"A child's learning is the funtion more of the characteristics of his classmates than those of the teacher." James Coleman, 1972

Saturday, January 17, 2009

Will the Shining Citi Becomes the CitiCorpse?

I've had a Citi credit card for a long time, and I have in recent years used it like a free Amex card: buy stuff and pay it off at the end of the month before interest accrues. Recently I got to wondering about all those points I've been collecting, and when I checked, I had enough for a new DVD recorder and a bunch left over.

About 2 weeks after my new player arrived, so did my monthly bill. My interest rate had gone from 7.99% to 14.96%. When I called up and finally got a human voice, I was told the cost of credit has gone up and so, I, a loyal platimum customer, must pay my fair share. When I asked a question that was not among the scripted responses, the poor lady put me onto a supervisor. He told me I could accept the new terms or accept the fact that my card would not be renewed when it expires.

Today's WaPo has a story about a new GAO report that shows that Citi is the leader among the corporate scumbags who set up foreign subsidiaries to evade American taxes. So it looks like now I and everyone else with a Citi Card is paying our fair share at least 4 times: the fees Citi collects for using its card, the increase in interest rates to pay for the tight credit, the taxpayer cash to pay for Citi's 45 billion dollar bailout, and now, extra taxes to pay for the taxes that Citi hasn't been paying for years.

I told the Citi supervisor on the phone that I know it is not his fault that he works for a corrupt bunch of thieves. He did not disagree--in fact, he said Happy New Year. From WaPo:
Most of America's largest publicly traded corporations -- including several that are receiving billions of dollars from U.S. taxpayers to finance their recovery -- have set up offshore operations that could help them avoid paying U.S. taxes on their profits, a government study released yesterday found.

American International Group, Bank of America, Citigroup and Morgan Stanley are among the companies that are getting bailed out by U.S. taxpayers while having subsidiaries in locations where they can avoid paying U.S. taxes, according to the Government Accountability Office.

Of the 100 largest public companies, 83 do business in tax-haven hotspots like the Cayman Islands, Bermuda and the British Virgin Islands, where they can move their income into tax-free accounts.

It is all legal, but it could come to an end, given the dire condition of the U.S. economy and President-elect Barack Obama's campaign pledge to close this popular business tax loophole. The Treasury estimates that it loses $100 billion a year in tax revenue as a result of companies shipping their income off shore, and congressional leaders are vowing to introduce legislation forcing big companies to pay full freight.

The GAO did not independently review company transactions to see if the companies purposely created tax-haven businesses to avoid U.S. taxes. But it said that historically, offshore subsidiaries are used for reducing tax costs and shielding transactions from public view.

Several of the companies are household names, including Pepsi, Exxon, Dell and Dow Chemical. In the list of 100 companies that GAO studied were 63 with major federal contracts, including Caterpillar, BearingPoint, Boeing, Merck & Co. and Kraft Foods.

Legislators gave particular attention to the 14 companies on the list that received bailout money from the Treasury in the recent financial meltdown. Sens. Byron L. Dorgan (D-N.D.) and Carl M. Levin (D.-Mich.) requested the GAO study as a launching pad for their effort to curtail what they call "tax-dodgers."

The bailout recipients on the list include Bank of America, which received $45 billion; Citigroup, $45 billion; American Express, $3.4 billion; and Goldman Sachs, $10 billion, according to the Taxpayers for Common Sense watchdog group.

"This is kind of like economic patriotism," Dorgan said. "Americans were told you have to pony up some money to help these companies. And it's rather infuriating for them to find out now that those companies, when they were profitable, didn't want to pay taxes and found clever ways to hide their money overseas."

Several companies said they are engaged in legitimate business operations around the world, and rejected the premise that they are trying to avoid paying their share of U.S. taxes.

Representatives from two companies reported in interviews that they couldn't say whether their foreign operations ultimately reduced their total tax bill.

"We do business around the globe," AIG spokesman Nick Ashooh said. "It's absurd that we're being accused of using these as tax havens. Now what the net tax impact is, that's extremely complicated."

The GAO found 17 companies with no business in tax-haven locales, including Fannie Mae, Freddie Mac, United Parcel Service, Verizon, Lockheed Martin and Northrup Grumman. . . .

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