Part of the 60 minute interview with Lesley Stahl

“I think when people hear that all these companies are moving overseas because of taxes, they think that doesn’t smell right,” Stahl said to Swiss tax attorney Thierry Boitelle.

“Yeah, the question is, ‘Does a company have a moral obligation to pay its fair share?’” he replied.

“I think many companies in the U.S. would like to keep the jobs in the U.S. if they could, but they also need to keep their shareholders happy. And they are in the U.S. in a corporate tax nightmare because it’s the highest tax rate in the world,” Boitelle explained.

With Japan slated to lower its rate in April, the U.S. will soon have the highest corporate tax rate in the developed world.

“We are dealing with a tax system that is a dinosaur,” Cisco CEO John Chambers told Stahl.

One CEO who would talk to us was Chambers. Cisco is the giant high tech company headquartered in San Jose, Calif. He says our tax rate is insane. It’s forcing companies into these maneuvers, especially when many other industrialized countries including Canada are busy lowering their tax rates in order to lure our companies and our jobs away.

“Every other government in the world has realized that the U.S. has it wrong. They’re saying, ‘I’m going to have lower taxes, period.’ That’s what you see all across Western Europe, that’s what you see in Asia in the developed countries,” Chambers said.

When asked if he’s judged as a CEO on issues like taxes, Chambers said, “Absolutely.”

He’s been expanding Cisco overseas because of growing demand abroad, but also to lower the company’s taxes: their average rate over the last three years was just 20 percent.

Economist Martin Sullivan says it’s standard operating procedure for companies like Cisco. “U.S. multinationals are shifting their research facilities, shifting their manufacturing facilities, and shifting some regional headquarters into Switzerland and into Ireland. And those are massive numbers of jobs,” he told Stahl.

Sullivan says Ireland taxes corporations at just a third of the U.S. rate, so no wonder the outskirts of Dublin look like Silicon Valley. Many well-known companies are all but obliged to go abroad.

“Well, if you have a 35 percent rate in the United States and, for example, a 12.5 percent rate in Ireland, there’s a incentive to move your factory to Ireland,” he explained.

“Six hundred American companies are in Ireland and they employ 100,000 people,” Stahl pointed out. “Those are jobs that aren’t here. And they moved to Ireland because of taxes.”

“The U.S. Treasury in effect is subsidizing investment in Ireland,” Sullivan said.

“Why isn’t everybody in Ireland if it’s that great?” Stahl asked.

“Almost everybody is in Ireland,” Sullivan said. “All the pharmaceutical companies, all the high tech companies. You’re stupid if you’re not in Ireland,” he replied.

“We notice that you have an awful lotta companies in Ireland,” Stahl told Cisco’s John Chambers.

“Yes we do,” he acknowledged.

By Stahl’s count, Cisco has eight companies in Ireland.

“We do what makes sense to the shareholders,” Chambers said. “We go where there are incentives in countries that say, ‘We want you here, we’re going to give you tax advantages, and we want you to add jobs here, etc.’ We can no longer in America say, ‘This is how we do it, therefore you must do it.’ We’ve gotta change, or we’re going to be left behind.”

An increasingly popular way, particularly pharmaceutical and hi-tech companies like Google avoid paying the 35 percent is to shift their patents, computer code, pill formulas, even logos from their U.S. bases to their outposts in low-tax countries.

“A hundred years ago, if a company would want to relocate, you know, you’d have to pick up a factory, machinery and move everything. Today, a company can move predominantly all of its assets just on paper,” Swiss tax attorney Thierry Boitelle explained.

“Or Coca-Cola could take the recipe out of the vault, put it in a Swiss vault,” he said.

“And then it’s Swiss?” Stahl asked.

“Yeah,” he replied.

When a formula or a computer code is registered abroad – say in Zug – a U.S. company is allowed to claim a lot of its taxable profits are there, even if most of its sales are in the U.S.

Economist Martin Sullivan told Congress these patent and profit transfers are accounting tricks that have allowed companies to chip away at the 35 percent and save tens of billions of dollars. He says that from 2007 to 2009 these maneuvers helped lower Pfizer’s average tax rate to 17 percent; Merck to 12.5 percent, and GE to just 3.6 percent.

“It’s really remarkable, as I review the data, is the consistency with which you see this phenomenon. The taxes are going down, the profits are shifting offshore at an accelerated rate over the last few years,” Sullivan said.

So now these companies have profits accumulating overseas in places like Zug.

If they bring the money home, it’s taxed the full 35 percent. If they leave it overseas, the IRS can’t touch it. In other words, the tax law all but forces companies to keep their money out of the country, indefinitely.

“We leave the money over there. I create jobs overseas; I acquire companies overseas; I build plants overseas; and I badly want to bring that money back,” John Chambers told Stahl.

Chambers told Stahl Cisco has almost $40 billion overseas that could be brought back to the U.S.

The total amount of money U.S. companies have trapped overseas is $1.2 trillion. Chambers is advocating for a one-time tax break to allow them to bring that money home at a rate of, say five percent. That would, he says, stimulate the economy and create jobs.

“What is your downside for money that isn’t going to come back anyhow? I’d say your downside is zero,” he told Stahl.

But the Obama administration opposed this idea. When it was tried in 2005, the Treasury did rake in billions of dollars, though very few jobs were created.

“What if tomorrow Congress passed a quickie law and the tax rate was 20 percent? Would that solve everything?” Stahl asked.

“I think it is the most important ingredient that we have to think about being competitive,” Chambers replied.

“You lower the rate from 35 percent to 20 percent. You lose something like $2 trillion in taxes. We have a horrible deficit crisis, debt crisis. That’s almost too much money to lose. What’s your answer to that?” Stahl asked.

“My answer’s very simple: every other developed country in the world has already done this. I’m not asking to give me a favor, or a hand out,” Chambers replied.

“You know what: it sounds it,” Stahl remarked.

Chambers replied, “All we’re asking is: Give us a level playing field. Get us close.”

CBSNEWS.COM

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