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(Salon)   Why pay taxes when you can stash your money overseas, lend it to the government, and have them pay you?   (salon.com) divider line 26
    More: Sick, iPads, sovereign wealth funds, don't be evil, digital economy, Securities and Exchange Commission, United States Court of Appeals for the Ninth Circuit, tax havens, Cisco  
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2408 clicks; posted to Business » on 19 Mar 2014 at 2:30 PM (1 year ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



26 Comments   (+0 »)
   
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2014-03-19 01:21:01 PM  
It is not so much of "ripping off the US Treasury" as much as it is avoiding double taxation of income earned in a foreign jurisdiction.
 
2014-03-19 02:23:34 PM  

minoridiot: It is not so much of "ripping off the US Treasury" as much as it is avoiding double taxation of income earned in a foreign jurisdiction.


6 words in that sentence are missing quotes around them.
 
2014-03-19 02:35:36 PM  
This just in: There are governments that actually want wealth instead of punishing it.
 
2014-03-19 02:46:39 PM  
U.S. is one of a handful of countries that does not do territorial taxation. Taxing company money that was already taxed elsewhere tells the company to keep their money elsewhere.

Then again us stupid citizens don't seem to mind that we have fees, sales tax, gas tax, etc after already being taxed.
 
2014-03-19 02:46:49 PM  
Amazing that tech companies would try to make it look like they are making more and more money overseas at the same time that they are expanding into many large international markets. How dumb do they think we are?
 
2014-03-19 02:47:28 PM  

minoridiot: It is not so much of "ripping off the US Treasury" as much as it is avoiding double taxation of income earned in a foreign jurisdiction.


Those poor companies.  How will they ever survive the onslaught of Uncle Sam?

"The tech sector has led the way on this, moving their patents and other intellectual property to low-tax countries to give the appearance that their profits have been earned offshore. "

Oh.
 
2014-03-19 03:10:25 PM  
"Our aim is not to do away with corporations but endeavoring to do away with any evil in them. We are not hostile to them; we are merely determined that they shall be so handled as to subserve the public good. We draw the line against misconduct, not against wealth."
-T. Roosevelt


Someone posted this awhile ago and I shall repeat it here

Unless we address the cancer that is killing us from the inside - corporate oligarchy - then all of the political lipservice paid to both the left and the right is meaningless. The rise of mega-corps, the vastly over-inflated value of capital vs labor and the demands of stockholders for unsustainable long term growth are our biggest enemies as a nation.

Capitalism is a good idea in theory, much like communism or socialism - the problem is that humans are greedy little poo flinging monkeys with little ability to see a larger picture than what benefits them directly. Neither system works without some sort of oversight to prevent irrational greed and short term thinking.
As long as the greedy few know that they can loot the coffers at the expense of the lower and middle classes, things are only going to get worse. It is imperitive that the goverment rebalance the distribution of wealth in this country. We are at critical mass, and soon more money will be stagnant in the bank accounts and stock portfolios of the uber-wealtly and not in the hands of the small-business owners, and the middle and lower classes who actually drive the economy.
 
2014-03-19 03:16:46 PM  

ltdanman44: As long as the greedy few know that they can loot the coffers at the expense of the lower and middle classes


Not clear here if you are speaking of the corporations, which are following tax law, or the government, which is practicing tax policies that encourage corporations to keep overseas profits offshore.  And please, your diatribe works better if you don't wear that Che Guevara t-shirt.That government redistribution BS works so well; can you point me to a successful example that didn't involve revolution, thousands of deaths, and greater poverty?
 
2014-03-19 03:21:17 PM  

Galloping Galoshes: That government redistribution BS works so well; can you
point me to a successful example that didn't involve revolution, thousands of deaths, and greater poverty?


Brazil.
http://en.wikipedia.org/wiki/Bolsa_Fam%C3%ADlia
 
2014-03-19 03:22:44 PM  

Galloping Galoshes: That government redistribution BS works so well; can you point me to a successful example that didn't involve revolution, thousands of deaths, and greater poverty?


Progressive Income tax.
 
2014-03-19 03:24:50 PM  
More info on Brazil from that commie rag The Economist.
http://www.economist.com/node/16690887

Mind you, before you attempt a reply, remember that the conditions you asked to meet were:
"didn't involve revolution, thousands of deaths, and greater poverty"

But please proceed in your inevitable attempt to move the goalposts.
 
