Hi, there, fellow neoserfs. Ever wonder how the Lords of the Manor launder their money so they hardly have to pay any income tax?

Well, look no further than this extraordinary article which appeared on Bloomberg.com today.

Of course, the Lords of the Manor don't call it money laundering. They euphemistically call it "transfer pricing." And, since they are the Lords of the Manor, it is, of course, not only legal, but nearly impossible to stop. Neofeudalism at its finest.

More below the crease.

In an article disturbingly titled "Companies Dodge $60 Billion in Taxes Even Tea Party Condemns," reporter Jesse Drucker lays it all out there so that any neoserf can understand it.

Drucker follows the money from one man's purchase of a bottle of the antidepressant Lexapro, which is sold only in the US, to see how Forest Laboratories, Inc. avoids paying US income tax (and little tax anywhere) on the profit.

Drucker writes:

The profits from his $99 purchase began a 9,400-mile journey that would lead across the Atlantic Ocean and more than halfway back again, to a grassy industrial park in Dublin, a glass skyscraper in Amsterdam and a law office in Bermuda surrounded by palm trees.

Why the circuitous route? Well, it's all part of the money laundering transfer pricing scheme. And Forest Laboratories, Inc. is not alone.

Transfer pricing lets companies such as Forest, Oracle Corp., Eli Lilly & Co. and Pfizer Inc., legally avoid some income taxes by converting sales in one country to profits in another -- on paper only, and often in places where they have few employees or actual sales.

And just exactly what is this magical transfer pricing? To see it in action go to this handy-dandy interactive graphic.

It seems that Forest's newest tax strategy cheats the American public out of $183.4 million per year. But don't put it all on poor Forest Labs. That's just a drop in the $60 billion bucket.

According to Wiki,

Transfer pricing refers to the pricing  of contributions (assets, tangible and intangible, services, and funds) transferred within an organization (a corporation or similar entity). For example, goods from the production division may be sold to the marketing division, or goods from a parent company may be sold to a foreign subsidiary. Since the prices are set within an organization (i.e., controlled), the typical market mechanisms that establish prices for such transactions between third parties may not apply. The choice of the transfer price will affect the allocation of the total profit among the parts of the company. This is a major concern for fiscal authorities who worry that multi-national entities may set transfer prices on cross-border transactions to reduce taxable profits in their jurisdiction.(emphasis added) This has led to the rise of transfer pricing regulations and enforcement, making transfer pricing a major tax compliance issue for multi-national companies.

As to that last sentence, not so much. But Obama and the Dems are working on those regulations and enforcement. From the 2011 Budget:

Reform the Taxation of International Income and Eliminate Other Corporate Loopholes.

The American corporate tax code is riddled with inefficiencies and loopholes, including the fact that it allows companies to indefinitely defer the payment of U.S. taxes on foreign income while immediately benefiting from the tax deductions associated with these activities. It also allows many companies to take advantage of transfer pricing to shift income earned in the United States to lower-tax countries. The Budget will reform and end these practices.

But it's not that easy. (More on that below.)

Sen. Carl Levin (D-MI), chairman of the Senate’s Permanent Subcommittee on Investigations, said:

"Transfer pricing is the corporate equivalent of the secret offshore accounts of individual tax dodgers."

And in a rare moment of semi-lucidity, even Mark Skoda, chairman and founder of the Memphis Tea Party said:

"I find the issue of corporations paying no tax or little tax in the United States, when the majority of their operations are here, problematic," Skoda said in an interview. "The problem is that this is sort of the level of micro that people don’t look at."

Of course the Tea Party doesn't look at it, you stupid teabagger. You're too busy yelling socialism and blaming Obama and poor people for your problems when it's the Lords of the Manor that are screwing your pasty white butt without a prophylactic. Micro? It's macro, asshat. It's neofeudalism and you're a neoserf and you're too damn dumb to know it. But it's nice that you think this is "problematic." Sheesh.

This article is filled with neat mafia corporate jargon like "the Double Irish" and you'll find out fun facts like this:

U.S. companies amassed at least $1 trillion in foreign profits not taxed in the U.S. as of the end of last year, according to data compiled by Bloomberg. That cumulative total, based on filings by 135 companies, increased 70 percent over three years, from $590 billion in 2006.

And regulating this stuff is like trying to catch a greased pig:

"As a result of resting on this basic fallacy [that prices between subsidiaries are treated like prices in an open market], transfer pricing rules have for many years been unenforceable," said [Michael C.] Durst, [special counsel at Steptoe & Johnson LLP, in Washington]

Drucker quotes Sen. Byron Dorgan (D-ND):

Enforcement of the current rules is "impossible to do," he said.

"It’s the equivalent of asking the Internal Revenue Service to connect the ends of two different plates of spaghetti."

Wage slaves, this is just the tip of the iceberg Bloomberg. Drucker does a great, comprehensive job of laying it all out. Trust me, there is much more and it will piss you off.

If we don't figure out a way to stop the Lords of the Manor, the US will continue its descent into neofeudalism, and you, neoserfs, will continue to "owe your soul to the company store."

Originally posted to Dragonation™ on Fri May 14, 2010 at 09:55 PM PDT.


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