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Originally posted by apechild
This is absurd and completely untrue. No company with a profit motive will ever have any "incentive" to make expenses as high as possible.
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You missed the word "foreign".
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The idea of shifting expenses overseas in order to reduce the overall tax burden doesn't make any sense either - you got it completely backwards. Remember, corporate tax rates in the US are much higher than they are in most other nations, so as it is right now, there's an incentive to concentrate profits overseas where they will be subject to a lower tax rate and shift expenses to the US to offset the higher American tax rate. If, as Kerry would have it, overseas profits are taxed first by the nation in which they are generated, and then by the US, the incentive to shift those expenses overseas would finally exist.
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Bah, could you bluster a little more without doing the math. Most other countries have value-added tax, so you only pay tax on what you sell to a foreign consumer. So, let's do the math.
USA-based operational expense (say, a tech-support callcenter):
- Cost of making the product: $100
- Cost of callcenter per unit: $10
- USA tax rate on revenue (say 20%)
- USA tax: $20
- Foreign VAT: 10%
- Foreign VAT for selling the product $10
Gross profit: $100 - $20 - $10 - $10 = $60
(vastly oversimplified, I know)
Foreign-based operation expense (say, a tech-support callcenter):
- Cost of making the product: $100
- Cost of callcenter per unit: $10
- USA tax rate on revenue (say 20%)
- USA tax: $18 (only paying on $90 since the $10 is written off)
- Foreign VAT: 10%
- Foreign VAT for selling the product $10
Gross profit: $100 - $18 - $10 - $10 = $62
So, the more operations the company moves outside of the USA, the less tax they pay and the more they make. What's so hard to understand?
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Tell me, do you support Kerry's plan on its economic merits, or have you been misled?
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Tell me, apechild, how long have you been beating your wife?