A Reichsfluchsteuer For Companies
"You can check-out any time you like,
— The Eagles, "Hotel California"
"WASHINGTON—The Treasury Department issued new rules making it harder for U.S. companies to move to low-tax countries..."
—The Wall Street Journal, news article, "Treasury Toughens Rules for Firms to Move to Low-Tax Nations"
The Journal reports that "The new rules make it tougher for many U.S. companies to relocate to low-tax countries through merger by requiring the combined firms to have 25% of employees, property and gross income in the new home country. If firms don't meet these requirements, they face substantial tax penalties. The previous rules required substantial business activity in the new home country, a fuzzier standard."
I've written here about the effort to tax Facebook co-founder Eduardo Saverin and the parallels to the German Reichsfluchsteuer. Now the American government is going to erect and enforce tax barriers that prevent not just individuals but companies from leaving? This really isn't all that different from making like East Germany and putting up a big wall to keep people in. The 25% standard is nonsensical because it disadvantages smaller countries and global companies. Anyway, if the destination country wants to make a rule that a company wanting to move there needs to have 25% of its property, employees, and gross income there, that's one thing. But I don't think that America imposes such a rule on countries wanting to locate in America. The effect is to turn America into something like the Hotel California: "you can never leave."
If more firms did leave, it would put visible pressure on the government to lower the corporate tax rate. With the new rule making it harder to leave, the politicians can now say "why should we lower the corporate tax rate? It's nearly impossible for the firms to go anywhere else."
Kudos to the Journal for noticing the change.
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