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| US executives seek repatriation tax holiday |
| Bloomberg / New York Dec 30, 2010, 00:25 IST |
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At the White House on December 15, business executives asked President Obama for a tax holiday that would help them tap more than $1 trillion of offshore earnings, much of it sitting in island tax havens.
The money — including hundreds of billions in profits that US companies attribute to overseas subsidiaries to avoid taxes — is supposed to be taxed at up to 35 per cent when it’s brought home, or “repatriated”. Executives including John T Chambers of Cisco Systems say a tax break would return a flood of cash and boost the economy.
What nobody’s saying publicly is that US multinationals are already finding legal ways to avoid that tax. Over the years, they’ve brought cash home, tax-free, employing strategies with nicknames worthy of 1970s conspiracy thrillers — including ‘the Killer B’ and ‘the Deadly D’.
Merck & Co, the second-largest drugmaker in the US, last year brought more than $9 billion from abroad without paying any US tax to help finance its acquisition of Schering-Plough. Merck is also appealing a federal judge’s 2009 finding that Schering-Plough owed taxes on $690 million it had earlier brought home from overseas tax-free.
Pfizer, imported more than $30 billion from offshore in connection with its acquisition of Wyeth last year, while taking steps to minimise the tax hit on its publicly reported profit.
Disclosures in Switzerland and Delaware by Eli Lilly & Co show the Indianapolis-based pharmaceutical company carried out many of the steps for a tax-free importation of foreign cash after its roughly $6 billion purchase of ImClone Systems in 2008.
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