We live in an increasingly branded world. Even the last vestige of truly American sports, football, is now a string of brands thrown together. I don’t know about you but I could barely distinguish between the Tostitos/Starbucks/Pepsi Bowl and the Facebook/Hershey’s/Microsoft Bowl… There has to be a breaking point if, for no other reason, that I don’t think most companies can afford the additional space for signage.
That’s why this month when I heard Sen. Schumer (D-NY) discuss the “rescue” of the NY Stock Exchange, I had to wonder if this wasn’t finally it. The NYSE is, of course, now NYSE Euronext. In an additional move to keep it financially healthy (their characterization, more or less), NYSE Euronext is merging with Deutsche Boerse, a major German stock exchange based in Frankfurt. While far from a done deal, the move is raising eyebrows not only because of the odd result of having the NY Stock Exchange owned by less than 50% American shareholders but because after the merger, the company turns Dutch.
Here’s what is supposed to happen. Deutsche Boerse and NYSE Euronext will be merged under a newly created Dutch holding company, which is expected to be listed in Frankfurt, New York, and Paris. The holding company will take over both companies and will have, as its center, a corporate structure located in the Netherlands.
Why the Netherlands? It’s not the windmills and the tulips. It’s the tax structure. The Dutch do not, as a rule, tax global profits; under the U.S. Tax Code, U.S. companies are taxed on their worldwide profits. Additionally, the corporate tax rate in the Netherlands is less than that of Germany or the U.S.
Of course, for their part, both companies aren’t saying the move was contemplated because of taxes. But c’mon. It totally is.
The Netherlands has long been a magnet for taxpayers seeking to lower their tax bills. Our office refers to the country as the “Delaware of the EU” for its favorable corporate and tax climate. The country has been successful in its attempts to woo corporations and artists (like U2 and the Rolling Stones) by adjusting its tax laws.
The U.S., on the other hand, has become increasingly heavy-handed in its treatment of U.S. based companies. I should know, I am one.
That’s why Congress should be mulling what to do after this latest move. This isn’t about Apple moving its slick-based operations over to Ireland to make a quick buck. This is a very public slap in the face. It’s an American institution – an American financial institution – fleeing the country for better tax treatment. Think about the signal that sends to other companies.
Now, before you start sending me links to all of the reports that show that U.S. companies do pretty well on the tax front, let me just say that I agree that our corporate tax system isn’t as onerous as it tends to be painted. But it’s clearly in need of an overhaul. The world has changed fairly dramatically. Global companies are increasingly the norm. The internet means that physical location isn’t as important as it once was for some companies, particularly service-based ones. And yet, Congress hasn’t taken the tiniest step towards acknowledging these differences (it doesn’t help that so many of our politicians aren’t even aware of the intricacies of the internet).
Corporate tax reform should be at the top of our tax wish list. And it should be comprehensive tax reform, not this band-aid approach favored by many legislators. Our global view of corporate taxes isn’t at all the broad approach to a corporate structure that we like to think, rather it’s provincial.
I don’t believe in trickle-down economics. And I’m not so naive as to believe that allowing corporations more leverage in determining where to put their dollars will mean a boon to the U.S. economy. But I also don’t believe that chasing companies out of the country with burdensome tax laws makes sense.
I feel very fortunate to be an American. And I happen to think there’s a lot of great things about this country. But we cannot merely rest on our (tax) laurels and expect the world to come to us. The very opposite is happening. The world is fleeing from us… and they are taking our companies and our dollars with them.
Yep, our tax laws need to become simpler. Do you think that simplicity would reduce our tax burden, or that they both have to be done at the same time?
Or do you agree with some Europeans that we don’t pay enough in taxes? 😛
Good observations in this piece — but in my opinion, the pity is that, nowadays, our so-called legislative body is so enmeshed with political and ideological in-fighting that the actual job of governing (let alone prudent governing) is shoved aside. That leads me to think that the prime question is how do we get our legislators to actually think about the country first — do I sound too skeptical?
Thanks Kelly for an great explanation of what is happening in the upper regions of American financial world.
Look at what’s happening to Amercia folks. We are doing ourselves in. Global economy is one thing. Protecting American interests in another.
Guess we are in for rough ride.
Wayne Phillips
It really annoys me that our 3 Credit Bureau Information is in the Philippines,
Our Stock Holdings will be in the Netherlands, Our Food is coming from China and we pay our Taxes in the USA, supposedly to cover the costs of these services here. How about we get our Health Care from Canada then…it’s a Far better deal !!! I’m sorry, but if we are outsourcing everything necessary for our Financial future, why are we paying the rate associated with American control of these services ?
It looks like we are becoming the third world country where every major piece of our economy comes from or is owned by foreigners.