In stark contrast to what is happening at America’s southern border, new data released by various polling organisations as well as think tanks, have shown that American companies are moving abroad in bigger numbers than ever before – and it’s the quiet problem sneaking up on the States that no one is talking about.
But, as much as this scenario brings about a particular problem all of its own with capital outflows out of the United States reaching worrying heights, there are also an increasing number of companies moving back to the United States. Now, whether you’re based in America or you’re reading this post from outside of the States, if you’re serious about business you have to be serious about America. The vastness of the American economy and the reaches of Americana influence are matched only by the far-reaching power of the US Dollar – the Republic of Zimbabwe can attest to that, they no longer even use their own currency anymore. Different discussion for sure, but still of interest.
So what is driving American businesses back home, and is this a sign of things to come – how do these businesses survive abroad at all and what drove them there in the first place?
Let’s discover more.
WHAT MAKES A COMPANY LEAVE AMERICA?
The most obvious reason we have to explore here is the complex, never-satiated, and permanently demanding debacle that is the United States system of taxation. Depending on the city and state you conduct your business in, how many employees you have, and the industry you’re operating in, you’ll experience a very different taxation system. There is that and then actual monetary policy. Not just the monetary policy of the Federal Reserve, but how it translates to corporations themselves. We could all get better at managing our money, specifically cash reserves.
With States like Texas on an aggressive drive to bring in investment from tech companies leading to something like a “nouveau’ silicon valley in the State, they have achieved this only because they have installed a highly attractive tax deduction system. Companies setting up shop in the State will enjoy little to no State taxation and some of the most favorable Federal taxes in the country, with a generous deductible program for new startups that create jobs, and the rule is simple: the more Texans you employ, the more generous your taxation becomes. Just ask Elon Musk.
The problem is that taxation, simply in words, is sufficient in and of itself to cause stress to investors and the money-people.
But, we also know that that is not entirely true. New York City has some of the highest tax rates in the country – for individuals that are. For all the skyscrapers in New York, there are ten times that amount of companies based there who have taxation domiciled somewhere other than New York, and in most cases – not in America at all.
The Caribbean has been particularly successful in luring company HQs to their shores. With promises of highly lucrative taxation systems and, in many cases, little regulation, it’s no wonder that the “Yanks” are on the move.
SOLVING THE PROBLEM OF AMERICAN TAX
You may be surprised to learn that some of America’s biggest and most loved brands are no longer…well, “American”.
Burger King is Canadian after they acquired Tim Hortons, Budweiser of all companies now calls Belgium home, and Purina is now Swiss after their merger with Swiss giant Nestle.
What is more than just a little interesting is that many companies have left the USA for the United Kingdom – not exactly known for its liberal tax regime. Many American families have followed and now call London home. Sparking something of a “little America” in England’s capital, they bring that highly attractive Greenback with them. Relocation and migration it’s big businesses not just logistically but also in terms of consumption. New migrants from America tend to come from backgrounds higher up on the social strata and need services that range from banking to Building Surveyors when they get there.
But it’s not exactly an easy process, so how bad is the tax in America that so many are prepared to navigate the complex migration system practiced in countries like the UK?
Let’s see how America compares.
Firstly, America is only just behind the UK in the Group of 7 nations that between them represent the world’s most industrialized nations, in terms of tax collection. So what’s the attraction? The UK is expensive, the weather takes some getting used to, and post-Brexit is not nearly as competitive as before.
Well, it turns out that they’re moving there precisely. Nearly 40% of American businesses in Britain pre-Brexit had to consider moving to other countries in the European Union. Still, many decided against it – and returned to the United States instead.
So if that’s true, and it is – why is it happening?
Well, the plot thickens, and it turns out that the problem that sent American companies packing for shores abroad is the reason they’re returning – American businesses set up company HQs abroad knowing full well that they won’t turn a profit, thereby creating a massive tax write-off opportunity.
And therein lies the problem, and it’s a multi-billion dollar problem.
These companies are not breaking any law unless it can be proved that they are deliberately devaluing or mismanaging their companies to gain this advantage, and the short answer to that is this: Good luck with that.
This sort of blatant abuse of the laws of the United States is providing tax campaigners with limitless fodder. It is costing the US economy hundreds of billions of dollars and, in recent times, even more.
The overall issue is way more complex to explain here thoroughly, but certainly, it is skewed to the advantage of CEOs and holding companies.
It is precisely the liberal business environment of the United States that makes it so competitive. Still, it is not necessarily an environment that is shared equitably, at least not yet. Speaking to whether or not you should take advantage of those laws? Only you can decide if that will work for you or not, but what is somewhat unfair is the lack of access to those benefits that the “average Joe” would experience.