The police were led here by someone you wouldnt expect john clark from the American Drug company pfizer. This stuff is gonna get into peoples medicine cabinets . Unfortunately, yes. Counterfeit drugs are ending up in millions of american homes. At this postal facility, the shear volume of packages of suspicious drugs is staggering, and this is just from one day. [ticking] [crowd chanting] when most people think of brazil, they think of its passion and excellence in soccer. [crowd cheers] not of skyscrapers in sao paulo, the Financial Hub of a fledgling economic superpower. They think of the pulsating beat of the samba and carnival, not commodities or the Worlds Largest cattle industry. [cow moos] most powerful country in south america . Gdpwise, we are bigger than all the other countries together. This is it. Hello. Time for americans to wake up. Welcome to 60 minutes on cnbc. Im morley safer. In this edition, we take a look at the impact of Global Expansion on american Corporate Tax loopholes, counterfeit drug trafficking, and the economic rise of brazil. We begin with the always taxing topic of taxation. Companies searching out tax havens are nothing new. In the 80s and 90s, there was an exodus to bermuda and the cayman islands, where there are no taxes at all. When the government threatened to clamp down on tax dodging, Many Companies decided to leave the caribbean, but as lesley stahl first reported in march 2011, instead of coming back home, they went to safer havens like switzerland. Several of these companies came to this tiny dot on the swiss map called zug, a small, quaint, medieval town. I dont think anybodys ever heard of zug in the United States. Hans marti, who heads zugs Economic Development office, showed off the nearby snowcovered mountains. But zugs main selling point isnt a view of the alps. How low are the taxes here . Its something between 15 and 16 . And in the United States, its 35 . I know. Its half, half price. And do you have the lowest tax rate in switzerland . Most probably, yes. Most probably, yes. So youre kind of a tax haven within a tax haven. [laughs] maybe, yes. Yeah, yeah, yeah. The population of the town of zug is 26,000. The number of companies in the area 30,000 and growing. But many are no more than mailboxes. Texas democratic congressman Lloyd Doggett questions whether the moves of several companies are legit. A good example is one of my Texas Companies thats been in the news lately, transocean. Transocean owned the drilling rig involved in the giant bp oil spill. They moved to zug. Im not sure they even moved that much. They have about 1,300 employees still in the houston area. They have 12 or 13 in switzerland. And yet they claim that theyre headquartered over there. They claim theyre swiss, and they claim theyre swiss for tax purposes, and by doing that, by renouncing their american citizenship, theyve saved about 2 billion in taxes. So here we are in zug. We went to find their operations here. And we came to see your International Headquarters. Um, at the moment, my boss is not here, so. She said her boss wasnt there and we should call someone halfway around the world. In houston . Yeah. Not here . No. But this is the headquarters. I know. And is the ceo here . No. I mean, normally here . No. Another Texas Company that moved here is weatherford, a 10 billion Oil Field Services firm. It still has 2,800 workers in houston, but according to official documents, they are incorporated in zug in this small building. But there was no weatherford on the sign outside. Finally found it listed in this thing. Weatherford international. Hereheres the mailbox, but we dont know, even, where to go, cause theres no listing for the International Headquarters of weatherford. So we started knocking on doors. Hi. Greetings. Were looking for weatherford. Are they in this building . Yes, um here . Just a moment, please. I have to check it. Okay. All right. I was shown to a Conference Room they said weatherford rents for board meetings. But weatherfords Houston Office told us they never go there. So are these Big Companies pulling a fast one . Well, apparently not. Under both zug and u. S. Tax laws, its perfectly legal to get the low tax rate, even without a real presence here. But congressman doggett wants to change that. You have proposed legislation that a company will be taxed not based on where they file some pieces of paper, but where their decision makers, their management, actually resides and makes decisions. Let them pay the same way that other houstonbased companies pay. And so if they have their management in control there, they ought to be paying here in the United States. I think its fair. We found that faced with the mere threat of doggetts legislation, transocean and weatherford both packed up their top brass and shipped them to geneva. We were told transoceans top ten executives live around here in the geneva area and work on the top two floors of this building, everyone from the ceo to the chief Financial Officer to the Vice President of taxes. They wouldnt talk to us, and neither would weatherford, that also moved their ceo and cfo to geneva. And so now were beginning to see a jobs exodus from the u. S. Of top management. We cant write a law that their lawyers cant get around. Thats the whole problem here. Youre in congress. Why did Congress Write these laws that allows this to happen . Theres been a lot of arm