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Inversion Taxes – a New Kind of Trick to “Improve” the Bottom Line

Abstract - Inversion TaxesThere’s a new financial trick going on whereby a company acquires a foreign company and then moves headquarters to the foreign country where taxes are lower. So instead of doing the hard work of improving the business by delivering what customers want at a sustainable price, corporations do financial shuffling of headquarters.

The problem is: what if each country offers a progressively lower tax rate? Do the corporations keep moving their headquarters from one country to the next? This movement does not seem sustainable.

A lot of damage could ensure from this. Countries would never make enough revenue from its taxation to overcome the boom and bust of jobs produced by such fickle movements.  Citizens would be hurt because the investments that come from such taxes would no longer be available, thus hindering the ability to improve one’s lot. Corporations could be hurt because the level of investment in each country would decline, thus the pool of good resources would deteriorate.

All for an easy way to “improve” the bottom line in the short term. This is the outcome of an intense focus on just shareholders, ignoring the rest of the business ecosystem. This is not a healthy development in capitalism.

Besides, it feels traitorous. After the US has provided a stable environment to conduct business through upholding commercial law, fortifying the stability of financial systems,  building transportation rail and highway systems, and creating some of the best educational systems in the world (most probably made possible, directly or indirectly, through taxes), to turn your back on the US feels like biting the hand that fed you.

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