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Why would companies move patents, computer code and trade secrets overseas for lower taxes? Because profit after taxes is what counts, suggests 60 minutes.
Ask any CEO and they’ll tell you that profits and share prices are hugely important leading to the famous “think of the next quarter” maxim in management thinking. Marketing and Sales managers work hard to increase volumes and “value” while operations managers try to reduce cost at high quality while supply chain folks focus on reducing “total cost”. The operations and supply folks look at low lost global locations to manufacture and source while marketing folks look for new global markets. Sounds plain and simple- except that we are now in a “global” world, even for the post production and sales picture i.e. how much tax the company has to pay.
The difference between your sales and costs is your profit, and taxes come after profit and shareholders get a piece of the profit after taxes. At 35% corporate tax in the US, companies find it making sense to move the company to locations where taxes are less. Some dubious ones move the shell of the company while other big names simply move key intellectual property overseas for tax purposes, it’s not necessarily where you make, sell or buy your product or its components. It’s enough if your top managers reside and operate from the low-tax location or your intellectual property resides in that low tax location. In any case, with changing global opportunities, it’s difficult to figure out which country would qualify on all three counts of procurement, production and sales for tax residency! So companies might just register their intellectual property in a low tax country like Ireland as a first step and then move operations and jobs there because trained manpower and infrastructure helps.
Just reforming the patent filing process is not enough, lawmakers need to examine the US corporate tax situation to make it worthwhile for US multinationals to stay here and not move jobs along with intellectual property.