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If a US company generates 60% of its revenue overseas, is it still a US company?

October 10, 2011
Vejen, Denmark

[Editor’s note: Tim Staermose reporting]

I’m sitting on a train en route from the southwestern part of Denmark (near the German border) to Copenhagen. Across the aisle from me, a man is reading a book called The Post-American World.

Opposite him sits another fellow sipping a Starbucks coffee.  And on my side of the aisle, a younger man is drinking a Coca Cola and listening intently to his iPhone through the headphones.

I can’t be certain, but chances are he is listening to the latest American music of some kind.  That’s what remains the most popular music here in Denmark, at least if what my cousins were listening to over the weekend is any guide.

It’s a topic I’ve dealt with briefly once before, but it’s worth revisiting…  while the fall of America’s global influence is starting to become a mainstream topic, many American companies have survived and thrived by internationalizing themselves, their production, and their customers.

Illinois and Florida may not be the growth markets they once were for John Deere and Pizza Hut, but Brazil and China more than make up for it; Pizza Hut is actually an interesting example as over 60% of the company’s revenue is already derived from overseas sales. In this respect, Pizza Hut isn’t even an ‘American’ company anymore.

It’s interesting to note, though, that the US tax system provides a strong incentive for companies to keep their offshore profits overseas. They’re not able to repatriate their offshore profits without heavy tax consequences… meaning less capital, less investment, and few jobs in America.

If the authorities in Washington are serious about generating new investments, jobs, and growth in the US, they could do a lot worse than making it easier for the champions of US business to invest some of their offshore profits at home. Indeed, the Danish paper I was just reading on the train carried a story about the Danish tax authorities pursuing a group of successful multinationals for more than ten billion Danish crowns (nearly US$2bn) in unpaid withholding taxes on dividends remitted overseas.

This is just bad practice… though unfortunately all too common as bankrupt governments seek their ‘pound of flesh’ from anyone they can get their hands on.

Multinationals realized this a long time ago… and that’s why so many of them have diversified around the globe to increase tax and operating efficiency. They’re out of government reach. Instead, more and more, it’s the little guy who is being squeezed by government.

Endless pedantic regulations, punitive taxation, and an alarming shift in attitudes among the middle and working classes, not to mention the enormous drag imposed by the incompetent and bungling ruling political class, have sadly made it very difficult for small businesses, entrepreneurs and ordinary workers who are the lifeblood of the US economy to make successful headway in today’s America.

That books like The Post-American World are being read in places such as regional Denmark tells me that the trend of America’s decline perhaps better known about, and further along, than even I imagined.


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About the author: Born to a Danish father and British mother, in Dar Es Salaam, Tanzania, Tim Staermose has led an international life since the day he was born. Growing up, he also lived in Egypt, Denmark, and Singapore, before eventually settling in Australia, where he completed his education and took out citizenship. Since then he has also lived and worked in Hong Kong, and Manila, Philippines, in the field of equity research — both for a bulge-bracket Wall Street investment bank, and for an independent investment research firm. Today, when not traveling the globe looking for investment and business opportunities for the Sovereign Man community and catching up with his diverse, multinational group of friends, he divides his time between Hong Kong, and the Philippines.

Comments on this entry are closed.

  • John Lloyd

    “Multinationals realized this a long time ago… and that’s why so many of them have diversified around the globe to increase tax and operating efficiency. More and more, it’s the little guy who is being squeezed by government.’
    Hold on a minute, Simon! Multinationals are the little guy now? Some of these MNCs have more cash in the bank than the U.S treasury. I’m no fan of Uncle Sam and the push for big government, but these MNCs are equally immoral. Setting aside all the atrocities they’ve commited in the developing world, they have litterally raped America. They have outsourced our jobs and not paid a dime in tax. And the truth of the matter is no matter how low the regulatory/tax burden is set here int he U.S, they would still keep their money overseas where the labour is cheaper and the taxes are nil. You simply can’t be competitive with that….

    • DoesNotMatter

      It is impossible for any big company, multinationals included, to rape any country without explicit help from the government. It’s the big companies that make the most campaign contributions and so the labor laws, etc. eveything are designed to make it easy for them and hard for the little entreprenueur. So go ahead and blame the MNCs all you want, but understand that it is the govt. that makes it possible in the first place. Socialism is just a way for the Elite to build a moat around themselves and prevent anyone from attaining to their status. In a true free-market, things are too fluid. Rich today, poor tomorrow, that’s the free market. Rich today, rich forever, that’s socialism. So it is the rich idiot savants like GM execs that hate the free market. Socialism was always about the elites keeping all their priveleges and making it impossible for the rest of us to reach their station.

  • 4thaugust1932

    US companies are evading taxes by opening/operating an office in Ireland.
    But US citizen must pay income tax to US Gov if he is working in Ireland.
    Insider trading is legal to US Congress members.
    And insider trading is illegal to US Citizens.
    How long this hypocrisy will continue?

    • DetoxRevolution

      Wow! I never, never say it like that!

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