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3M Expanding Global Footprint To Cut Tax Rate

by Leroy Baker, Tax-News.com, New York

11 October 2007


US industrial conglomerate 3M has announced that it intends to move a substantial percentage of its manufacturing base overseas in order to be closer to its growing foreign markets and cut its overall tax rate.

In a presentation to investors and the media earlier this week, 3M, which makes a diverse range of equipment from electronics to safety devices, revealed that it intends to shift 12% if its production base to high growth areas such as Asia Pacific, Europe and the Middle East by 2012.

Huge investments are already earmarked for China and the Middle East, while the company is also focusing on emerging markets including Brazil, Russia, India and Poland.

By doing so, 3M is hoping to shift more production closer to its customers. In 2006, 61% of the firm's sales were attributable to overseas markets, yet 57% of its manufacturing base remains in the US. Also, because 3M is headquartered in the US and has a large presence at home as well as in high-tax countries in Western Europe and Japan, its overall tax rate, at 33%, is much higher than its competitors.

According to 3M Chief Financial Officer Patrick Campbell, the company has set itself the target of cutting its overall tax to 30.5% by 2012.

"All of our key operations are in high-tax areas," Campbell observed, adding that the company intends to explore "less taxing jurisdictions".

A comprehensive report in our Intelligence Report series looking at Tax-Effective Global Manufacturing and Financing Structures is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report8.asp

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