June 28, 2005
Profits and poodles: the story of a corporate tax loophole
On June 24, 2005, there was an article on the Minnesota Public Radio website entitled “Profits and poodles: the story of a corporate tax loophole.” The article talked about a Minnesota Supreme Court ruling this month that makes it easier for a business to protect income that have operations in foreign counties. This ruling is based on a law that passed in 1988, which said if a business has the bulk of your foreign operations overseas then the State would only tax the business 20 percent on the foreign income. The purpose of this law was to encourage business to broaden to overseas markets by making it cheaper to do so. The issue at hand with the recent court ruling is that it is even more lenient. Under the new ruling, a company could set up PICs or Passive Investment Corporations, which can set up just to avoid taxes and it is legal.
“The Minnesota Camber of Commerce supports a Pawlenty administration proposal to make sure subsidiaries don’t get the tax break unless they have a certain amount of property and payroll abroad.”
I feel that this article is a good example of ethics in business. This issue falls right between being illegal and free will to do what ever. In my opinion I don’t think that anyone with a business should be able to avoid State taxes by making up a fake company in another county. At the same time, though if I owned a business I am sure how I would feel.