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Obama Proposes One-Time Tax On $2 Trillion US Companies Hold Overseas
mrspoonsi writes with news about a new proposed tax on overseas profits to help pay for a $478 billion public works program of highway, bridge and transit upgrades. President Barack Obama's fiscal 2016 budget would impose a one-time 14 percent tax on some $2 trillion of untaxed foreign earnings accumulated by U.S. companies abroad and use that to fund infrastructure projects, a White House official said. The money also would be used to fill a projected shortfall in the Highway Trust Fund. "This transition tax would mean that companies have to pay U.S. tax right now on the $2 trillion they already have overseas, rather than being able to delay paying any U.S. tax indefinitely," the official said. "Unlike a voluntary repatriation holiday, which the president opposes and which would lose revenue, the president's proposed transition tax is a one-time, mandatory tax on previously untaxed foreign earnings, regardless of whether the earnings are repatriated." In the future, the budget proposes that U.S. companies pay a 19 percent tax on all of their foreign earnings as they are earned, while a tax credit would be issued for foreign taxes paid, the official said.
It's well understood what they are doing, because the companies are quite open about it. Back in the 90s Apple invented something called the Double Irish, which is where they register is shell company with no employees or other interesting in Ireland and have all the other Apple corporations around the world pay their profits to it in exchange for using the Apple name. Starbucks, Google, Amazon and others all do the same. Since the local corporations don't make any profit (due to the "crippling" fees they pay to Apple Ireland) they pay next to no tax.
So why doesn't Apple Ireland pay tax on all the money it takes? Irish law states that corporations that are headquartered overseas pay corporation taxes where their headquarters are. So Ireland says they pay in the US, the US says they pay in Ireland... and thus they pay no tax on all that money.
Of course they are quite open about this and list the money held in Ireland as part of their balance sheets. Apple is currently taking low interest loans to pay shareholders based on the vast reserves it has in Ireland, rather than bring some of that money back and pay ~40% tax on it.
The EU is working on a fix where corporations pay tax based on how much business they do in each country. This seems to be the best that the US can come up with, given the political climate.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Not really - the EU also wants to close this loophole.
"Transparent" is a shit show that trades on every stereotype going. A man in drag is NOT a transsexual.
It's well understood what they are doing, because the companies are quite open about it. Back in the 90s Apple invented something called the Double Irish, which is where they register is shell company with no employees or other interesting in Ireland and have all the other Apple corporations around the world pay their profits to it in exchange for using the Apple name. Starbucks, Google, Amazon and others all do the same. Since the local corporations don't make any profit (due to the "crippling" fees they pay to Apple Ireland) they pay next to no tax.
Except that's not what Apple is doing. See the fact that Apple US paid 6 billion dollars in US taxes on 18 billion profit.
What Apple Europe (which is in Ireland) does is holds all the profits that Apple makes in countries other than the US, because they can't bring that money back into the US. The US wants to charge a second round of taxes, even though European taxes have already applied.
This is the same thing that the US does to dual nationals - a US/UK dual citizen working in the UK will pay income tax both to the UK and to the US, because the US thinks they're entitled to taxes on money made abroad.
The reality here is that what should change is the US's policy of taxing all money everywhere, whether or not it ever had anything to do with the US.
If the Obama admin really insists on something like this, then it would probably be best to have a minimum effective tax rate system. I.e. the tax must be payed SOMEWHERE and there has to be proof of that sent to the IRS. If the effective tax rate is below the minimum (say 20%) then they pay the remainder to the IRS.
I guessed you missed the part in the summary where they mentioned the rate would be 19% and "while a tax credit would be issued for foreign taxes paid, the official said." So they are doing almost exactly as you are suggesting.
Australia also holds that view on personal income for Australian citizens on money earned abroad. I think the key with this proposal (vs. others which are just a pure money grab or in the Australian income tax case, double dipping) is the credit for taxes paid abroad. Presumably, if the company was already taxed at a higher rate, they would be refunded all the tax they paid to the USA. I think it's a good compromise - the company should have to pay taxes somewhere, and this will ensure that they do.
