Tim Cook to repatriate money
wsj.com
wsj.com
Meanwhile Apple's $200 billion are sitting in Europe far away from the 35% tax rate in the US. Tim Cook says that 35% is too high to pay and says that something like 25% would be reasonable. If the US doesn't change its corporate tax rate to something lower, they won't get a single dollar from Apple.
Here's the thing I don't get, how is 25% in the US acceptable but more than 1% in Europe is considered wrong? 25% of the $200 billion would be $50 billion which is way higher than the $13 billion fine...
Am I comparing Apples to Oranges here? Or is Apple simply unwilling to pay any corporate taxes outside the US?
Would you be willing to put your money into Venezuela even at 0% tax?
The US tax code is an outlier in the world in having both a very high corporate tax rate and then also a huge number of ways to avoid actually paying that tax. The Economist has written extensively about this, for example http://www.economist.com/news/leaders/21608751-restricting-c...
Can we incentivize bringing money back so we can reinvest in infrastructure for high speed transportation, self-driving cars and insanely crazy high speed Internet?
Ireland, a little nation on an island far away from the rest of the EU, has decided that they will attract businesses by offering very low tax rates. Apple obliged them and based their European business in Ireland.
BUT, the EU requires that each member nation "play fair" in how it subsidizes national businesses. The kerfluffle over Apple's Irish tax bill is because the EU competitiveness committee has ruled that Ireland's low taxes are equivalent to an unfair subsidy. But the key point is that it is Ireland's rate, which is why Ireland is also fighting the EU ruling. If they can't have lower-than-average business tax rates, they might have a harder-than-average time attracting businesses.
U.S. federal taxes apply to ALL U.S.-based businesses, and apply to their global business (unlike every other national tax regime in the world). So--since Apple is a U.S.-based business, they cannot avoid federal taxes if they bring profits home the U.S.
Apple cannot realistically expect to get more than a marginal improvement in the U.S. federal rate, because there is not competition with the federal government for setting that rate. So they store their profits outside the U.S., hoping the rate goes down in the future.
"The kerfluffle over Apple's Irish tax bill is because the EU competitiveness committee has ruled that Ireland's low taxes are equivalent to an unfair subsidy. But the key point is that it is Ireland's rate, which is why Ireland is also fighting the EU ruling. If they can't have lower-than-average business tax rates, they might have a harder-than-average time attracting businesses."
Ireland made a deal with Apple, whereby Apple effectively paid NO tax (vs the standard Irish rate of 12.5 or 13%). THAT is the problem - that Apple scored a preferential one-off deal that is not available to most other business operating in Ireland.
Apple and Ireland both seem to disagree with this. It's a major point of contention in the case.
Anyway, even if Ireland did give Apple a special rate, that would still arguably be "Ireland's rate." I just wanted to illustrate the difference between the EU, where the component nations are the highest taxing authorities and can compete on tax rates (now in question, to some extent), vs. the U.S, where the federal government is the single highest taxing authority.
Edit to add: In the EU, multinationals have leverage because they can choose their tax regime. In the U.S. multinationals have little leverage over the federal government. This explains why Apple would expect to have a lower tax rate in the EU than the U.S.
This is not a tax issue. The EC and the EU in general are cool with Ireland's taxes. Hell, Ireland could effectively lower the company tax to 1% and that'll be perfectly fine.
Not quite the same meaning as the headline.
However I have no sympathy for their complaints that it is too expensive to repatriate the money. It seems unfair to expect the law should change because you made the decision to accumulate money outside of the country to avoid paying taxes that would otherwise be due. I might be naive expecting parity but just like everyone else corporations should pay their way.
It's kind of questionable that transferring properly earned and taxed funds from another country into the US makes the US suddenly want to tax the funds.
This also has consequences. If the best place for Apple to invest some of its money is the US, but the tax makes it less profitable, Apple may choose to invest that money in a different country instead. So the tax code encourages US countries to invest overseas profits into overseas investments.
No - I don't believe this is true in the sense you mean it.
Effectively for corp. taxes - US companies are indeed 'double taxed'.
This means US companies are incented to leave zillions overseas and not bring it back to America.
The US tax code basically ignores the fact that the rest of the world exists. Most countries tax codes have to deal with the fact there is such a thing as 'international markets'.
The terrible thing is - there is any easy fix. Any President could pull it off I think.
If the US got rid of double taxation, and reduced the corporate tax rate - I think most business leaders would accept the closing of all the crazy loopholes.
If someone else doesn't pay their taxes, either you make up for it by paying more or government services are cut.
seems like he's dangling the money in front of the US gov's nose. perhaps the US gov will help apple avoid this huge bill from EU.
If a company pays x% tax somewhere overseas - they still have to pay full amount of corporate tax when repatriating - meaning US companies are 'double taxed'.
I.E. They pay 30% in Russia, then another 35% in the US.
That's crazy.
In most countries, you pay tax in the jurisdiction overseas - and then a 1-4% 'repatriation' fee bringing it home. This is more rational.
The US also has crazy high corporate taxes - some of the highest in the world - added to this a crazy bunch of odd loopholes.
The US tax system needs to be cleaned up here:
A) Small repatriation tax, and don't double tax foreign sales.
B) Reduce corporate taxes to make them more competitive with international standards.
C) Get rid of the loopholes and actually make corps pay the tax.
Obviously - the EU needs to clean up it's act as well.
Sane, rational taxation would have solved the repatriation problem - and the EU/Ireland tax avoidance problems a long time ago.
Unlike healthcare or some other unwieldy subject - this one is easy. Everyone knows what needs to be done. Nobody seems to be willing to do it.
Why is the US the only country that does this? Is it just greedy? Does it feel more entitled to taxing those things than other countries? Is there a historical or cultural reason it ended up this way?
("Tim Cook Says Apple Could Send Cash Back to U.S. Next Year")
Well, maybe Scott Adams can stop declaring himself a Clinton supporter for his safety ...
I was referring to this:
http://blog.dilbert.com/post/145456082991/my-endorsement-for...
If you want to invest in something in an EU country, you might calculate the taxes due on your investment before deciding if the investment is suitably profitable. With this decision, you now have an unexpected new risk factor to take into account: the EU bureaucracy may retroactively change your tax rate. That means uncertainty of payout, therefore the investment has a lower payout, therefore you are less likely to invest in an EU country.
A better way of minimizing your risk factor would be hiring tax lawyers who know the rules of the EU Single Market. Which makes Cook's comments so baffling: Apple should have known that there is a possibility of a crackdown.
Maybe this timeline helps: https://en.wikipedia.org/wiki/Treaties_of_the_European_Union...
Ireland is, apparently, trying to appeal this ruling.