How Starbucks Lost its Social License--And Paid £20 Million to Get it Back

I have a new column in Tax Notes International [gated] today, pdf available here, about Starbucks's £20 million promise to the UK after a firestorm of controversy erupted last year when it was revealed to have paid no taxes despite 14 years of franchise expansion in the country. 

Abstract:

UK Uncut's logo for Starbucks Protests

It is well accepted that corporations require various legal licenses to do business in a state. But Starbucks’ recent promise to pay more tax to the UK regardless of its legal obligation to do so confirms that businesses also need what corporate social responsibility experts call a “social license to operate”. Companies may now in effect be required to pay some indeterminable amount of tax in order to safeguard public approval of their ongoing operations. This suggests that even as the OECD moves forward on a project to salvage the international tax system from its tattered, century-old remains, the tax standards articulated by governments will no longer be enough to guarantee safe passage for multinationals. Instead, companies may have to deal with a much more volatile, and fickle, tax policy regime: one developed on the fly by public opinion.

As always, I welcome comments.

Manal Corwin, now at KPMG, to discuss Reputational Risk Deriving from the Tax Transparency Movement

Fresh out of Treasury, Manal Corwin and some of her new/old colleagues will present a webcast next Tuesday on Tax Transparency and OECD Initiative on Base Erosion and Profit Shifting:

KPMG's Tax Governance Institute will host a webcast that addresses the implications of tax transparency and the potential impact of the OECD initiative on base erosion and profit shifting. Board and audit committee members, CFOs, tax directors and other business professionals interested in attending the program – one in a series of KPMG presentations on this timely topic – can register at: www.taxgovernanceinstitute.com.

The webcast will focus on "the debate over the shift of taxable business income out of the United States and high-tax jurisdictions around the world and into low or no-tax jurisdictions, and the resulting issue of tax base erosion." I'm not sure if debate is the right word there.  Is there a debate about these two phenomena existing as a factual matter? I think no.  Is there a debate about the appropriateness of such shifting and base erosion? I think decidedly yes.

Interestingly, however, KPMG suggests this is a debate about neither the existence nor the appropriateness of profit shifting and base erosion, but rather it is specifically about transparency, namely, the extent to which the public will gain a right to know about the existence and legal sanction of these practices:

The global debate on tax transparency has sparked both public interest and concerns among many companies, and the spotlight will grow brighter in coming weeks as the OECD prepares to deliver its coordinated action plan on base erosion and profit shifting and the European Commission moves forward with announced plans to address issues around tax fairness. With potentially significant changes in future tax obligations and reputational risks at stake, senior executives and board members at multinational companies should find this webcast, and those that will follow, especially useful as they formulate how their organizations should respond to the debate and possible outcomes.

[Emphasis mine.]  This statement is from Brett Weaver, who is described as "tax partner in KPMG's International Corporate Services practice and the firm's partner-in-charge of Tax Transparency" and a member of KPMG's "Tax Transparency Steering Committee," along with Corwin, who is described by KPMG as:

national leader of KPMG's International Corporate Services practice, principal-in-charge of International Tax Policy in the firm's Washington National Tax practice, and former deputy assistant secretary for Tax Policy for International Tax Affairs in the U.S. Treasury Department and U.S. delegate/vice chair to the OECD's Committee on Fiscal Affairs. 

The other participant on the webcast will be Philip Kermode, "director of the Directorate-General for Taxation and Customs Union of the European Commission".

It seems very clear to me that the "reputational risk" Weaver identifies is going to be something corporate tax managers and their legal & accounting advisers will be forced to price in going forward. The last paragraph illuminates this:

...the [KPMG] Tax Governance Institute ... provides opportunities for board members, corporate management, stakeholders, government representatives and others to share knowledge regarding the identification, oversight, management, and appropriate disclosure of tax risk.

