A Belgium-based company, InBev, has reached an agreement to purchase America’s biggest brewer, Anheuser-Busch (maker of Budweiser and other well-known beers). This has triggered whining from many politicians, including senator and Democratic presidential hopeful Barack Obama.
Rather than engage in demagoguery against foreign investment, maybe Senator Obama and his colleagues should fix the tax code so that U.S. companies are not disadvantaged in global markets. America’s high corporate tax rate, combined with a pernicious policy of taxing worldwide income of American-based firms, makes it very difficult for those companies to compete.
Belgium, by contrast, has a lower corporate tax rate. More important, it has a territorial tax system — the common-sense notion of taxing only income earned inside national borders. As such, it makes sense — from the perspective of all shareholders — for Anheuser-Busch to be taken over by InBev rather than the other way around. Indeed, that is why American companies almost always become the subsidiary rather than the parent when there is a cross-border merger.