I like Bloomberg’s tack on the Obama corporate-taxes story, reporting on real examples of tax avoidance—ones that counter Big Business’s spin better than any he-said/she-said.
Obama wants to raise a couple of hundred billion dollars over the next decade by ending tax incentives that encourage companies to go offshore. Business says this is no time to do such a thing (guessing a boom wouldn’t be either), and that:
“The overseas operations of U.S. multinational companies support jobs and higher living standards here at home,” said John Castellani, president of the Business Roundtable, an association of chief executives of major corporations.
That quote is in the Journal‘s story, which goes for a second-day story that the proposal “riles business.”
Bloomberg skips the hard-news lede and goes with the anecdotal, which is a pretty informative way of showing why the proposal riles business and whether we should care:
Seagate Technology, the world’s largest maker of hard disk drives, is headquartered in Scotts Valley, California. Yet the documents it files with the Securities and Exchange Commission list its address on South Church Street in George Town, the capital of the Cayman Islands.
Seagate is just one of the companies that may be affected by President Barack Obama’s proposal yesterday to raise about $190 billion over the next decade by outlawing techniques used by U.S. companies in offshore locations to avoid paying taxes. While the U.S. corporate tax rate is 35 percent, Seagate paid an effective tax rate of 5 percent in the year ended June 2008, according to data compiled by Bloomberg.
That cuts through the corporate spin quite a bit. Also, this:
A five-story office building on South Church Street in the Caymans serves as the official address for 18,857 corporations. That building, called Ugland House, is listed in SEC filings as Seagate’s headquarters. About half those Cayman companies had billing addresses in the U.S., according to a 2008 GAO study.
But that won’t keep people from trying. Here’s the law firm that occupies that office space:
“I’m sorry to disappoint anyone, but our office is neither the largest building in the world nor a center of financial misconduct,” said Charles Jennings, joint managing partner of Maples and Calder.
“Having a registered office address in the Cayman Islands is driven by commercial considerations, not by tax avoidance,” Jennings said. “It allows companies to raise capital and conduct global business.”
Nice try.
Bloomberg’s story shows, as well as telling (like its straightforward headline, “Coca-Cola, Oracle, Intel Use Cayman Islands to Avoid U.S. Taxes”). And that’s why it’s so effective.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.