Replies to post #73965 on Mohacsy's Safe Portfolio Member Forum

[Elroy Jetson]

The cash is offshore on an accounting ledger but the company's cash is here in America, without cost, if they choose it to be.

It's entirely fictional and provided my brother-in-law an accounting job at Dole. Tuna fishing companies which had actually closed long ago were now shell companies which lent Dole it's own money earned overseas.

The interest they pay themselves is deductible for US taxes, bringing down their effective income tax rate.

But for profit reporting to shareholders all global activities are combined so there's a Dollar of interest income offsetting each Dollar of interest expense.

What Congress needs to do is make this illegal for companies, require consolidation of shell company earnings, like they made it illegal for individuals.

Most of these shell companies would be closed within days.

But Congress members need donations from these companies to feed their election costs, and keeping this potential change in tax law hanging over their heads keeps to donations flowing.

The companies involved see the campaign contributions as merely another small cost in running their shell company scheme.

[Elroy Jetson]

Some shell companies provide purposes other than tax avoidance. They can help US companies get around government sanctions and embargoes against doing business with countries like Iran.

One example is Infinium which Exxon created with Shell in Europe.

http://www.slate.com/blogs/the_slatest/2017/01/09/on_tillerson_s_watch_exxon_sold_iran_oil_circumventing_u_s_sanctions.html

Because Infinium was a European company and Exxon owned only 50%, they could do business with Iran, Syria and Sudan - which was strictly prohibited by US sanctions on those countries. If Exxon had owned 51% of Infinium, they could not have traded with Iran. This is another example of pay-to-play with Congress members.

Everyone has a different idea of what is morally right. Unlike Exxon, Chevron has never used shell companies to violate sanctions, but they do use shell companies to reduce their income taxes.