Corporate flight

[Cartman]

We have all heard of large corporations moving their operations to other countries to reduce taxation. Not too long ago, Stanley Tools left the US moved to Bermuda.

http://www.foxnews.com/story/0,2933,52474,00.html

The move outraged Republicans and Democrats alike because jobs were lost but Stanley retained their market in the US. Both parties gave thoughts to sanctioning such companies.

My question is this: why do companies (apart from primary resource extraction businesses) operate in North American at all?

[August1991]

Not too long ago, Stanley Tools left the US moved to Bermuda.

I don't know about the specific case of Stanley Tools but it is wrong to say companies are moving offshore.

It would be better to say they are moving their accounting department (or account books) offshore. The purpose is to avoid tax inspectors, and specifically corporate taxes. (There could be other regulatory reasons too.)

This does not mean the shareholders or employees avoid taxes. The employees work in Canada and so are taxed here (regardless where the pay cheque comes from). The shareholders resident in Canada, in theory, pay tax on any dividend income or capital gain. (Publicly traded companies would have a share registry open to tax inspection. In addition, they must comply with audited reporting requirements. For privately held companies, the story is different.)

Let me give you a simple comparable example. Europeans frequently open bank accounts in small "countries" such as the Channel Islands or Luxembourg. Interest acrruing on any savings there are tax-free because the local (German, British) tax authority, in practice, has no access to the information. In this way, Europeans have "imitated" (badly) our RRSP.

Corporate tax is a "bad" tax because it is easier to avoid than it is to pay. In fact, I would measure the "goodness" of all taxes that way.

[Cartman]

I am kind of surprised that August is the only one replying to this thread since there seem to be all kinds of "experts" with answers as to why companies leave Canada. Apart from oil, coal etc, why do companies operate here?

[playfullfellow]

Apart from oil, coal etc, why do companies operate here?

It probably boils down to what facilities a company has here to begin with. Do they just have their head offices here or do they have the manufacturing or processing here? To move the main or head office is fairly simply. Pack up the computers and paperwork, then head out the door. As for manufacturing, it would boil down to what existing facilities they have and what would the cost be to build new ones somewhere else. Manufacturing or processing would also boil down to what resources are available the cost of bringing them to these facilities.

As to the point about sanctions against companies that move abroad but still sell their products here, what s the point? They just need to be treated like any other foreign company wanting to sell their wares here.

[Guest eureka]

I think August pretty much covered it. Corporations are not leaving Canada to any great degree. There is, as on the WalMart thread, signifcant shift in their production and purchasing patterns

It is the movement for tax purposes that is mainly taking place. Fictional Head Offices are also set up on tax havens as August explained.

What is disturbing about that is that it is wrong and harmful to the "mother" country. The recent most talked about example is CSL because of Paul Martin. Yet that company had no choice in the matter. It is a competitive necessity as is the Registration of its fleet in "Flags of Convenience" countries.

Until there can be forged some international agreement in these areas, we are stuck with it.

You almost frightend me off by asking for experts. In the age of the "pat answer" I stand for the anti-expert.

[August1991]

You almost frightend me off by asking for experts. In the age of the "pat answer" I stand for the anti-expert.

eureka, before my first post on Maple Forum and after reading here for awhile, I decided never to lie on this forum. I have been posting here for almost a year. I feel free to say what I think.

[There is a French Forum which is also free. I post there very occasionally.]

I have posted on Rabble but I feel censored there. I have lied (exaggerated, simplified, shut-up) because the nonsense was so extreme that I thought I should "bend against the wind" or "hold my tongue". On Rabble, I did not tell the truth. On this forum, I tell the truth, as I see it.

BTW, Rabble is financed by all Canadian taxpayers.

I prefer the honesty of this English language forum. I hope others feel the same.

[JWayne625]

Many corporations have moved their operation offshore because free-trade allows them to ship their product into both Canada and the United States duty-free, so why would they manufacture their products here? One of the richest family's in Canada, the Irving's of New Brunswick still manufacture here, but the old man before he died took the family wealth to Bermuda. I believe I read somewhere that in order for his offspring to inherit they have to also move to Bermuda.

I have a habit of trying to buy Canadian or at least made here or in the U.S.A., but it is getting very difficult to find Canadian or American made clothing. Old Navy just opened an outlet here in my city, and I went looking for a fleece-lined sweater, and all I could find was made either in Bangladesh, or some other third world country. In fact I was in Giant Tiger just yesterday for the first time and they had fleece line winter jackets for $19.97, which I though was an excellent price, but I could find no label anywhere on any of their displayed products which indicated where these products were made. I left without buying anything.

As long as we keep buying foreign made articles, especially clothing, more and more will pack up and leave. If we suddenly got a conscience and stop buying these peoducts, just maybe they would be force to bring these well paid manufacturing jobs back into Canada.