I think it is safe to attribute the creation of reputational risk (or what some might call an internalizing of a cost that heretofore has been externalized thanks to strong corporate tax confidentiality laws), as well as any potential that may currently exist for systemic change to occur in the OECD's approach to the taxation of multinationals, to the international tax activist movement. As a result this should be a very informative webcast.

Apple's simple design interface most certainly does not extend to its tax department.

Lee Sheppard has an article today on Apple's tax tricks [gated] where she works through Apple's multinational structure & planning detailes as outlined in the Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations (PSI) report. You should read the whole article, but here are some of its key concepts:

We're ... not easily shocked by transfer pricing practices that the U.S. government accepts, for better or worse. ...But Apple's planning ... is a special case . We're talking gross worldwide revenues the size of the California state budget, and no tax being paid anywhere on a huge chunk of profits. What is truly surprising about the Apple case is its brazenness. PSI concluded that Apple's self-serving intercompany contracts had no effect on its business practices.

...Nearly two-thirds of Apple's revenue comes from foreign sales. According to the PSI report, this foreign income is routed through Ireland and may be taxed nowhere, not even in Ireland. ... 

Apple Operations International (AOI), Apple's Irish-registered holding company, acts as an internal finance company. ... AOI claims tax residence nowhere.

Apple Sales International (ASI), an Irish principal company that manages Apple's supply chain and sales to Europe and Asia, is a subsidiary of Apple Operations Europe (AOE), which is a subsidiary of AOI and has employees and operations. ASI has 250 employees and deals with Apple's third-party Chinese manufacturers. 

ASI claims no tax residence anywhere ... [emphases added].

When I heard these statements--more than once--in the hearings, I wondered why on earth the Senator who was asking at the questions at the time didn't stop right there and say hold on, are you telling us that these companies exist, we are supposed to treat each as a separate taxpayer and respect its independence from the parent company for tax purposes, and accept at the same time that each resides for tax purposes in no country anywhere?

Let's be clear: humans never get away with these kinds of arguments. You might be resident in many places but I think it is very hard to claim that you are resident nowhere--governments always seem to find some reason and some way to claim you. But somehow the Senator didn't challenge this troubling statement.

If the challenge had come, we might have heard a not-so-simple design explanation from Apple, such as that the subsidiaries are incorporated in Ireland, which would make them Irish residents for US tax purposes, but for Irish tax purposes each is resident in Bermuda, while for Bermuda purposes each is resident in Ireland or at least not resident in Bermuda; either way, certainly neither is resident in the United States even though both are clearly controlled from California.

Simple, clean, one button design interface Apple's corporate structure is not.  Funny how Steve Jobs' vision was, and now Tim Cook's vision is, so different for the tax department. Yet this basic structure is, I must hasten to repeat, perfectly, unequivocally legal, understood and accepted and in many ways even facilitated by governments all over the world including and perhaps especially the United States with its deferral regime.  But that doesn't mean the whole structure is similarly straightforward from a legal compliance perspective. More from Lee:

Apple conducts all of its research and development in the United States. Apple Inc., the U.S. parent, has a cost-sharing agreement with AOE and ASI, which pay 60 percent of the cost of this research. Apple's intellectual property is in the United States with the U.S. parent, Apple Inc. Apple told PSI that it divides R&D costs according to worldwide sales revenues.

This arrangement, Lee tells us, dates back to a more permissive time in cost sharing regulatory history and would probably be protected from today's more stringent requirements. Lee observes:

...AOI has no employees; its American board members, who are Apple executives, hold their meetings in California, often without the participation of the lone Irish director. Apple's tax director told PSI that he believed AOI is not managed and controlled in Ireland. Apple told PSI that AOI has not paid income tax to any government for the past five years.

...Ireland takes the position that it is a legitimate low-tax country that only permits the 12.5 percent rate for income from trade, an ancient English concept that appears to require a ruling. Yet Apple told PSI that Ireland permitted an income calculation that enabled Apple subsidiaries to pay Irish corporate income tax at a rate of 2 percent or less. 

