Business Law (International) Coursework Example | Topics and Well Written Essays - 1500 words

Business Law (International) - Coursework Example The United States Supreme court has stated that "The legal right of an individual to decrease the amount of what would otherwise be his taxes or altogether avoid them, by means which the law permits, cannot be doubted." [Wikipedia] Tax can be averted by: To minimize their tax liability within the United States and to try to reduce tax disadvantages, a growing number of American corporations have been moving their headquarters offshore, a procedure known as â€Å"corporate inversion.† A corporation opens a subsidiary in another country’s jurisdiction. That subsidiary then buys up the shares or assets of the parent corporation, becoming the legal â€Å"Mother Company,† with the U.S. facility now transformed into the subsidiary. Virtually nothing else changes as a result of this inversion. Manufacturing, jobs, sales, and marketing remain as they were before. It is basically just a paperwork process to shift the company’s ownership outside the United States to avoid such fiscal disadvantages as double-taxing of earnings. It is not costless. The formal selling of the shares by the stockholders results in a capital gains on which they then have a tax liability to the U.S. government, even though those sold shares are merely transferred into shares of the newly relocated company. Yet a growing number of companies have chosen to make this move with shareholder approval because of the long-run tax savings for the corporation. (Clarkson, 2008) One company, Seasons Steel of Australia, Sydney, made this shift to Bermuda because they estimated that while capital gains taxes owed by shareholders to the U.S. Treasury would be as much as $150 million as a result of the inversion, the company would save as much as $30 million per year in tax liabilities. Assuming a 2.5 percent interest rate, over 10 years this would result in a savings of $263 million in present-value terms. At the same time, the company estimated that the higher profitability of the firm resulting from the