Timely piece on changes in corporation decisionmaking about location based on tax regimes

Read the story at Sixty Minutes. Note that what drives the seemingly bizarre behavior of corporations whose workers are primarily located in the US but who rent a conference room (!) or a mailbox in a building in a small town in Switzerland is the differential taxation of corporate profits in different jurisdictions. This is not an easy issue to resolve; according to the story, if the rules change to require decisionmaking in the country where filing takes place, the companies simply move their top execs to Geneva. When the stakes are high, for individuals or for corporations acting to maximize shareholder profits, there are great rewards to figuring out how to make the most of tax law – no matter how arcane – and the final decision may be simply to exit the original “home” jurisdiction (Tiebout’s theory).

It is not as simple as saying “corporations need to pay their fair share” – remember a corporation, though it may embody the fiction of a “legal” person, is still not a real one, and that all taxes are paid by individuals – be they shareholders in the form of reduced profits or owners in the form of reduced earnings or consumers in the form of higher prices. The question is how to design rules and incentives in such a way as to make it desirable for companies to keep their operations and their tax filing within our borders; and in a “globalized world” companies are more footloose than ever before, making this a difficult task.

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