One tax break lost means opportunity for other
U.S. firms enjoyed having their home office in Puerto Rico for years. The tax breaks for doing this have now gone away. How do the companies react to this loss? They simply shift their home office location to the Cayman Islands. Problem solved. This was assuredly not the intent of the law changes, but there are many instances where the ripple effect of new laws is not fully thought out or realized until it is too late. These offshore tax deferred earnings total at least $1.38 trillion according to a report from J.P. Morgan Chase.
Companies legally move profits offshore using the system of allocating income between units in different countries. This lets the corporations profit from a product that has earning in the Cayman Islands even though it was made in Puerto Rico and sold in the states. The profit shifting costs the U.S. government an estimated $90 billion a year. Read more at http://www.washingtonpost.com/business/2011/12/20/gIQAJ8o9DP_story.html
