterium as well as 40 different types of chemical weapons that the regime has developed itself,” Im said. “Through these experiments, they know the effects of the weapons and the amounts to be used.”

To give the regime’s actions legitimacy, children born with mental or physical disabilities are not taken away by force – although, in reality, few citizens of North Korea have the right to resist the authorities’ will, says Im.

“They want to do it ‘legally’ and they don’t want to lose the support of the people, so they buy disabled children from their parents for a few kilograms of rice,” he said. “The officials say they will take care of the children.”

Global Financial Outlook 2015~Grim

Posted on December 30, 2014December 30, 2014 by Denise Simon

What is the financial outlook for 2015? Not good as the monetary experts have created a study group in the United States to examine conditions, causes and solutions.

The Federal Reserve deliberately keeps quiet about how it measures lenders’ performance during downturns, to prevent banks from finding loopholes in the process that would allow them to take more risk, senior regulators have said publicly. It has given banks a little more information recently, but many executives still gripe about the tests.

“You put something in and one year it’s okay and the next year they say ‘no,’ and you’re scratching your head,” said one bank executive. The executive, like others that spoke to Reuters, spoke about the stress tests on the condition of anonymity.

A few years ago, banks might have hesitated to share information with rivals about how they measure risk and how they communicate with the Federal Reserve. Their willingness to talk to competitors about these issues underscores just how exasperated they are with the process. Meanwhile, banks in Europe are failing stress tests as Italy suffered the worst count: nine of the country’s 21 banks examined failed the test. Italy is Europe’s fourth-largest economy.

Greece and Cyprus, southern European countries that required international bailouts, were next. In each country, three of four banks examined did not pass muster.

Five of the Italian banks and one Greek bank have since covered their shortfalls.

Only one of the 25 major banks in Germany, Europe’s strongest economy, failed the test, but it has since raised sufficient capital.

Greece is the indicator for Europe as Greece has undergone the most strenuous financial retooling program in the last few years and yet it is not enough. Banks are all interconnected given the quiet bailouts globally through the International Monetary Fund and associated global banks. So what about Greece?

Greece’s threat to the European economic recovery

It is difficult to exaggerate the importance of the Greek government’s failure today to secure sufficient votes in parliament to choose a new president for the country. Since such a failure not only forces Greece to hold snap elections by the end of January, which could see the coming to power of a radical left-wing government. It also raises the real possibility that Greece will be forced to exit the Euro in 2015 that would be a major blow to the prospects of a meaningful European economic recovery.

On the basis of current electoral polls, the Syriza Party, headed by Alexis Tsipras, should win the parliamentary elections now scheduled for January 25. Judging by Syriza’s consistent electoral promises, if elected one must expect that Syriza will roll back the austerity policies imposed on Greece by the IMF, the ECB, and the European Union (the so-called “troika”). Syriza must also be expected to reverse many of Greece’s recent structural reforms in the labor market and in the area of privatization policy. In addition, it will more than likely insist on substantial official debt relief from the ECB, the IMF, and its European partners.

The prospect of a Syriza government taking office is already sending shudders through the Greek financial markets and is undermining confidence in the still very depressed Greek economy. One must expect that the election of Syriza will put Greece on a collision course with both the troika and the German government. Since it is difficult to see how the troika and the German government can accede to Greece’s request for either debt relief or for additional budgetary financing at a time that Greece’s economic policy would be going in a direction clearly unacceptable to its European partners. For its part, it is difficult to see how Syriza can quickly make a policy U-turn from a position that it has been consistently espousing these past few years.

To be sure, a month in Greek politics is a long time and Syriza is by no means assured of electoral victory. However, it would seem that even in the best case scenario of a New Democracy win, it would fall well short of the votes needed for forming a majority government. With a deeply divided PASOK Party highly likely to be decimated in the elections, New Democracy will have difficulty in forming a stable coalition government. It is also likely that in the election campaign, New Democracy will emphasize that if re-elected it too will take a tough line with the troika, from which line it will be difficult to withdraw after the elections.

Greece’s already battered economy can ill-afford a prolonged period of political uncertainty, and much less a radical government, especially without the backstop of a troika financial support program. For not only does Greece have substantial official debt amortization payments to make in 2015 — it is also vulnerable to a run on its bank deposits. This would especially appear to be the case in light of the recent Cypriot experience, where Cyprus’s official international lenders insisted on a large write-down of bank deposits in return for their financial support to the country. Without a troika program in place, Greek banks would not be in the position to access the European Central Bank’s rediscount window in the event of a bank run that would almost certainly lead to the further collapse of the Greek economy.

European optimists argue that, unlike in 2010, any spillovers now from a Greek crisis to the rest of the Eurozone would be limited. However, in so doing they overlook Europe’s very poor economic and political fundamentals, which make the Eurozone all too susceptible to renewed contagion from the Greek crisis intensifying. After all, Europe is on the cusp of yet another economic recession and of a prolonged period of Japanese-style price deflation. Meanwhile, its economic periphery remains highly indebted and throughout Europe support for its political elite is crumbling at a time that parties on the extreme-left and the extreme-right of the political spectrum appear to be on the march.

Shadow Hackers Attacking America, No Identity

Posted on December 30, 2014December 30, 2014 by Denise Simon

If the whole truth bubbled to the surface on just how deep, far and wide cyber attacks hit America, they would truly be the most significant threats known to the West. Hackers hit targets in America so often daily that they cannot be measured for frequency or damage, but expert estimates are known and not revealed.

When it comes to the recent Sony hack and that of Xbox and PlayStation, black-hat types are brought in to investigate and opinions are set in motion. Even with all the attention paid to Sony, to date a culprit has not been fingered and certainly no punishment is forthcoming.

So, was the Sony hack really performed by North Korea? Was it at the hands of China as a proxy? Heck was it Russia or Iran? Was it an inside job working in collusion with both domestic and foreign entities? No one really knows or there is a refusal to explain. This is a major problem itself as blame may be misplaced for the sake of fouled diplomacy, fear of future retributions or the possibility of wide-spread panic across the country.

POLITICO Pro

FBI briefed on alternate Sony hack theory