Lee wonders if this puts Ireland in a troublesome place vis a vis EU law which prohibits burying state aid within generally applicable tax laws, especially since Ireland is already getting some heat for changing its laws "to accommodate the numerous U.S. multinationals that use it to shelter European sales income." She then works through US domestic tax law and the US-Ireland treaty to show that AOI could very well be viewed as being taxable in the US, yet its income probably wouldn't be subject to tax in any event given the rather complex, internally inconsistent, but overall taxpayer friendly rules of subpart F and its ancillaries.

All in all Lee runs through of some of the more arcane complexities of the US international tax rules in this article, and makes a pretty persuasive case for viewing the system as hopelessly absurd in the extreme.  Tim Cook says he wants to change that, that he's all for a simpler, cleaner interface for the tax code. But remember that very often when someone says they want simplicity, what they really just want is to be able to pay (even) less tax.

Are multinational companies a public good? If not, why are taxpayers subsidizing their global marketing strategies?

The story is that the Canadian government recently set up food trucks in Mexico in order to promote "Canadian cuisine," which the National Post pictures as follows:

Above: poutine. Below: tourtière, both from Quebec.
(the article says only QC has any sort of cultural food identity. Sorry BC!)  

These national icons are being served from this truck:

Don't judge this book by its cover.

So, the Canadian government has gone to Mexico with a van decorated with fresh fruits...to sell gravy-and-cheese-slathered french fries and meat pie.

To be sure I'm not against either of these foods in principle (so long as the latter is served with maple syrup) and I'm not against Canadians...whether individual or corporate... setting up shop in Mexico to sell the hapless public yet more creative combinations of salt-sugar-fat. (Neither would I be opposed to Mexico imposing Pigouvian taxes on this activity, to compensate for the costly externalities visited upon the public health.)

But I very much object to taxpayers subsidizing the venture. I get that all countries try to promote their culture and in the process increase exports of their goods & services (or is it really the other way around). But as industrial policy goes, this has to be the bottom of the barrel.  If McCain Foods Inc cannot get the word out about its wonderful french fries, I simply cannot see how it becomes the  public's responsibility to provide it with free advertising. 

Last week we learned that corporate tax expenditures more or less equal corporate tax revenues raised in the US.  I haven't seen similar number crunching for Canada (working on it), but I expect for multinationals at least the story is very similar. If you then add these straight up subsidies, are we getting to a place where multinationals constitute a net drag on the fisc? If yes then we should be asking ourselves: when did we decide that multinational corporations are a public good that must be financially supported by other taxpayers? 

Is there anyone out there still clinging to the sense that a free market economy must mean something other than government subsidies for favored industries?

Starbucks to UK: Kneel before Zod!

When it comes to tax, we know by now that Starbucks only giveth when it wants. That means of course that Starbucks can taketh away.  After David Cameron made some remarks about companies smelling the coffee, Starbucks feels bullied and makes noises about maybe not being quite so generous.

Aw, poor Starbucks! Oh, but don't worry, because when you're Starbucks, you just demand a meeting to set things straight:

Kris Engskov, the multinational’s UK managing director, demanded talks at Downing Street after the Prime Minister said tax-avoiding companies had to “wake up and smell the coffee”.

...“The PM is singling the business out for cheap shots, a company that, it should not be forgotten, has pledged to pay tax now and into the future,” said a source close to the firm.

Can we possibly descend into anything more absurd than this ridiculous status quo?  Well sure, of course we can!

The warning on investment comes amid concern among businesses that Government rhetoric on tax avoidance is hurting their image while their creation of jobs and wealth is not highlighted. 

You see, it is the government's job to produce the proper kind of propaganda on these things.  In sum, what we are now being told by multinationals is:

1. We will pay tribute when and where and in the amount we wish to, according to the will of our PR department and no one else.
2. Those upon whom we graciously bestow tribute must grovel in thankfulness and describe us favorably, or we will soon regret our generosity.

