Thoughts on case readings.

I am amazed how smartly the companies find options to go around the law, as I read from the chapters from Prof. Silver’s book. Although we did discuss about United Airlines and Sinclair in the first half of our semester, I found the case for Limited Brands Inc. really interesting. I observe how the links between the company, its subsidiaries and retail operations have been optimized in order to make the tax payments as minimum as possible. It sounds interesting that at step one, the parent company sells the intellectual property to its DE subsidiaries because the state has no income tax for corporate activities that relate to intangible assets of the company. At step two, the retail operations in other states pay back to these subsidiaries in the form of large royalties and end up making less income and hence paying fewer taxes. So eventually the company is able to get the maximum into its pockets while playing around the law in different states. And legally this sounds appropriate because the state laws, “as written” are still being obeyed. Not only this, the companies could go to an extent of shifting taxes through their international operations as in the case of a company that starts as a subsidiary in a low tax nation and later turns into a full fledged parent company owning all the related IPR. As Prof. Silver wrote, the company now would be under no pressure to abide by the U.S laws for taxes. I sometime fail to understand that why would these giant companies try to evade taxes if they are making a sizeable income which demands those taxes to be paid. I think if one intends to eat a larger piece of the pie, one should be able to pay for it..!!