Walgreens attempting tax dodge

[artto]

Walgreens, based in Deerfield, Illinois, the largest U.S. drug retailing chain with 8678 stores in all 50 states, District of Columbia, Puerto Rico, the U.S. Virgin Islands & Guam, plans to acquire European drug store chain Alliance Boots so that it can move its headquarters to Switzerland, where Alliance Boots is headquartered, so that it can do what is known as a tax inversion, and avoid paying a projected $4 billion dollars in U.S.taxes over the next 5 years while the rest of us get stuck with making up the difference. Walgreens CFO and Pharmacy president are leaving the company, apparently, so far, they are the only company officials with any integrity.

Rest assured, absolutely not a single penny of the tax savings will make its way into our pockets as lower prices. It will go to certain large shareholders currently pressuring the company, top company officers and the members of the Board of Directors.

If Walgreens goes through with this tax avoidance strategy I am going to take my business elsewhere & never buy anything there again!

[Sancho Panza]

If it's legal, I'm all for it.

[billybob]

Me too!

[billybob]

Walgreens, based in Deerfield, Illinois, the largest U.S. drug retailing chain with 8678 stores in all 50 states, District of Columbia, Puerto Rico, the U.S. Virgin Islands & Guam, plans to acquire European drug store chain Alliance Boots so that it can move its headquarters to Switzerland, where Alliance Boots is headquartered, so that it can do what is known as a tax inversion, and avoid paying a projected $4 billion dollars in U.S.taxes over the next 5 years while the rest of us get stuck with making up the difference. Walgreens CFO and Pharmacy president are leaving the company, apparently, so far, they are the only company officials with any integrity.

Rest assured, absolutely not a single penny of the tax savings will make its way into our pockets as lower prices. It will go to certain large shareholders currently pressuring the company, top company officers and the members of the Board of Directors.

If Walgreens goes through with this tax avoidance strategy I am going to take my business elsewhere & never buy anything there again!

Me too! Thanks for the headsup on this practice...

[beeker]

From what i have been reading and know they are the front of more to follow and others have already been upon this path

[Fjd]

Walgreens isn't the first, but only one of the most recent. Pfizer Inc. in the pharmaceutical industry has been in the news lately too.

Take a look at the effective tax rate of any of the large, multinational corporations and look to see how they get the low effective tax rates, which are much lower than you or I pay.

I believe it was in 2012 that the Wall Street Journal did a study of the Congressional Budget Office numbers and found that corporations were paying an effective rate of 12.1% income tax.

The large, multinational corporations hire the best tax attorneys and develop many strategies that you cannot even dream of, to reduce, or essentially eliminate their tax burden. Factor in the various favors that the politicians give to certain industries; you essentially eliminate any chance of the small domestic company's competing. These small companies and we, as individuals, will end up carrying the tax burden for the nation.

I'm sure it would 'upset the apple cart' and cut into certain special interest; however, in some respects it would seem to make sense to eliminate the corporate tax altogether, raise the capital gains rate, and shift the tax burden entirely onto the "owners of the corporations" (i.e. shareholders that include the same CEOs & CFO, etc.).

If nothing else, the change should greatly reduce the company's expenditures and incentives to waste time and resources, and save on legal salaries that go into inventing these overly complex tax-avoidance strategies.

On another front, you have the internal revenue service allowing companies in certain industries to reclassify most of their assets as "real estate (i.e. Windstream most recently received the IRS approval to reclassify most of its copper and fiber-optic lines as real estate).

These reclassifications have allowed these companies to form Real Estate Investment Trusts that allow them to essentially shield billions of dollars from the IRS tax collectors. The estimated tax savings to Windstream in the first year is estimated to be $100 million.

The domino effect being that immediately upon announcement, Windstream shares jumped 12% and peer companies also jumped, including Frontier Communications by 14%, CenturyLink by 6% and AT&T by 3% as the bankers are now out beating the bushes to pitch similar strategies to all of the industry firms.

.

