Tastes Great, Less Taxes

An analysis of the purchase of Anheuser-Busch, producer of America’s most iconic brew, by the Belgian firm InBev reveals there was more to the deal than a handsome payday for shareholders.

According to the Tax Foundation, Belgium’s corporate tax rate is 33%, but the effective tax rate can be half the nominal rate thanks to adjustments for something the OECD calls a “notional allowance for corporate equity.” Bottom line: InBev was paying around 20% of its profits in corporate taxes, compared to Anheuser-Busch’s rate of 38.4%. 

Things have gotten pretty bad when U.S. companies relocate to Europe to cut their tax payments. But a research analysis by Morgan Stanley finds the combined company’s corporate tax bill will be lower than in the U.S. and that the tax differential indeed figured into the economics of the sale.

So while John McCain may have benefited from his wife’s ownership of Anheuser stock (estimated at between 40,000 and 80,000 shares), the country will continue to see its competitive edge wither away without a corporate tax rate cut. Mr. McCain to his credit wants to cut the corporate tax rate to 25%, close to the global average. Senator Obama is more interested in raising tax rates than cutting them.

Does the Anheuser-Busch deal represent a precedent? Maybe not. Milller Brewing, long a Milwaukee fixture, is majority owned by SABMiller, the “S.A.B.” being South African Breweries.

Is there more of this to come? With Obama in the White House? Yes and definitely yes.

Wall Street dealmakers tell us to expect more sales of U.S. companies to European rivals thanks to the combination of America’s higher corporate taxes and the weak dollar. They’re right. New data from the OECD for 2008 indicate that the international average for corporate tax rates fell by another percentage point last year, meaning the U.S. is pricing itself out of the market as a corporate headquarters.

4 thoughts on “Tastes Great, Less Taxes

  1. Silly blogger. End results don’t matter. Only thing that matters is that corporations pay huge taxes to make things “fair”.

  2. Once again, there goes the WSJ op-ed folks.

    First, total taxation is FAR higher in Europe, oh and by the way, they have FAR fewer ultra-wealthy – they also have far greater levels of regulation YET their economy is doing (comparatively) MUCH better than ours.. go figure.

    I suppose it’s just those darned old corporate taxes – I mean – of course since they instead tax individuals and provide huge disincentive to robber barron actions (including highly negative political climates to such actions) I’m just SURE it’s the taxes.

    Sure it is, it’s not that since Europe is FAR healthier economically after NOT engaging in rampant shifts of money upward, that they then are better able to purchase undervalued US companies due to our profligate spending on Iraq, the military in general, and our empty national coffers because we decided to no longer tax the rich.

  3. “…YET their economy is doing (comparatively) MUCH better than ours.. go figure.”

    Unless you’re a worker, facing unemployment that’s double ours.

    Unless you’re in a family, in which case you’ve got far less living space.

    Unless you’re a breadwinner, in which case you can spend far less on far more expensive luxuries.

    Seriously, Peev, you ever been there or talked to people from there? They like it … until they’ve been here a few years. When I worked at a certain major three letter acronym technology company we regularly had workers come on assignment to the States. Initially they’d whine about how much more sophisticated Europe was, and how much better everything ran. But there was a long term problem: fewer than 10% of them who stayed two years ever repatriated. And when the company tried to force them to go back, they’d quit. It got to the point that one of our European technology partners who was having the same issue refused to send more workers over.

    “…able to purchase undervalued US companies due to our profligate spending on Iraq, the military in general.”

    Apparently you’ve never heard of the tragedy of the commons or the free rider problem. Perhaps if we had the cojones to make the Europeans pay for their own defense things might be different. But watch what would happen if we were to announce the removal of US troops from Europe. We still play a large stabilizing role in that theater.

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