Fortune 500 holding trillions offshore

Taxprof links to a Citizens for Tax Justice report (pdf) that says Fortune 500 corporations are holding at least $1.6 trillion in profits offshore.  290 of the 500 collectively self-reported the figure (via SEC filings), as at the end of 2011. Interesting: half of the $1.6T is reported by just 20 companies (7% of the self reporting, .4% of the fortune 500--the corporate 1%?).  The report includes a list of each of the 290 and the amount they reported as offshore.

It looks like notorious tax dodger GE tops the list here, with $102B waiting for a holiday to repatriate (recall that GE's global head of tax Will Morris, is also head of the tax committee of the business and industry advisory council at the OECD, winner of an "external engagement award" for his service to HMRC, and a long time and vociferous opponent of corporate tax transparency efforts through the OECD and related fora, for a discussion, see here).

Next in line comes a familiar cast of characters, all on that ever-growing tax dodger ledger:

• Pfizer (63B) 
• Microsoft (60B) (and check out Microsofttaxdodge.com)
• Apple (54B) 
• Exxon (47B)
• Merck (44B)
• Johnson & Johnson (a family company that doesn't like to pay taxes in its very own family's back yard, let alone around the world, 42B)

But really, every big American company you can think of appears on this list.  Starbucks can be forgiven for being a bit touchy on the tax dodging radar, since its offshore holdings of less than a billion look positively benign compared to the companies occupying the top of the list.  No wonder that multinationals fear increased corporate tax disclosure, because you never know where the media will train its spotlight for naming and shaming.

Picciotto: States can and should switch to unitary corporate tax

Professor Sol Picciotto has a guest post over at TJN today, in which he talks about the viability of unitary taxation for multinationals and why detractors are too pessimistic because they are too wrapped up in transfer pricing. Excerpts:

The main response to my paper on unitary taxation published last week has been that it would take too long or be impossible to agree. ... Not so.  

.. people have spent too long labouring in the salt mines of the OECD's Transfer Pricing Guidelines: They need to get out and look at the real world.

... The trouble is that the OECD approach starts from the wrong end [by treating offshore subs as independent from their onshore parent companies]. ... A unitary approach would do what any sensible person would, as even the M.P.s on the PAC did, and compare the profits shown in the UK with the share of the companies' worldwide business actually done in the UK. If they are seriously out of line, as they have been shown to be, the UK companies' taxable profits should be adjusted accordingly.

 Sol goes through the history of arms' length and how the world has evolved past the principles.  He concludes that yes, agreeing cooperatively on a measurement and allocation regime will take time, but --

In the meantime, tax authorities could use the weapons already at their disposal much more vigorously. ...Perhaps now that they all are beginning to understand that public opinion will no longer find this acceptable, they will see the need for a new approach.

More at the link.

What we know and can't know about MNCs and their taxes (a.k.a., why don't we know what Google actually pays?)

In Through a Glass Darkly: What Can We Learn About a U.S. Multinational Corporation's International Operations from Its Financial Statement Disclosures?, three accountancy profs explore what we can and can't discern from SEC disclosure about the taxes MNCs pay.  Here is the abstract:

We discuss the accounting rules that apply to reporting a U.S. company’s international operations. We use examples to illustrate diversity in accounting and offer caveats for policy makers, standard setters, analysts, and researchers regarding their interpretation and use of financial accounting information.

This is an important topic because it highlights a few of the many reasons why we might benefit from Dodd-Frank-style disclosure in the face of media stories about the low, low taxes paid on a global basis by companies like Google, Apple, and Microsoft.  The authors use case studies of SEC disclosures to highlight some of the book/tax differences that show why companies' reported tax rates are nowhere near their actual taxes paid.  For example, in the case of Google:

• Google’s “expected” provision at its federal statutory tax rate of 35 percent is a“hypothetical” federal income tax that Google would owe if all of its pretax book income was reported on its U.S. corporate income tax return.  
• In 2011, Google reported “income before income taxes” of $12.3 billion.  At a 35 percent tax rate, Google would owe $4.3 billion in taxes
• But Google reported an income tax provision (an amount it says it owes) of $2.5 billion, for an effective rate of 21%.  
• The difference between the headline 35% rate and the 21% effective rate is explained by book/tax reporting differences for various taxes and credits, some of which are permanent differences (will never be reconciled) and some of which could be reconciled in the future, but the big difference is explained by its "foreign rate differential," which is short form for what Google saved by reporting its income as earned outside of the US.

