Ritchie on Kelloggs

The cash we generate outside the U.S. is principally to be used to fund our international development. If the funds generated by our U.S. business are not sufficient to meet our need for cash in the U.S., we may need to repatriate a portion of our future international earnings to the U.S. Such international earnings would be subject to U.S. tax which could cause our worldwide effective tax rate to increase.

Or rather, Ritchie quoting Kelloggs. And entirely failing to note that this entirely explodes his main thesis. No one does “avoid” corporation tax through their various machinations. They delay it until such time as they repatriate the profits. In the interim they invest it back into the business (there is no other place for it to go, it must either be invested or handed out to shareholders).

Ritchie complains that companies do not invest enough. Yet Ritchie complains when companies don’t pay out to shareholders but invest.


8 thoughts on “Ritchie on Kelloggs”

  1. And the US of course disadvantages its own corporations from investing money made outside back in the US – a German company makes 100M profit in Denmark, it’s taxed in Denmark at 25% and the remaining 75M can be invested in the US branch.

    A US company makes 100M profit in Denmark, it’s taxed in Denmark at just under 25%, leaving 75%. However, to invest in the US branch with this money, the difference with the US rate (35%) has to be paid (the 25% paid to DK is credited, in principle). So US company has 65M to invest in its US branch, and is thus 10M worse off than its German competitor.


  2. The tax gathered by HMG is going to end up in the hands of African Mercedes-Benz dealerships anyway so why does he give a shit?

  3. To be fair to Ritchie, I have helped Kelloggs to avoid a lot of tax, but at the same time I have helped them to finance their overseas investments. The thing is with international food processing, you have to invest in or near the countries where you are going to be selling the food.

  4. abacab

    I am presuming that the US Branch (or US Trading Co) wouldn’t need to be owned by US Holding Co. For example, US Branch could be owned say by Lux O/Seas Holding Co, which also itself owns Danish Trading Co?

    Hence, O/Seas profits might be “invested” in US Branch without profits first being “repatriated” back to Holding Co, if that makes sense?

    And I’ve no idea whether the US have a law specifically to counter that, but even if they did minds far more creative than mine would probably find a way?

    The wonders of evil leo niberalist tax avoidance…

  5. PF,

    since 10% ultimate beneficial US ownership makes you US, basically no, cos you’d have a damn hard time diluting the US shareholding that much.

    This is why there’s been such a focus on inversions, and now on foreign companies acquiring US companies in mergers rather than the other way round.

  6. abacab

    I might be confused. I’m not suggesting that US Branch isn’t an ultimate subsidiary of US Holdings (ie via Lux); simply suggesting that Lux lending to or investing in its subsidiary US Branch might not comprise a repatriation of funds (for US tax purposes) from Lux to US Holding Co?

    I’m not knowledgeable on US tax – and It’s probably too detailed for this blog – but have I got that wrong? I’m actually just curious as much as anything?

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