[ZAKO]

TO AVOID PAYING TAXES IS LEGAL...TO EVADE PAYING TAXES IS IL LEGAL...

[Chris A]

Did you know that the 39% top tax rate for the U.S. corporations is the highest in the world--right behind Guyana. What's a rational response to that (especially for retailers)?

Another observation: all corporate taxes must be passed on to customers in order for each corporation to make a profit and survive in an international marketplace.

Bad government policy is driving this, regardless of your personal political leanings.

Edited August 5, 2014 by Chris A

[Shakeydeal]

I agree with Chris. Our current administration does nothing but stranglehold businesses. This is to be expected.

Shakey

[Fjd]

Did you know that the 39% top tax rate for the U.S. corporations is the highest in the world--right behind Guyana. What's a rational response to that (especially for retailers)?

Another observation: all corporate taxes must be passed on to customers in order for each corporation to make a profit and survive in an international marketplace.

Bad government policy is driving this, regardless of your personal political leanings.

A couple of years ago Japan was the highest corporate tax rate, but with their current efforts to reduce the corporate tax rate, I think Japan is now right behind the US.

However, some of your reasoning and observations is similar to mine and essentially why I believe that it would seem to make sense to eliminate the corporate tax altogether, raise the capital gains tax rate, and shift the tax burden entirely onto the "owners of the corporations" (i.e. shareholders that include the same CEOs & CFO, etc.). The companies should be more profitable and better equipped to survive as a true 'U.S.' corporation, rather than a 'foreign' corporate located, corporation.

When you think about it, a company’s profits are distributed to people, whether the distribution goes to shareholders or employees. If a company cannot find investment with certain returns, they tend to just distribute the money to shareholders in the form of dividends. That income can then be taxed at a rate that the society deems fair and corporations no longer have the tax burden and we eliminate the “double taxation” concept in the process.

One hurdle is that you probably will not find a politician willing to expend the political capital it would take for such reform as institutional investors, hedge funds, and high-level executives would probably not be too fond of a plan that shifts more of the tax burden to them.

Let’s go back to late 2007. Now, think about, and reflect upon, the events after the financial crisis that essentially started in 2008 with the Lehman Brothers failure. In the midst of the financial crisis and recession all around the world, people were looking for governments all over the world to solve the problems and “take back” the power from the corporations.

It didn’t happen, government didn't take back any power, as politicians did not have any real solutions for the monstrous problems facing everyone and did not want to risk any political capital on the problems.

Fast forward to today and you can see that the top companies are doing great, sitting on large amounts of cash, enjoying free money for investing given the low interest rates, and the executives of those companies are prospering like never before. The stock market and these companies reach new record highs daily. There is well over $2 trillion in wealth sitting on corporate balance sheets today.

Overall, it is these same largest companies in the world that are moving on at an incredible rate and leaving countries and their governments in the dust. It seems like these companies now perceive that they are above the governments and the governments only seem to be to be incompetent and hopeless.

Talk about ‘being above the fray and the problems’ these corporations come across as high-fliers operating in a place that is very disconnected from our local concerns, disconnected from anything that once resembled the “home US market,” and disconnected from government itself, except for the lobbying efforts.

Companies will argue that they have created jobs and prosperity around the world, where it makes sense.....just not in our country.

Was it last year, or the year before, when Apple Inc. figured out how to shift taxable income overseas? I don’t remember, but I do seem to remember one of the company’s executives state that “We don’t have an obligation to solve America’s problems.”

Given the resources available to large corporations and the attitude that comes across in the quote, the governments will always be behind in the 'how to tax the corporation' game; therefore, why tax them at all? Just move to a path that that may be achievable.

Edited August 6, 2014 by Fjd

[Jeff Matthews]

Did you know that the 39% top tax rate for the U.S. corporations is the highest in the world--right behind Guyana. What's a rational response to that (especially for retailers)?

Another observation: all corporate taxes must be passed on to customers in order for each corporation to make a profit and survive in an international marketplace.

Bad government policy is driving this, regardless of your personal political leanings.

