A new view of companies investing overseas!

Ah-hah, I say. After hearing so much about what this country should do to help bring jobs back to America, I decide to do some research in starting a company in China. Very eye opening it was. Although it would take a book to explain how China allows foreign firms to invest there, I will try to simplify it a little bit here after I first go over what Pro- corporation firms and individuals are proposing.


These people want to reduce the corporate tax rate to 27% from the current 35% without getting rid of current tax breaks and incentives or loopholes for the companies that have moved much of their production to China and elsewhere.

I would like to know exactly what these corporations pay since some of these same people allude to the fact that these corporations DON’T really pay as much as 35% of the corporate income tax. Could this be that because of the multimillion dollar bonuses, it greatly reduces the corporate income? I would bet it does!! Since these individuals must pay taxes on their bonuses I would be willing to bet that those bonuses are listed under what they pay out in employee income and of course would be removed from what these corporations claim as profit. In other words I see the only reasons for moving overseas is the cost of wages here in the states as well as being able to hide actual profits there, from here (in the states).

Okay, now let’s talk about doing business in China (since that is where most of our jobs went).

Many corporations that have moved operations to China have gotten many tax breaks and incentives for moving there but overall will see those incentives and breaks disappear in the coming years. Back in 1979 the corporate income tax was 35% and for all but the largest of companies, they were forced to keep ALL profits in China. Hmmmmm, interesting isn’t it?

But recently China reduced it to 25% effective January 2008 and have tried to make things a little more fair for China’s domestic companies to compete. Does not sound bad at first, however! The next sentence was copied from chinaorbit.com which has some eye opening information on doing business there.

“FIEs (Foreign Invested Enterprises) have been able to take advantage of an extensive range of incentives based on the industry sector of their business, or their geographical location, provided they have agreed to a statement of commitment to operate in China.”

A statement of commitment would mean that if they pulled their operations out of China before an agreed time period, they would lose everything they have invested there, EVERYTHING! It currently looks as though whatever agreements were made for any time period previous to January 2008, would have restarted at this time. These agreements are anywhere from 3 to 7 years depending on the industry and the following is from the same China site;

“Some of the new tax incentives are detailed below:

• Sectors where there is investment in agriculture, forestry, fisheries and infrastructure

• Sectors where investment is in venture and environmental protection

• Start-up high technology industries will be given preferential treatment if they are supported by the State and located in so-called Special Economic Zones (SEZs) or the Pudong district of Shanghai.

• ‘Super’ reductions given to firms producing original research and development, and new technologies.

• Direct tax reduction has been replaced with a preferential system for labour and welfare services, and others which make efficient use of resources.”

Take note of the sentences in bold. The “SUPER” reductions are part of the reasons we are also losing our engineering jobs here in the states. Our own engineers are helping this along by going to China and doing Engineering work there. Any new technologies our engineers develop there, are actually the property of the Chinese Government. How about that!!! But don’t say that I am wrong and that this technology belongs to the United States. It only belongs to the United States, if it is developed here. This I know to be FACT!

So now I would like to redirect my argument for bringing those jobs back here to the states. I think that we should allow those companies to wallow in whatever they have decided to create elsewhere. Take away those tax breaks and incentives and close the tax loopholes for them including knocking out the bonuses as being included in the company’s expenses AND taxing bonuses at a higher rate that exceed $100,000. For one you will see multimillion dollar bonuses simply disappear. And you may see the $1.00 a year CEO pay go on up to a more realistic value so that it covers what was lost in bonuses.

After all that, the United States will have more than enough money to invest in new companies here, after all they have dumped OUR money into the cesspools they call, banking, GM, and others that I just learned, much of those dollars will never come back to the people that paid their taxes for it. Our country’s engineers should pool their talents together and create new and better companies, right here. It will bring us back to the respect we once had in the business world. And for the other countries that saw the same departure of jobs, you should do the same thing.

Sure it will change the face of the world as we know it today. The big names of business will be swallowed up by the countries they have turned to and new names will emerge to take their place.

I do not believe that it will send those countries into ruin because of it, on the contrary, I believe that there would be more equalization between everyone and certainly it would be so much harder multinational corporations to rise up and reclaim their multimillion dollar bonuses they so generously give to people who could never make it on their own!