24 multinational companies, have decided to move their regional headquarters to Shanghai, including 6 Fortune 500 companies such as Vale, Walt Disney and Kraft Foods.US Tax policy allows deferral of taxes on corporate profits held overseas. Tax policy, in conjunction with global wage arbitrage, practically begs corporations to move jobs and profits overseas.
This will push the total number of companies with regional headquarters in Shanghai to nearly 300. Nearly 500 have regional research and development centers there.
Shanghai has been China's top destination, for multinationals. Even during the world economic slump, the city's foreign direct investment still increased. Data shows Shanghai's foreign direct investment has already surpassed more than 5 billion US dollars in the first half of this year.
Meanwhile, small businesses struggling in the US face higher taxes and increased medical expenses thanks to the Obama administration. It's a lose-lose situation for small businesses vs. larger multinationals.
The worst part of this sorry situation is small businesses are the real economic driver for jobs.
For further discussion of small businesses, job creation, and our inept policies, please see Bleak Outlook for Small Businesses and Job Creation; Where Obama Went Wrong, and What to do About It.
Addendum
A couple people pointed out the word "Regional". Offices did not move out of the US.
True enough.
However, the likelihood those regional offices are bigger at the expense of US is high, but admittedly there is no way of knowing. However the underlying message on tax policy is valid regardless.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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