SOURCE: cbsnews.com

DATE: March 27, 2011

This segment from the 60 Minutes episode airing March 27, 2011, profiles how the American tax code encourages U.S. companies to invest abroad rather than in the United States. After Japan’s tax code is revised in April, according to this segment the United States will have the highest corporate tax rate in the developed world. Other countries, such as Ireland, have dramatically lowered their corporate tax rates to encourage foreign investment. In order to lower their corporate tax bills, U.S. companies are increasingly shifting parts of their operations to tax havens such as the small town of Zug, Switzerland. Even though their operations may be no more than a mailbox or a mailing address in Switzerland, the companies are able to save thousands of dollars by not having to report income as U.S.-based income. Since the American tax code allows firms to defer taxes on income until the money is repatriated to the United States, many firms reinvest their funds abroad or park their money overseas. Many governmental officials in the United States want to revise the tax code to force companies to pay higher U.S. taxes. Many businesses, including Cisco CEO John Chambers, want to see the United States lower its corporate tax rates to put the United States on a more even playing field than other nations. Companies such as Cisco are leaving their money abroad rather than returning it to the States. The segment indicates that U.S. companies have $1.2 trillion that they are refusing to return to the States.

QUESTIONS FOR DISCUSSION:

1. Countries that lower their corporate tax rates often believe that the increase in employment more than offsets the loss corporate tax revenue. Would it be wise for the U.S. to lower its tax rates?
2. The CEO of Cisco, John Chambers, is advocating for a one-time tax break to allow U.S. companies to bring foreign money home at a dramatically lower rate, arguing the move would stimulate the economy and create jobs. What would be the advantages and disadvantages of implementing such a policy?
3. Do businesses have a moral obligation to pay their “fair share of taxes” or is their primary objective to serve the firm’s shareholders?