I run: Windows, OS X, Linux, FreeBSD. Just because you have a hammer, doesn't mean everything is a nail.
read it carefully, they will tax American companies for earning tax and then give them a tax credit for any taxes paid by those companies overseas.
So if you pay tax at 19% in the UK, America will tax you at 19% as well and then give you a 19% rebate. Net result, you pay the due tax in the UK at 91% and all's well.
Of course, if you don't pay any overseas tax for whatever reason, then you will still be charged at 19% but you won't have any credit to claim, boohoo sucks that you thought you could get away with paying no tax whatsoever.
What is to stop companies registering themselves elsewhere so that they are no longer US companies and then only their US operations will get taxed?
That's what the Double Irish it, it's what they are already doing. Apple in the US pays massive fees to an Irish shell company for use of the name Apple, and thus makes very little profit in the US that can be taxed. The only tax they do pay in the US is on their US operations like income tax and sales tax. The Irish company pays no tax at all.
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
The problem is that this money is not exclusively earned abroad. Large companies can easily setup shell "holding" companies that own their IP licensing and use transfer pricing to pull fund legitimately earned in countries where they would owe tax out to the tax havens by use of internal licensing fees. And since the US corporate taxes are on profits and not revenue, this internal transfer of funds is heavily abused by anyone with a half-way competent accounting department.
Overly Simplified Example:
Revenue: $100M
Fictitious Licensing Cost of already developed internal system: $80M
Staffing Costs: $10M
=============
Taxable Income: $10M instead of $90M
Effective Tax: $3.5M instead of $31.5M
Evaded Tax: $28M
Nobody's talking about "taxing other countries".
US law says that, if you're a US citizen, you're liable for US taxes. Doesn't matter where you live or where your money comes from. However, it also recognises that it's not nice to subject citizens residing overseas to double taxation--so if you live in $country and pay $country's taxes on your income there, the US will often accept this as having fulfilled your obligation. But if you've income that you're not paying taxes on, anywhere, and the IRS finds out, they will come calling.
What Obama is apparently intending is to extend this philosophy to US corporations, which currently enjoy a much better deal than you or I. They pay US taxes on profits reported in the US. They don't pay US taxes on profits reported in other countries--and here comes the important part--even if they report those profits in $nation, which happens to have negligible or even zero corporate taxes. Whereas, if I move to $nation and they don't make me pay income tax there, then I get to pay it to the US.
So corporations currently get a huge overseas tax dodge that you and I don't. Quoth TFS,
In the future, the budget proposes that U.S. companies pay a 19 percent tax on all of their foreign earnings as they are earned, while a tax credit would be issued for foreign taxes paid, the official said.
So in other words, US corporations making money overseas would be subject to taxes on it in a manner very much like how US citizens are already subject to their overseas earnings, and with same proviso that they won't be doubly taxed.
Okay, go ahead and explain how this is "retarded" or unfair. Seems pretty smart and fair to me.
Il n'y a pas de Planet B.
Except that's not what Apple is doing. See the fact that Apple US paid 6 billion dollars in US taxes on 18 billion profit.
That is what they told you. The US Senate grabbed Apple's IRS paperwork and found a check for $2.5 billion.
What Apple Europe (which is in Ireland) does is holds all the profits that Apple makes in countries other than the US, because they can't bring that money back into the US. The US wants to charge a second round of taxes, even though European taxes have already applied.
European taxes have not been collected because of the tricks Apple uses. The EU is pursing Apple for dodged taxes as well. One of Apple's subsidiaries paid absolutely no taxes at all for 5 years despite $30 billion in profits. $0 taxes, $30 billion profit.
