Nevermind the Bullocks: Outsourcing and the Great Corporate Tax Swindle

It was a big part of the last presidential campaign and most assuredly will be part of the on-going debt ceiling-financial cliff-econopalyspe discussion that will be taking place over the next few FOREVER! Also, because it's the start of the New Year, our thoughts will slowly start drifting to one of our favorite seasons of the year: Tax Season.

Specifically- The Corporate Tax Season.

One of the heated arguments that was pretty constant and ongoing during the presidential election is how high America's corporate tax rate is compared to the other industrial powers in the world.  Politicians, corporate business leaders, bankers, manufacturers- everybody that has a stake in, opinion of or participates in outsourcing- point to America's burdening and suffocating corporate tax as the great push for these companies to go overseas.

That all sounds nice and it is a great way to rile the masses, especially the masses that just got the boot because their job has moved to India or China. However, aside from some deflecting teary-eyed rhetoric from CEOs or a poly-knob looking to score some brownie points (and donations) from the business community, the tax is too damn high argument is a fairly too damn weak argument.

First off, YES, America's corporate tax rate is on the high side of compared to tax rates around the world - somewhere between 34 and 39%. Not by much, though. Most industrial countries fall in that 20-40 percent range. Even among the 'BRIC' countries, only India falls below that number, with a corporate rate at 10%. Brazil has the highest at 34%.

Still, high is high and on paper, you'd look at those rates and think that it would make sense to cut them for competition sake. However, on paper, those rates are only a burden or anchor to competition if they are, you know...actually paid.

We've all heard the stories. Huge profit generating corporations; well known to you and me as companies whose products that we use every day, companies that make billions every year. Through mind-boggling complicated, sophisticated and completely legal accounting tricks, somehow they don't pay anything, or worse, get money back from the government.

Yet still there's the never ending battle cry to lower these suffocating rates! Even though they, well...you know, technically can only be suffocating if they are again, actually paid.

I used a word earlier: deflect.

Let's face it, all this tax-too-high chatter is just a deflection. A deflection from a darker yet less complicated or sophisticated reason. Sure, it's still about the money and I guess that it has something to do taxes or government regulations, stifling or not. Really though, those are the excuses.

No, the real reason that we have outsourcing is not because of taxes or regulations, but because we can get our smartphones, auto parts, TVs, refrigerators, shoes and clothing, customer service calls and a myriad of goods and services made by little people in the third world for next to nothing.

No unions to worry about; no working conditions to worry about; no threats of lawsuits for safety or harassment. If workers complain about something, the management can have them fired, beaten, jailed or heck, just close the whole plant down and move to the other side of town. They know that there are twenty or thirty or a hundred workers that would love to have that job.

This is why we have outsourcing.

I know the argument is that nobody is forcing them to take those jobs. The fact of the matter is, when you're starving, you take anything and put up with pretty much anything for a warm meal and a chance to not sleep in the rain.

On the other hand, China, India, Indonesia, Bangladesh and a host of other 'work friendly' countries are not forcing American corporations to close plants here and shift their operations overseas. THOSE countries are not making THOSE decisions.

While it's safe and defects attention away from reality and provides great hot-points during a campaign, the notion of corporate taxes is the root of outsourcing is just PR spin for a company that is about to add to their corporate travel budget or when journalists start digging a little.

Speaking of campaign rhetoric, where do you think the talk of eliminating the minimum wage, busting unions, getting rid of the EPA, "job killing regulations" all came from? The candidates?

It leaves one wondering if some of these patriotic captains of industry go to bed dreaming of a time when this country will some day become a land free of unions, workers' rights, taxes replaced by cash 'gifts', safety and environmental regulations, child labor and sexual harassment laws. A land that given the right amount of money and power, one can do what one wants. This corporate paradise filling their dreams would have its own special name... "Nigerika".

Comments (3) -

Vincent Suro

At the root of the problem is our currency.  We have an unconsitutional FIAT currency.  FIAT means there are more dollars than assets backing up those dollars.  The more they print, the less the dollars purchasing power.  It is a form of taxation, also called inflation.  Fix that and the other problems will go away.  In other words, fix the root cause, and the symptoms go away.

Karl Egenberger

Wow, quite the thought provoking post! Let’s have a closer look at some of the arguments put forth. Why do corporations exist if it is not to make money for their shareholders? Who are those shareholders? Are they not individual investors, pension funds, employees, mortgage lenders etc.? Do pensioners want to receive maximum returns to live better on their investments?

The fact of the matter is that corporations (all businesses) exist for only one main purpose, and that is to generate maximum returns for their shareholders. They are not social entities. Social issues must be decided by individual governments.

Governments are elected by their people (at least in democratic countries) to deliver the level of social programs demanded by their electorate. If the electorate demand high levels of social services, these governments must set higher taxes to pay for them and, if the taxes are too high, corporations will find alternate ways to maximize shareholder value.

One could also make an argument about “taking advantage of low wages” in developing countries. Although this is not a particularly good argument, the people employed by corporations with off-shore facilities at least earn a wage which is better than no wage at all. Furthermore, if things work as they should, the standard of living in those countries will gradually rise, over time, (as we see in China) narrowing the gap and reducing the initial labour cost advantage that existed in the first place.

In terms of worker abuse, I am not certain that any corporation based in a developed country would establish off shore facilities in order to abuse workers. It seems to me that most of those horror stories emanate from local companies that sub-contract to supply off-shore goods and services.

Of course not everything is rosy; there are a number of exceptions. Some companies go off-shore, do allow worker abuse and should be severely punished for it by either the local government or the government presiding over the head office.

The bottom line is, let’s not lay all blame on all corporations, and let’s leave some blame for the governments in charge of those jurisdictions for failing to enact the necessary laws to protect their citizens.


The value-added tax is equal in Russia of 18 %, and the profit tax is equal 20 %. These taxes are established by the government for all branches, the doge for such hi-tech branch as an oil recovery intensification. Likely, it not the greatest taxes. But it is necessary to consider, that taxes to wages of workers make about 47 % to size of these wages. It too not the biggest size of the tax on a global scale. However, it is necessary to consider, that Russian has in an internal turn as monetary unit rouble, and for for international trade it is compelled to buy dollars and euro, and it reduces the country budget. In other words, the size of internal taxes needs to be considered in a binding to other business factors and an economic condition of the country during this moment of history.

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