twisting, a lot of effective lobbying here, and some really smart tax lawyers figuring out how to game the system with one shenanigan after another. But are they shenanigans, or is it the law . I think it was a shenanigan when some of these companies felt so strongly about america that they renounced their american citizenship and began saluting a foreign flag. They exploited a provision in our tax laws and moved offshore. [ticking] coming up are u. S. Corporate taxes too high . Every other government in the world have realized that the u. S. Has it wrong. Ciscos ceo, john chambers, when 60 minutes on cnbc returns. I make a lot of purchases for my business. And i get a lot in return with ink plus from chase. Like 50,000 bonus points when i spent 5,000 in the first 3 months after i opened my account. And i earn 5 times the rewards on internet, phone services and at Office Supply stores. With ink plus i can choose how to redeem my points. Travel, gift cards, even cash back. And my rewards points wont expire. So you can make owning a business even more rewarding. Ink from chase. So you can. Ounds] the wait is over for even faster internet. Xfinity is now doubling the internet speed. On two of our most popular plans. Xfinity continues to innovate, bringing you the fastest, most reliable internet. Period. Xfinity internet from comcast, now double the speed. [ticking] in 2004, Congress Passed a law mandating that any u. S. Company wanting to move offshore would still have to pay the 35 Corporate Tax rate. But despite passage of that legislation, companies can still substantially lower their taxes by moving chunks of their businesses to their foreign subsidiaries. I think when people hear that all these companies are moving overseas because of taxes, they think, that doesnt smell right. Yeah, the question is, does a company have a moral obligation to pay its fair share . Swiss tax attorney thierry boitelle. 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 the shareholders happy, and they are in the u. S. In a Corporate Tax nightmare because its the highest tax rate in the world. The u. S. Actually has the second highest rate in the developed world after japan, and theyve considered lowering theirs. We are dealing with a tax system that is a dinosaur. One ceo who would talk to us is john chambers, head of cisco, the giant hightech company headquartered in san jose. He says our tax rate is insane. Its 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 have realized that the u. S. Has it wrong. Theyre saying, im gonna have lower taxes, period. Thats what you see across all western europe. Thats what you see in asia in the developed countries. Are you judged as a ceo on things like this, on taxes . Absolutely. Hes been expanding cisco overseas because of growing demand abroad but also to lower the companys taxes. Economist Martin Sullivan says its 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 says ireland taxes corporations at just a third of the u. S. Rate. So no wonder the outskirts of dublin look like silicone valley. These companies are all but obliged to go abroad. Well, if you have a 35 rate in the United States and, for example, a 12. 5 rate in ireland, theres a incentive to move your factory to ireland. Why isnt everybody in ireland . [both chuckle] almost everybody is in ireland, all the pharmaceutical companies, all the hightech companies. Youre stupid if youre not in ireland. We noticed that you have an awful lot of companies in ireland. Yes, we do. One, two, three, four, five, six, seven, eight companies in ireland. Mmhmm. We do what makes sense to the shareholders. We go where there are incentives in countries that say, we want you here. Were gonna give you tax advantages. We want you to add jobs here. Et cetera. We can no longer, in america, say, this is how we do it; therefore, you must do it. Weve got to change, or were gonna get left behind. An increasingly popular way particularly pharmaceutical and hightech Companies Like google avoid paying the 35 is to shift their patents, computer code, pill formulas, even logos from their u. S. Bases to their outposts in lowtax countries. 100 years ago, if a company would want to relocate, youd have to pick up the factory, machinery, move everything. Today a company can move predominantly all of its assets just on paper. You can push a button and move your algorithms, you know or cocacola could take the recipe out of the vault and put it in a swiss vault. And then its swiss. Yeah. When a formula or a computer code is registered abroad, say in zug, a u. S. Company is allowed to claim that a lot of its taxable profits are there, even if most of its sales are in the u. S. The need for tax reform is greater than ever. Economist sullivan told congress these patents and profit transfers are accounting tricks that allowed companies to chip away at the 35 and save tens of billions of dollars. He says that from 2007 to 09, these maneuvers helped lower pfizers average tax rate to 17 , merck to 12. 5 , and ge just 3. 6 . You know, whats 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. So now these companies have profits accumulating overseas in places like zug. Oh, look at your clock tower. If they bring the money home, its taxed at the full 35 . If they leave it overseas, the irs cant 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. How much does your company have overseas that could be brought back here . Almost 40 billion. 