This is the same thing that the US does to dual nationals - a US/UK dual citizen working in the UK will pay income tax both to the UK and to the US, because the US thinks they're entitled to taxes on money made abroad.
Does said US citizen get to hold his US passport? Does he get to use US Embassies? Will he be rescued by the US military if kidnapped in Iraq? All that costs money. And the guy gets to deduct from his US tax bill anything paid in the UK anyways.
The reality here is that what should change is the US's policy of taxing all money everywhere, whether or not it ever had anything to do with the US.
As long as it has nothing to do with the US.. I agree the US shouldn't tax it. Last time I drove through Cupertino though, I'm pretty sure I saw a giant Apple logo behind a bunch of people carrying Apple Ids. At least one of Apple's Irish subsidiaries has zero employees though.
"In 2014, job growth averaged 246,000 per month, compared with an average monthly gain of 194,000 in 2013."
http://www.bls.gov/news.release/empsit.nr0.htm
This is somewhat more than the ~150,000/mo which is needed to account for the increase in the number of employable Americans.
http://www.investopedia.com/terms/j/jobsgrowth.asp
In other words, there is definitely job growth. As for wage growth, there isn't any. but this appears to be a long-term trend:
http://www.pewresearch.org/fact-tank/2014/10/09/for-most-workers-real-wages-have-barely-budged-for-decades/
No they don't, they transfer the money to the country with the least tax and pay it there.
How? they set up in the lower tax country and charge an expense to the US country.
E.g. say a company earns $1,000,000 the overseas office charges them a $1,000,000 for an admin fee. so the company ends up paying tax on $0 in the US, and tax on $1,000,000 in the company with the low tax rate.
Liberty means no ex post facto laws. Earnings made before passage of any such law (which, let's face it, will NEVER pass with the current Congress - whether you agree with them or not) should be excluded from this. If the Government can retroactively tax your profits,
This isn't a retroactive tax.
There's no ex post facto involved.
You see, the trick is that technically, all the money held overseas is deferred income.
The IRS said "you don't have to pay your taxes until you bring the money back to US shores."
The corporations said "Cool, we'll bring it back. No really, we will. But how about we pay you less when we bring it back?"
As a result, the incentives for repatriating foreign profits are completely upside down and backwards.
It makes far more sense to dodge US corporate taxes and invest the money overseas.
[Fuck Beta]
o0t!
The tax they did pay was on stuff they couldn't dodge, like employment taxes, sales tax and taxes on physical assets. There was a lot more tax that would have been due on their global profits that was dodged by wiping those profits out with massive fees paid to the Irish shell company. The profits were converted to those fees and moved to Ireland, where they are not taxed
const int one = 65536; (Silvermoon, Texture.cs)
SJW, n: "Someone I don't like, and by the way I'm a fuckwit" - AC
Free market is exactly absence of government...
Sorry but that's the Fox news definition.
"Free" - as in anyone is free to participate in the market.
"Market" - A set of rules governing trade, normally created and enforced by governments, eg: property law.
In other words the all too common Fox definition of "free market" is actually an oxymoron.
And did you exchange a walk on part in the war for a lead role in a cage? - Pink Floyd.
Obama has been in office for 6 years, moving with regular consistency in contradiction to ideals of Reganomics, but our current citizen opportunities are Reagan's fault?
At what point can you be intellectually honest enough to recognize that our current economic policies are disastrous.
We're $18Trillion in debt. We have roughly 1/2 a trillion in deficit per year. This President (and the one before him, easily as culpable), are bankrupting our nation, and setting policies that have failed -every- -single- -time- they have been implemented globally throughout history. No nation has ever spent their way out of debt, not matter how hard they've tried.
Please, I beg you. Look up Thomas Sowell and Milton Friedman. They are both very respected and accomplished economists, and there are hundreds of recorded lectures from them available on YouTube. They can demonstrate these ideas for you in no uncertain terms.
"But we have to pass the bill so that you can find out what is in it,..." - Nancy Pelosi