Tax avoidance - corporate relocations

[Judge Roy Bean]

http://www.reuters.com/article/rbssEner ... ews&rpc=22

Corporate oil booms in low-tax Switzerland

....a wave of energy companies has in the last few months announced plans to move to Switzerland -- mainly for its appeal as a low-tax corporate domicile that looks relatively likely to stay out of reach of Barack Obama's tax-seeking administration.

[grammarian44]

One trend that we see is that particularly Bermuda-based companies are now moving to Switzerland," said Martin Frey, a partner at law company Baker & McKenzie. "That may only partly be obviously for tax reasons, but also for security reasons and the fact that the Obama administration may go after them.

If you leave out that part, people might think the story is about U.S. companies relocating to Switzlerland because of U.S. corporate tax rates. It's not.

These companies already are not located in the U.S. Most are in Bermuda. There is no tax treaty between the U.S. and Bermuda, but there is a treaty between the U.S. and Switzerland.

Under the U.S.-Swiss treaty, payments from U.S. sources to Swiss resident taxpayers are subject to far lower rates of withholding tax than payments to Bermuda (or other non-treaty) sources. That's one reason they're moving--they want the lower treaty rate.

The other reason, as the quote says, is "security reasons and the fact that the Obama administration may go after them." That is, these companies are afraid that if they don't relocate to a country that protects taxpayer information from foreign eyeballs (the way Switzlerland does), their activities will come under scrutiny. The Bush administration was willing to look the other way. The Obama administration is not.