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Exactly. This is all about corporate tax rates, capital gains, transfer pricing, etc.
by nikcub 13y ago
Exactly. This is all about corporate tax rates, capital gains, transfer pricing, etc.
- jacques_chester 13y agoCould you elaborate? It'd be interesting to know more.
- rayiner 13y agoI don't know about Australia's system, but the U.K. has been a popular target for reincorporation of American companies, along with Ireland and Switzerland: http://online.wsj.com/news/articles/SB10000872396390444230504577615232602107536 http://online.wsj.com/news/articles/SB1000087239639044423050.... Bermuda, a popular domicile in the past, apparently made certain changes to its tax code that caused companies to move to European countries. For corporations, tax rates lead to domicile-shopping because finance analysts use Earnings per Share (EPS), which is computed after taxes, as a key measure of company performance. Relocating from somewhere in the U.S. to the U.K. might substantially increase the total taxes paid by employees and executives (almost every developed country has a higher individual tax burden than the U.S.), but it can goose that all-important EPS number.
- jacques_chester 13y agoWell part of the confusion is that one reason for our headline rate, as I understand it, is because we have franking for company/income tax. So Australian companies tend to pay dividends much more freely than US companies, but the headline corporate tax rate is higher.
- rayiner 13y agoThat's actually an interesting illustration of the dynamic. The management at publicly-listed companies are very preoccupied with what finance analysts have to say about the stock. When someone at Morgan Stanley compares two companies on an EPS basis, what's relevant is the rate paid by the company. It comes down to $0.28 per share versus $0.35 per share, even if other features of the tax code mitigate that difference when a dividend is actually paid out.