Much more in the paper.  The basic story is not new, but it's nice to see how the policy choices that go into corporate tax disclosure play out in practice and how they inform our understanding of how the tax system works.  The authors have a few suggestions for how non-accountants (including journalists) should understand and interpret what they find in SEC documents.  

I have been told that one of the reasons corporate managers resist greater tax disclosure in their SEC filings, such as is contemplated under Dodd-Frank and its impetus, the EITI regime (and country by country reporting more broadly) is the fear that people will misunderstand the information and therefore draw incorrect conclusions.  The authors acknowledge the validity of this fear and explore how companies make disclosure decisions with public perception in mind. Yet this paper itself provides an antidote to that fear.  It shows that tax data disclosure is capable of being correctly understood and interpreted.  We may need experts to help us do that in the face of flexible rules and ambiguous cases, but there is no shortage of experts.

Glaxo Tax Dodging: Belgium Edition

This article is in French but roughly translated it asks, how could Glaxo pay something like 3% in taxes on  2.3 billion euros in profit in Belgium?  And the answer is Belgian tax policy that allows earnings stripping to the tune of a 320 million euro tax break for the global pharma conglomerate.  TJN explains:

The main story is about how the GSK Group used Belgium as a tax haven to avoid tax on over a billion Euros in royalties linked to GSK's worldwide sales of the swine flu vaccine Pandemrix in 2009-2011. In a nutshell, these royalties were taxed at less than 3%, thanks to two Belgian fiscal measures: first, a 80% deduction on royalties earned by the company, and second, the so-called "notional interests", a Belgian tax specialty. 

More generally, these two "fiscal gifts" helped GSK (through its Belgian subsidiary GSK Biologicals) to deduct €2.6 billion from its profits before tax between 2008 and 2011, and thus legally avoid 892 million euro of taxes in Belgium on worldwide sales of vaccines (H1N1 + others)

Sheppard on transfer pricing: clumsy, sorry, and doomed

Lee Sheppard asks Is Transfer Pricing Worth Salvaging, and answers no: it is "the leading edge of what is wrong with international taxation."  She calls transfer pricing a "clumsy tool[] that affluent developed countries have used among themselves, to their collective detriment" and "a sorry vestige of a system that will be gone in 10 years."  She points to a series of factors that will kill transfer pricing as a going concern: resistance from the BRICs, Europe's move to combined reporting with formulary apportionment, social justice activists' increased scrutiny of and scorn for high profile tax dodging, and various prior failures of tax policy that have already allowed multinationals to exit from the tax system on a global basis.  She concludes:

Booking income from an intangible in a tax haven is not a fit subject for tax competition. Tax competition for foreign direct investment is honest competition. Tax competition for booking income is not. Poor little Ireland is still poor, despite the billions of dollars of multinationals’ income booked there. It was only booked there. It sloshed through Ireland on the way to somewhere else, and did not pave the dirt roads on its way out.

HT: TJN, which is hosting a copy of the column on their website.

Corporate Tax Transparency: U.S. Update

A step forward in the global tax transparency effort: the U.S. SEC has finally approved rules for implementing the extractive industries transparency provisions of Dodd Frank s. 1504.  The rules were due, by statute, more than a year ago.  Industry lobbying against their issuance was fierce but, perhaps spurred by Oxfam's lawsuit compelling the SEC to stop its foot-dragging, the agency has finally produced.  Here is the announcement from the SEC.  A number of stories call this a big day for transparency and a big step by the US, from the New York Times, Global Witness, the Financial Integrity Task Force, the Brookings Institute.