... some of your reasoning and observations is similar to mine and essentially why I believe that it would seem to make sense to eliminate the corporate tax altogether, raise the capital gains tax rate, and shift the tax burden entirely onto the "owners of the corporations" (i.e. shareholders that include the same CEOs & CFO, etc.). The companies should be more profitable and better equipped to survive as a true 'U.S.' corporation, rather than a 'foreign' corporate located, corporation.

When you think about it, a company’s profits are distributed to people, whether the distribution goes to shareholders or employees. If a company cannot find investment with certain returns, they tend to just distribute the money to shareholders in the form of dividends. That income can then be taxed at a rate that the society deems fair and corporations no longer have the tax burden and we eliminate the “double taxation” concept in the process...

... Fast forward to today and you can see that the top companies are doing great, sitting on large amounts of cash, enjoying free money for investing given the low interest rates, and the executives of those companies are prospering like never before. The stock market and these companies reach new record highs daily. There is well over $2 trillion in wealth sitting on corporate balance sheets today.

There's your problem. On the one hand, you say corporations distribute assets (cash) to stockholders, who in turn, will pay taxes. Sure, this is how it works when that happens, but consider how often that happens when you have major shareholders with dynastic wealth, who are flush with cash and who will not need to tap into their corporate holdings for generations. When you are that rich, holding blocks of shares in corporations is like owning rural property adjacent to an interstate highway. They have time to wait.

I suppose since population growth tends to be geometric, there will be some point in time in the nation's future when this will happen. Maybe in 300 years or so.

As you say, look how flush corporations are, sitting on all that $2 trillion in wealth. Just sitting on it.

And you want to eliminate corporate taxes and move the burden over to shareholders who will never pay it?

The better approach, if revenue is the goal, would be a tax on wealth.

[Sancho Panza]

Constitutional money

[fuzzydog]

and avoid paying a projected $4 billion dollars in U.S.taxes

They're a publicly owned company and have a fiduciary responsibility to their shareholders (which likely includes most people with 401k's and other institutional investors).

[Guest Steven1963]

America is Fu(k3d. If you are worried about who is paying their fair share of taxes at this late stage then you are behind the curve. We are passed the point of taxes making any difference. As a nation we currently spend $3.8 Trillion a year and have to borrow almost $800 Billion just to make it work. That was this year, next year will undoubtedly be more. Our current national debt for FUNDED obligations is closing in on $18 Trillion. Does anybody here really think we are going to collect that in taxes or pay back what we borrow? By the way, borrowing that money is becoming increasingly difficult. The Treasury has been authorizing the Federal Reserve to print the money so we can borrow it (very simplified explanation). We are beginning to loan ourselves money to survive. That's the mark of a country in its final stage.

It's only a matter of time - all great civilizations collapse. Ours will be no exception. And if you think this is somewhere in the distant future you are sadly mistaken.

And if you've never given thought or hadn't really understood how much just $1 Trillion is, click this link:

http://www.pagetutor.com/trillion/index.html

Remember, we are borrowing a little under $1 Trillion this year just to make ends meet.

[derrickdj1]

The taxes in the Chicago area are so high and they are always looking for ways to tax more, I can't blame Walgreens. Chicago did not want to raise property tax this year so, they want a $17.00 tax per month added to all cell phone users in their area codes.

[Fjd]

The better approach, if revenue is the goal, would be a tax on wealth.

I was probably being just a touch too facetious with the 'no corporate tax plan.' In addition, I’ve read a few views on formulary apportionment tax programs and how they could be implemented on a ‘global’ basis; however, each plan will have huge obstacles given all of the ‘special interest’ contributing to PACs out there.

Overall, my intent probably wasn’t so much in presenting ideas on how to raise tax revenue, but to see if anyone had any thoughts on the deeper, underlying issues about corporations becoming part of the ‘elite’ and moving out. What has transpired is a situation where certain corporations carry very little, if any of the tax burden, while other corporations are shouldering much more of the burden.