2014-03-19 03:32:57 PM  
I'll keep saying it - if companies worked half as hard making sure their employees got the same advantages as they do for themselves, we could pay off the national debt.

That they don't is all the reason I need to support taxing them more.
 
2014-03-19 03:46:02 PM  

ltdanman44: "Our aim is not to do away with corporations but endeavoring to do away with any evil in them. We are not hostile to them; we are merely determined that they shall be so handled as to subserve the public good. We draw the line against misconduct, not against wealth."
-T. Roosevelt


There is no misconduct here.  They are following the rules set by the US and I see no ethical reason for these companies to always and instantly repatriate the foreign earnings. What misconduct is going on?
 
2014-03-19 03:53:48 PM  
Really?  the Apple iPad and Google Glass?

Apple iPad Sales:  170M production units
Google Glass Sales:  0 production units.

Sounds like someone is trying to deflect according to bias.
 
2014-03-19 04:08:07 PM  

un4gvn666: Galloping Galoshes: That government redistribution BS works so well; can you point me to a successful example that didn't involve revolution, thousands of deaths, and greater poverty?

Progressive Income tax.


I was thinking more broadly, of actually seizing assets rather than taxing income.  I was unclear.
 
2014-03-19 04:25:10 PM  
So, now it's a bad thing that US corporations are owning US debt? I'm used to pundits telling me that China or Japan or whomever is the bad guy today are holding our debt and are putting us at a great risk of losing everything.
 
2014-03-19 04:34:48 PM  

midigod: minoridiot: It is not so much of "ripping off the US Treasury" as much as it is avoiding double taxation of income earned in a foreign jurisdiction.

Those poor companies.  How will they ever survive the onslaught of Uncle Sam?

"The tech sector has led the way on this, moving their patents and other intellectual property to low-tax countries to give the appearance that their profits have been earned offshore. "

Oh.


What infuriates me is that these same companies will go to the US court system to pursue civil damages against other companies for infringing on these patents and other intellectual property.  I believe that any damages should be based on the profits  in the US that the company lost because of the infringement.   The profits should be based on the amount of taxable income in the US.  So if a company chooses to recognize profits on the sale of goods in the US elsewhere, then they won't receive any money for  damages as the company didn't experience any loss of profitability in the US.
 
2014-03-19 04:52:58 PM  

Galloping Galoshes: ltdanman44: As long as the greedy few know that they can loot the coffers at the expense of the lower and middle classes

Not clear here if you are speaking of the corporations, which are following tax law, or the government, which is practicing tax policies that encourage corporations to keep overseas profits offshore.  And please, your diatribe works better if you don't wear that Che Guevara t-shirt.That government redistribution BS works so well; can you point me to a successful example that didn't involve revolution, thousands of deaths, and greater poverty?



Corporations "following tax law" is a charade. They created the loopholes through lobbying efforts, so you're right they are technically following the law, but it's just as corrupt as outright breaking it, except now they don't have consequences.
 
2014-03-19 04:54:34 PM  

paswa17: I'm used to pundits telling me that China or Japan or whomever is the bad guy today are holding our debt and are putting us at a great risk of losing everything.



Those pundits are idiots.

By issuing securities which are purchased by foreign governments, the US Government increases its ability to provide goods and services that the citizentry demand through Congress. In return, we promise those foreign governments that we will pay them in a currency that we theoretically can produce in infinite amounts. Sure, we are unlikely to undertake steps to utterly inflate away that debt, as their would be numerous undesirable consequences, but we could any time we decided it was in our best interest, and they would have no real way to prevent that from occuring. We have the power in that relationship, not them.

To paraphrase J.P Getty:
"if you owe the bank a million dollars, it's your problem. If you owe the bank a billion dollars, it's the BANK'S problem."
 
2014-03-19 04:56:27 PM  
Isn't this the same as people getting taxed on what the earn. then getting taxed again when they spend it.
 
2014-03-19 05:30:59 PM  
I always figured those piles of offshore cash were there to pay Chinese invoices in a manner where the operating capital wasn't multiply taxed.

US Treasuries at 1% aren't ahead of inflation, but they're safer than banks. It's just a place to stash money until you need to use it. Hard to steal, easy to sell, our national debt is a fiscal lubricant all by itself.
 
2014-03-19 08:12:49 PM  
Still not as bad as the big banks taking billions in 0% loans from us (meant to spur hiring and small business) then buying bonds we have to pay them interest on.
 
2014-03-19 09:03:02 PM  
When the giants of industry are all doing the same thing, either they're all independently wrong, or the thing they're all working to avoid is.
 