Of course, as Brookings notes, the devil will be in the details, a.k.a., the implementation.  From their report:

Tomorrow those details will be in the hands of the SEC and will determine whether ‘effective transparency’ is attained or continues to remain elusive. Namely the SEC will determine whether the information that needs to be disclosed by companies is sufficiently detailed, relevant and accessible, enabling effective monitoring and analysis by civil society, investors and government reformists.

Given the content of the 2-year-old Dodd-Frank legislation, the SEC has no choice but to mandate disclosure. However, effective disclosure is by no means guaranteed as the SEC could issue weak rules, rendering disclosure ineffective. Thanks to Dodd-Frank legislation mandating transparency, the main danger is no longer wholesale ‘transparency evasion’ by many companies, but the more nuanced risk of enabling ‘transparency elusion’ (or ‘transparency avoidance’) by companies that wish to skirt detailed disclosure, thereby masking possible misdeeds.

Similarly, from the NYT:

Oil experts said it was difficult to know how onerous the payment disclosure rule would be since it was not yet known how the S.E.C. would define some of the requirements. Kevin Book, an analyst at ClearView Energy Partners, said in a research note that the ruling could “impose very real competitive challenges for U.S. companies,” particularly if “compliance leads to disclosure of previously secret terms of concessions, leases and production-sharing agreements.”

More on this to come.

The flawed, insensible, unworkable arm's length standard

TJN will host a conference on transfer pricing in Helsinki, June 13-15 2012, to analyse the OECD Transfer Pricing Guidelines and suggest alternatives.  Info here together with a new paper by David Spencer on the subject, "Transfer Pricing: Will the OECD Adjust to Reality?"  Spencer is understandably critical of the OECD arm's length standard:

[An] OECD Staff  Report [published on Oct. 20 2011] defended the OECD’s arm’s length principle described in the OECD’s Transfer  Pricing Guidelines for Multinational Enterprises and TaxAdministrations of July 2010 (“OECD Guidelines”), in particular for developing countries.  ... The OECD Staff Report ... begins by quoting the OECD Guidelines (paragraphs 1.14-15), that “the arm’s length principle is sound in theory .... The main weakness of the OECD Guidelines is that there is no such “sound theoretical basis.” According to Michael Durst, who from 1994 to 1997 served as Director of the U.S. Internal Revenue Service’s Advanced Pricing Agreement (APA) Program, there is “a gaping conceptual hole at the heart” of the OECD Guidelines....

...Michael Durst has in effect implied that the OECD’s arm’s-length standard exists precisely because it is unenforceable and that is why business lobbyists, in the United States and other countries, have supported it so energetically.

Spencer then documents a litany of criticisms of arm's length by such notables as Martin Sullivan ("The arm’s length method is seriously flawed in both theory and practice"), Reuven Avi-Yonah and Ilan Benshalom (arm's length's "central assumption defies reality, and it is not surprising that a system of
“arm’s length” pricing cannot yield sensible results"), David Rosenbloom ("the arm’s-length system as it operates today [is] fundamentally unworkable"), Stephen Shay ("there is evidence of substantial income shifting through transfer pricing"), and so on.  In conclusion, Spencer asks:

[W]hy should the OECD, a club of 34 rich countries, representing only 18  percent of the number UN member countries, and with a declining share of world trade and investment, be the arbiter, the rule maker, of such a “consistent global transfer  pricing system?” Why should the OECD try to impose its transfer pricing rules on major  developing countries such as Brazil, China and India, and other developing countries?

Professor Mike McIntyre, a vigilant observer of the follies of arm's length and a champion for the viable alternative of combined reporting with formulary apportionment, also responded to the OECD's Oct. 20 report, here, and will present at the TJN conference. He says:

[T]he arm’s-length system promoted by the OECD, after years of tinkering and major reforms has worked poorly or not at all for both developed and developing countries. The great sign of the general failure of the arm’s-length system is that it has permitted multinational enterprises to divert uncounted billions of dollars annually to tax havens.