Here is an overview on how Apple ened up paying virtually nothing in taxes.

http://www.businessinsider.com/how-apple-reduces-what-it-pays-in-taxes-2013-5

Tax inversion strategies similar to the Walgreen example are just another product of the Wall Street investment banks and large M&A law firms to drum up business for their slumping profits since the “Collateralized Debt Obligations” (bond securities backed by home loans) went bust with the credit crisis.

After the Y2K scare, the M&A legal firms and the investment banks had been on the ‘gravy train’ regarding earnings from a strong M&A market that essentially collapsed in 2008.

Fast forward to today, there has been little M&A activity, and now that the government stimulation incentives, which helped drop the effective corporate tax rate to 12/1% that I referenced above, have pretty much expired. I believe that now the effective corporate tax rate probably hovers close to the historical 25% - 26% effective corporate rate.

Investment bankers and lawyers in both the U.S. and Europe already knew that huge income tax benefits are possible with cross-border M&A between the U.S and the rest of the world. In financial circles it is common knowledge that corporate profits are at an all-time high and wages have been stagnant or even still falling in some instances.

Bingo, the time seems right to roll out the tax inversion strategies to U.S. and European corporations and try to drum up some business and any of the associated profits.

Thomson Reuters has disclosed that since 2011, investment banks have made close to $1 Billion in fees related to these types of mergers. I believe that the investment banks on the forefront of these types of mergers are Goldman Sachs, Morgan Stanley, J.P. Morgan, and Bank of America Corp. There really isn’t any information out in the public domain on what the big law firms are making from these deals.

Of course, one unexpected bi-product has been that it gives Europeans another reason to not like the U.S. as their perception is that the U.S. Corportions are taking over.

[Fjd]

Constitutional money

U.S. Constitution, Article I, Section 8, clause 4 contains the following clause:

The Congress shall have power to coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

[Sancho Panza]

Also says ONLY

gold & silver; forgive the paraphrase from my iPhone.

[Fjd]

Also says ONLY

gold & silver; forgive the paraphrase from my iPhone.

Good point. I believe that the dollar is still defined as 371.25 grains of fine silver.

Another aspect is that when people hear the term “Federal Reserve” they equate that to mean government. However, the responsibility for the value of money has been given to a group of private banks and investors for which the organization is name “the Federal Reserve Bank.”

Essentially, our money is controlled by private bankers that turn around and issue it to Congress and charge the government interest for the privilege.

[Guest Steven1963]

Also says ONLY

gold & silver; forgive the paraphrase from my iPhone.

Good point. I believe that the dollar is still defined as 371.25 grains of fine silver.

Another aspect is that when people hear the term “Federal Reserve” they equate that to mean government. However, the responsibility for the value of money has been given to a group of private banks and investors for which the organization is name “the Federal Reserve Bank.”

Essentially, our money is controlled by private bankers that turn around and issue it to Congress and charge the government interest for the privilege.

Exactly. People hear this and either yawn or stare at you as if they don't understand what you just said. We no longer have Constitutional money we have private money. Our government sold the "We the People" down the river many decades ago.

The only part of your statement I disagree with fjd, is that the dollar is based on silver. It's not. Silver Certificates went out a very long time ago. The dollar is based on nothing. NOTHING of value. It is based on faith. Faith that someone, somewhere, will take it in exchange for goods and services. It is the Reserve Currency of the world and that fuels our debt based society. Countries are tired of "America the bully" and are looking to establish a new reserve currency. Those countries are Russia, China, and the BRIC Nations. Russia is pushing the hardest and as of now, constitutes the biggest threat. Why the heck do you think Obama is pushing hard with sanctions, etc. It sure as heck isn't because of the Ukraine. That's just a cover story.

Bottom line: the U.S. will and has gone to war to protect the status of the U.S. dollar. And it looks like we will again only this time with Russia. Look for a 'development' along those lines in November. War is coming - are you ready?

And just to keep this from being moderated: Walgreens doesn't sell Klipsch speakers.