40 billion. Cisco has 40 billion trapped over there somewhere . Yes. The total amount of money u. S. Companies have trapped overseas is 1. 2 trillion. Chambers is advocating for a onetime tax break to allow them to bring that money home at a rate of, say, 5 . He says that would stimulate the economy and create jobs. What is your downside for money that isnt gonna come back anyhow . Id say your downside is zero. But the Obama Administration has opposed this in the past. When it was tried in 2005, the treasury did rake in billions of dollars, though very few jobs were created. But what if tomorrow Congress Passed a quickie law, and the tax rate was 20 . Would that solve everything . I think it is the most important ingredient that we have to think about being competitive. You lower the rate from 35 to 20 . You lose Something Like 2 trillion in taxes. Okay. We have a horrible deficit crisis, debt crisis. Thats almost too much money to lose. Whats your answer to that . My answers very simply every other developed country in the world has already done this. Im not asking you to give me a favor or a handout. You know it . It sounds it. All were asking is, give us a level playing field. Get us close. Since our report first aired, the Corporate Tax debate has continued unabated. Representative Lloyd Doggett remains a staunch opponent of what he calls a tax holiday giveaway for u. S. Corporations looking to move their offshore profits back home. In the meantime, seemingly American Companies such as transocean and weatherford stay swiss. [ticking] coming up the new war on drugs. Sucrose, confectioners sugar, and maple sugar. Sugar and also chalk. Imagine taking a medication to treat a serious illness with those ingredients. People can be seriously injured, but people can also die. The real cost of fake drugs when 60 minutes on cnbc returns. How about over there . What does it mean to have an unlimited Mileage Warranty on a certified preowned mercedesbenz . What does it mean to drive as far as you want. For up to three years. And be covered . It means your odometer. Is there to record. The memories. During the mercedesbenz certified preowned sales event now through september 2nd, youll get complimentary prepaid maintenance and may qualify for a twomonth payment credit. Only at your authorized mercedesbenz dealer. Easy like monday morning. S sundays are the warriors day to unplug and recharge. What if this feeling could last all week . With centurylink as your trusted partner, it can. Our visionary Cloud Infrastructure and Global Broadband network free you to focus on what matters. With Custom Communications solutions and dedicated support, your business can shine all week long. Go go wow go power. Oats go made from oats cheerios cheerios go, go, go go power oats go cheerios go power go. Power yayyyy [ticking] theres a new front in the war on drugs. Were not talking about narcotics. This is about drugs that could wind up in your medicine cabinet, counterfeit prescription drugs made with cheaper, sometimes even dangerous ingredients such as highway paint and floor wax. As cnns dr. Sanjay gupta reported while on assignment for 60 minutes in march 2011, criminal counterfeiters will go to any length to evade detection. [dog barking] youre watching a surprise earlymorning raid in lima, peru 200 police in riot gear storming an indoor market. Their target counterfeit prescription drugs, and they found them everywhere. There were crude packaging machines and silk screens with imprints of actual name brand drugs. Hundreds of thousands of counterfeit medicines collected from that raid were traced back to this house. Through a back door and down a narrow hallway, we found a tiny squalid patio that was actually a fake drug factory turning out an astonishing number of counterfeit medications. Peruvian police were led here by someone you wouldnt expect john clark from the American Drug company pfizer. Im looking at this pan with these pills in it. This stuff is gonna get into peoples medicine cabinets around the world . Unfortunately, yes. Clark heads up a Global Security team assembled by pfizer, former fbi, homeland security, and narcotics agents who work with local police to track down criminals around the world. Counterfeit operations like these are costing Drug Companies millions of dollars a year. This has pfizer written all over it. And its even got the newer pfizer emblem with the little slant on it and stuff. I mean, from the packaging, youd never know. Here, they discovered about two dozen medicines, including antibiotics, seizure, blood pressure, and pain medications. Were in the middle of this very primitive courtyard. This doesnt look like any kind of facility that youd expect at all. Does this surprise you . No. No, unfortunately, the quantity of counterfeits youre seeing is phenomenal. The conditions are just abysmal, and if the consumer ever realized that products that theyre putting inside their bodies come from this, from dirty water drying out in the open under a heat lamp, insects and Everything Else getting into it, contaminants being, you know, brought into the equation and stuff, i think theyd be horrified. According to john clark, counterfeit pfizer drugs, many from disgusting conditions like this, have made their way to pharmacies and hospitals in at least 46 Different Countries including england, canada, and the