Prof. McIntyre addresses the various critiques of CR/FA by those who support arm's length (such as the oft-made claim that CR requires a common tax base--no more true than for arm's length), and concludes:

If the goal is simply to eliminate double taxation, then the OECD can claim success. That goal, however, is rather unambitious. A far more worthy goal would be to make multinational enterprises report something close to the income they actually earn in each country in which they operate. The OECD’s arm’s-length approach does not come close to achieving that goal...In contrast, a combined reporting system with formulary apportionment is designed specifically to achieve that goal.

...The arm’s-length method simply is not working, and 50 years of tinkering and major revisions have revealed that it cannot be made to work.  ... Combined reporting remains the best hope of the world for moving past the failed system based on the arm’s-length principle to a system that actually apportions income exclusively to the countries where meaningful economic activity occurs.

It should be an interesting conference.

Repatriation lobby disbands

Apple's anti-tax shill group, the WIN America Campaign, has apparently ended.   Not just Apple's, of course, but Apple has been particularly noisy on the subject.  Bloomberg reports that while it looked like the group was making headway last year, the political climate has changed:

"The repatriation campaign ran into resistance in part because the money held outside the U.S. was seen in Congress as a way to help finance an overhaul of the tax code, the lobbyist said."

I will accept that as a political/pragmatic reason why repatriation amnesty might have been killed in this instance but I still hold out hope that (1) the principle of the thing and (2) the fact of its empirically observable outright failure as a stimulus policy, might have had some sort of impact, so that it's not just a political change that keeps the U.S. from re-adopting this patently outrageous program (first seen in the 2004 JOBS Act).

WIN America's anti-tax twitter screed feed was last updated a month ago March, ending with this gem: "Apple CFO: 35% tax rate is an "economic disincentive."  We need to take down barriers, not keep them up."  Pithy.  But so self-serving as to be embarrassing.  It's pretty clear Apple's actual tax rate undoubtedly gets no where close to that figure and the company seem to be fully able to pay its taxes as a matter of cash flow.

US and Foreign Employment & Sales by MNCs

Newly released BEA report, Summary Estimates for Multinational Companies: Employment, Sales, and Capital Expenditures for 2010.   They just have one little chart on their website:

So I put together a few more.  Here are a couple on their employment data (from tables available in the full report, pdf):

First, you can compare employment in the US and abroad in US-headed multinationals (I didn;t bother putting the date range breaks in, as in chart 1 above):

The numbers are in millions of employees.  This seems to indicate that there was an upward trend of foreign hiring up until some time between 2004 and 2007, and then a holding steady of both foreign and US employment within US MNCs since then.  BEA's chart 1 seems to express this as a steady decline in US employment, which it certainly is as a percentage of total employment, but  it looks like surging foreign employment is responsible for the decline.   Also this doesn't necessarily means that grey bars represent only American citizens and orange represent only foreign citizens, since companies may move people around and it may be that many of the grey people are foreign and the orange people American, but in any event it's likely that the majority are citizens of the country in which they are employed.

They also have statistics for US employment by US affiliates of foreign-headed MNCs, but annoyingly the years do not all correspond so this looks a little odd when charted:

Even so we can see that foreign companies hire what looks like about half as many people in the US as US MNCs do abroad, and the employment in the US seems to be holding steady after a slight uptick between 1999 and 2002.

Now a couple on sales.  Here are US vs foreign sales of US-based MNCs:

Steadily rising, across the board, but look at the relative picture, sales by US Parent as a percentage of the total sales of US MNCs (BEA didn't provide this data so I calculated as USP sales/(USP sales + foreign affiliate sales):

That looks pretty startling doesn't it.  But it just means that overall, for US MNCS, foreign sales are growing faster than US sales.  That's one reason to be an MNC--expansion to other markets.

Now here are sales by US affiliates of foreign MNCs added in (again with the mismatched years):

A bit of an upward trend until 2009, no surprise there, with an uptick in 2010 but more modest than that of the US MNCs.