12/14/2008

Companies leaving the US -- "investment fleeing the country"

Investor's Business Daily has this:

Energy: Another day, another oil company fleeing the country. No, this isn't Ecuador, the banana republic that just defaulted on its debt after chasing out investors. It's the United States, and what we're seeing is self-defense.

Much political hay has been made in Congress about "unpatriotic" corporations that move operations abroad. Weatherford International is the latest, taking its headquarters from Houston to Switzerland. The oil services company said that it wants to be closer to its markets. But what it really meant was that it no longer saw the future in the U.S.

In a political atmosphere of blaming corporations, it's no wonder. Halliburton fled to Dubai in 2007. Tyco International, Foster Wheeler and Transocean International all went to Switzerland. As a pattern emerges, America's global standing diminishes, in part because it's based on the willingness of companies to invest. It's an especially bad sign when domestic companies flee. . . .
Huge companies such as Exxon Mobil, whose market cap exceeds the GDP of most countries, create $100 billion in earnings in quarters when oil prices soar. It looks high, but over the years, the industry's average returns, at 9%, are less than other industries.

Nevertheless, Exxon's profits are evidence of its success at extracting oil from miles below the earth's surface, even underwater, and from unbelievably hostile environments, such as the Arctic. Instead of being objects of national pride for their productivity and efficiency, and subjects of heroic Hollywood movies, their success is considered to be dishonest.

Congressional hostility affects oil companies' operations abroad, too: Exxon, remember, noted that Congress' animus toward oil profits directly encouraged Hugo Chavez's uncompensated expropriations of $1 billion of Exxon's assets in Venezuela, which drove oil prices higher. . . . .

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3 Comments:

Blogger The Right Guy said...

John:
I hate to be an alarmist, but it seems Atlas Shrugged is becoming a reality.

12/14/2008 4:57 PM  
Blogger Martin G. Schalz said...

I am going to throw myself to the wolves on this topic.

If I recall correctly, the Kennedy Administration had the Tax Codes revised to enable American companies to move offshore whereby said companies could avoid paying taxes if they kept the money overseas.

If I am wrong, I'll cheerfully take the hit for this one.

After a short search, I believe it is called "Foreign Investment Tax Credit ".

Perhaps this link may be of help.

http://search.irs.gov/web/query.html?col=allirs&charset=utf-8&qp=&qs=-Wct%3A%22Internal+Revenue+Manual%22&qc=&qm=0&rf=0&oq=&qt=Foreign+Investment+Tax+Credit

12/14/2008 7:48 PM  
Blogger Tbone said...

You are correct Martin, the US taxes the companies so much it is ridiculous. Transocean for instance has hundreds of Deepwater rigs that cost millions a year each to operate, to flag those vessels in the US cost an outrageous amount of money and the company still has to be profitable for the investors. As far as the major oil companies like Exxon-Mobil, Chevron ETC... by the time they pay for the lease, run seismic to find out if there is a possibilty of oil / gas, drill the well if it's not a dry hole, build, and set a production platform in place complete the well, build a pipeline to tie in to shore or lease tankers to get the product to shore, refine it ( some states has several blends of gasoline that require the refinery to shut down the crack tower up to 24 hrs with each blend) then ship it to your local gas station.... That oil company has made +/- 8 cents per gallon on average, while the government has made on average 88.8 cents per gallon. And they are still yelling for "Windfall" profit taxes. Oil is by far cheaper than most consumer products in our homes. We pay on average $366.24 dollars per barrel of ............Water! I don't see Coca-Cola, Pepsi, etc under the gun for their water profits. I didn't mean to ramble, but you see the point. Let's see some of the "Green Industry" getting some tax increases instead of tax cuts, but that's another story.........To get to the point, if I had an "out" on taxes, i'd take it too.

12/17/2008 8:37 PM  

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