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American Morning

Minding Your Business: U.S. Companies Getting Tax Vacation

Aired October 02, 2003 - 07:48   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


BILL HEMMER, CNN ANCHOR: This is Andy Serwer...
ANDY SERWER, "FORTUNE" MAGAZINE: Hey.

HEMMER: ... "Minding Your Business." A bit of a setup for you. A Senate committee has voted to give a one-time tax holiday to companies trying to shelter their companies overseas. What gives on this, Andy?

SERWER: Well, I don't think this is going to sit well. That's right, Bill. The Senate Finance Committee approved a measure that would allow giant U.S. corporations to essentially have a tax holiday. What big company doesn't like a tax holiday? And, you know, I don't think -- even the administration is raising their eyebrows over this one.

This is the way it works. Big companies have subsidiaries overseas, where they make a lot of money. When they repatriate those dollars, they have to pay taxes. They don't have to pay taxes if they leave it over there. So, if they've got money in Egypt, maybe they'd build another plant, or maybe they just leave it in the bank.

What this proposal would do is let these companies bring the money back at a very low tax rate. "The New York Times" crunched some numbers on some of the biggest companies. Let's take a look and see at how they would fare. We are talking about billions of dollars here.

Well, it would save Merck $15 billion, Hewlett-Packard $14 billion -- there you go. Johnson and Johnson -- a lot of drug companies.

HEMMER: Billion.

SERWER: Billion, those are with a "B," Bill.

So, this is how it works. Senator Breaux from Louisiana had this to say about it: "The company that left Louisiana is going to pay a 5 percent tax on the widgets they make overseas. If the company had stayed in Louisiana, it would pay a 35 percent tax rate." You do the math.

If that isn't an incentive to leave, as in America, I don't know what is. I think this is ill-advised, and it's just interesting. You know, these tax things, people don't understand the consequences very often. They don't think them through, and I think this is the case here. HEMMER: Listen, we were surprised yesterday.

SERWER: We were.

HEMMER: Stocks are off to a slow start.

SERWER: And you know why? Because I was talking about the economy being weak and people being concerned. So, of course...

(CROSSTALK)

SERWER: Well, there was a bunch of reports -- the ISM report came out yesterday suggesting the economy was picking strength up, No. 1. And, No. 2, also people thought stocks had been beaten down. Some bargain hunting, Jack. And, boy, the Dow took off 194 points on the upside.

JACK CAFFERTY, CNN ANCHOR: It's a good thing if you're low on the market.

SERWER: Yes, right.

HEMMER: Thank you, Andy.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.





Vacation>


Aired October 2, 2003 - 07:48   ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
BILL HEMMER, CNN ANCHOR: This is Andy Serwer...
ANDY SERWER, "FORTUNE" MAGAZINE: Hey.

HEMMER: ... "Minding Your Business." A bit of a setup for you. A Senate committee has voted to give a one-time tax holiday to companies trying to shelter their companies overseas. What gives on this, Andy?

SERWER: Well, I don't think this is going to sit well. That's right, Bill. The Senate Finance Committee approved a measure that would allow giant U.S. corporations to essentially have a tax holiday. What big company doesn't like a tax holiday? And, you know, I don't think -- even the administration is raising their eyebrows over this one.

This is the way it works. Big companies have subsidiaries overseas, where they make a lot of money. When they repatriate those dollars, they have to pay taxes. They don't have to pay taxes if they leave it over there. So, if they've got money in Egypt, maybe they'd build another plant, or maybe they just leave it in the bank.

What this proposal would do is let these companies bring the money back at a very low tax rate. "The New York Times" crunched some numbers on some of the biggest companies. Let's take a look and see at how they would fare. We are talking about billions of dollars here.

Well, it would save Merck $15 billion, Hewlett-Packard $14 billion -- there you go. Johnson and Johnson -- a lot of drug companies.

HEMMER: Billion.

SERWER: Billion, those are with a "B," Bill.

So, this is how it works. Senator Breaux from Louisiana had this to say about it: "The company that left Louisiana is going to pay a 5 percent tax on the widgets they make overseas. If the company had stayed in Louisiana, it would pay a 35 percent tax rate." You do the math.

If that isn't an incentive to leave, as in America, I don't know what is. I think this is ill-advised, and it's just interesting. You know, these tax things, people don't understand the consequences very often. They don't think them through, and I think this is the case here. HEMMER: Listen, we were surprised yesterday.

SERWER: We were.

HEMMER: Stocks are off to a slow start.

SERWER: And you know why? Because I was talking about the economy being weak and people being concerned. So, of course...

(CROSSTALK)

SERWER: Well, there was a bunch of reports -- the ISM report came out yesterday suggesting the economy was picking strength up, No. 1. And, No. 2, also people thought stocks had been beaten down. Some bargain hunting, Jack. And, boy, the Dow took off 194 points on the upside.

JACK CAFFERTY, CNN ANCHOR: It's a good thing if you're low on the market.

SERWER: Yes, right.

HEMMER: Thank you, Andy.

TO ORDER A VIDEO OF THIS TRANSCRIPT, PLEASE CALL 800-CNN-NEWS OR USE OUR SECURE ONLINE ORDER FORM LOCATED AT www.fdch.com.





Vacation>