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Comment by malandrew | Hacker News Reader

It's so incredibly obvious that the best course of action is to let all these companies bring home all those foreign revenues so long as a significant portion of it is reinvested in the US is a reasonable period of time, excluding investments in financial instruments (stocks and bonds) and non-productive assets like land.

Any money that is stuck abroad will be reinvested abroad, making foreign economies more competitive relative to the US economy. Anyone arguing for taxing profits from abroad heavily I can only assume has a very poor understanding of macroeconomics.

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The money isn't "stuck" abroad, it is hidden there. Don't pretend that it is the big bad tax man that is stopping these companies from being altruistic, this is 100% about maximizing profit.

The idea of reinvesting money domestically is good in theory, but how do you actually ensure that the money stays here? Is Apple Et Al. going to build, staff and operate these factories with local labour? Or, are they going to sub-contract out to the lowest domestic bidder who will just end up outsourcing the work overseas where the factories and labour is already established and cheaper?

Take the spirit of my comment and exercise the principle of charity:

https://en.wikipedia.org/wiki/Principle_of_charity

I already suggested that we attach restrictions on what constitutes a valid reinvestment in the US. If you considered the spirit of my comment, it should be obvious that I would support restrictions that would prohibit the loophole you suggested.

Maybe we can even make it so the money can only be brought home piecemeal, one investment at a time, with each investment going through a process that demonstrates that the overwhelming majority of each repatriated tax dollar is going to benefit the US economy.

> I can only assume

Perhaps they have a very good understanding of accounting and how easy it is for a company to artificially inflate overseas profits. Note the legal troubles about Ireland. If companies could bring overseas profits home tax-free, we'd miraculously have no domestic profit the next year.

Reducing/removing taxes from abroad just incentivizes the firm to move as much of their profit abroad as possible, leaving nothing but domestic holding companies that report losses on behalf of their profitable overseas subsidiaries.

Huh? These customers will sell wherever there are customers. They can't just move their American customers abroad so they earn money from them outside the country.

If there is a 35% tax on profits in the US and a 0% tax in Europe and the cost of customer acquisition is similar, the obvious conclusion is to invest in your European branches until cost of acquisition becomes so high that it makes sense to invest in the US again.

So yes, you cannot immediately trade out American customers for customer abroad, but it makes foreign investments more profitable than domestic ones. Leading the firm to invest more of their earnings abroad rather than domestically, which I believe is the opposite of what you wanted.

If this was actually a real concern and not a strawman argument, these businesses wouldn't even bother with having any business in the US at all.

From a purely theoretical position, your argument may not make sense, but the already have all this money earned abroad and staying abroad paying low taxes there.

Basically all companies that are in this position are those that are so large that they are looking for returns on investment wherever they can find them, domestically and abroad. A smaller company with less profits to reinvest would likely perform the calculation you made, but then again they'd be small enough that this wouldn't even matter.

These companies want to bring these profits back to the US. What is worth barring is the ability to pay them back out as dividends in exchange for the tax break. Basically, just structure the tax break to make sure that they only get it if the money is funneled into investments in the US only.

There's such a thing as internal charges. The customer buys from the domestic subsidiary at low margin, the domestic subsidiary sources from the foreign subsidiary at a tremendous margin.

https://www.bloomberg.com/news/articles/2016-12-16/the-insid...

"The investigators say the company channeled profits from dozens of countries through two Ireland-based units. In a system at least tacitly endorsed by Irish authorities, earnings were split, with the vast majority attributed to a “head office” with no employees and no specific home base -- and therefore liable to no tax on any profits from sales outside Ireland. The U.S., meanwhile, didn't tax the units because they’re incorporated in Ireland."

> It's so incredibly obvious that the best course of action is to let all these companies bring home all those foreign revenues so long as a significant portion of it is reinvested

It is very easy to bring back foreign revenue and spend it in the US. The issue companies have is that they already are making a profit in the US. They would spend down their US profit first.

If your company is losing $1B/year in the US, you can use that to repatriate $1B already.

We should be encouraging the reinvestment of both profit abroad and domestic profit back in the United States. It doesn't need to be an either/or proposition.

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