Corporate expatriation continues to be both a popular and controversial practice.
American companies pursue foreign corporation for a variety of reasons including asset protection, corporate anonymity, and tax benefits. Although the limitations vary from one foreign jurisdiction to another, the benefits are substantial enough to make it attractive for all kinds of U.S. businesses.
Critics argue that foreign corporation is unfair, unethical, and downright unpatriotic. They point out that since these companies benefit from a skilled American workforce and other domestic resources, they should also be accountable for paying taxes in the U.S. In recent years, the argument has been hotly contested in boardrooms and legislative halls throughout the nation.
Yet those who are in favor of the practice are quick to counter with arguments that support corporate expatriation. Proponents are not only from the business leaders, but also legislators who feel strongly that government should not interfere with corporate activity in a free economy. Here's what they say:
- Ability to compete. At the heart of the pro-foreign incorporation argument is the idea that offshore incorporation enhances the ability of U.S. companies to compete in the global marketplace. High tax burdens and overly restrictive regulations shackle domestic companies, while offshore corporations run free and lean.
- Benefits to shareholders. By increasing the business' ability to compete, foreign incorporation results in increased profitability and increased returns to shareholders. When these returns re-enter the U.S. in the form of shareholder dividends, they are taxed – but the net income to the government is more because the dividends are higher than they would be if the corporation was located in the U.S.
- American jobs. Improve profitability and the ability to compete ultimately lead to the retention of American jobs. Companies that transfer their incorporation to a foreign jurisdiction proudly proclaim that the move didn't cost any American jobs, and in fact, made it possible for the corporation to hire more American workers on a go-forward basis.
- Economic expansion. What's good for the corporation is good for the American economy, or at least that's what the proponents of offshore incorporation argue. The tax savings associated with the decision to incorporate offshore frees up resources that can be invested in American capital and labor resources.