2014-03-19 09:16:37 PM  

Dr Dreidel: I'll keep saying it - if companies worked half as hard making sure their employees got the same advantages as they do for themselves, we could pay off the national debt.

That they don't is all the reason I need to support taxing them more.


And they totally won't shoot any new taxes full of loopholes.

You're playing their game, which they will win every time. The big players don't mind a tax hike or a regulatory burden if they know they can wangle an advantage that will hold back their competitors and any upstarts.

Zero out their taxes and their subsidies at the same time, and we'll see which ones are the capitalists and which ones are the welfare queens.
 
2014-03-19 09:41:30 PM  
The interest earned on the U.S. Treasuries is immediately taxable to the parent companies in the U.S., whether it is repatriated or not.

The article writer somewhat misunderstands the deferral system.  Taxation on the profits isn't deferred until the money is brought to the U.S.; it's generally deferred until a foreign corporation distributes (pays a dividend of) the earnings to a U.S. company.  When a foreign company loans money to the U.S. government, it isn't effectively distributing the earnings to its U.S. parent.  They're still tied up in the foreign company.  The U.S. parent doesn't gain access to them through the Treasuries.  If the U.S. parent does gain access to the earnings (e.g., because they are loaned to the U.S. parent), there are rules to treat that as a taxable distribution.

As for why deferral exists in the first place: it's a feature, not a bug.  If there is no deferral, a U.S. company which owns an Irish company operating in Ireland pays 35% tax (15% Irish plus 35% U.S. minus a credit for the Irish tax) on the Irish operations.  A U.K. company doing the same thing pays just the Irish tax: 15%.  If a given post-tax rate of return is required for that type of Irish operation, the U.S. company is going to be at a competitive disadvantage vs. the U.K. co.  When it plows its Irish earnings back into the Irish company (say, to expand operations), it has less to invest in Ireland than a similarly situated Irish company owned by a U.K. company.  Deferral makes the NPV of that 20% residual U.S. tax much lower.

The main issue with what the tech companies are doing isn't that deferral exists.  The problem is that companies which primarily make their money from intangible property have a much greater ability to choose which jurisdictions they are treated as earnings their profits in than other companies.  The OECD and the U.S. government have been focused on trying to fix that issue for a few years now, but it's not an easy thing to do without breaking the international system of tax treaties that have been in place since the early 20th century.
 
2014-03-20 05:42:10 AM  

Nicholas Urfe: The interest earned on the U.S. Treasuries is immediately taxable to the parent companies in the U.S., whether it is repatriated or not.

The article writer somewhat misunderstands the deferral system.  Taxation on the profits isn't deferred until the money is brought to the U.S.; it's generally deferred until a foreign corporation distributes (pays a dividend of) the earnings to a U.S. company.  When a foreign company loans money to the U.S. government, it isn't effectively distributing the earnings to its U.S. parent.  They're still tied up in the foreign company.  The U.S. parent doesn't gain access to them through the Treasuries.  If the U.S. parent does gain access to the earnings (e.g., because they are loaned to the U.S. parent), there are rules to treat that as a taxable distribution.

As for why deferral exists in the first place: it's a feature, not a bug.  If there is no deferral, a U.S. company which owns an Irish company operating in Ireland pays 35% tax (15% Irish plus 35% U.S. minus a credit for the Irish tax) on the Irish operations.  A U.K. company doing the same thing pays just the Irish tax: 15%.  If a given post-tax rate of return is required for that type of Irish operation, the U.S. company is going to be at a competitive disadvantage vs. the U.K. co.  When it plows its Irish earnings back into the Irish company (say, to expand operations), it has less to invest in Ireland than a similarly situated Irish company owned by a U.K. company.  Deferral makes the NPV of that 20% residual U.S. tax much lower.

The main issue with what the tech companies are doing isn't that deferral exists.  The problem is that companies which primarily make their money from intangible property have a much greater ability to choose which jurisdictions they are treated as earnings their profits in than other companies.  The OECD and the U.S. government have been focused on trying to fix that issue for a few years now, but it's not an easy thing to do without breaking th ...


The effective tax rate of the parent companies has remained far below 35% for years on end. As I understand it the money has been repatriated on special deals like '04 where 300 billion was brought back at a 5.25% rate.

This movement is intentional by these companies and has nothing to do fixing tax treaties, it's about the US not giving special exceptions to these companies to bring the money back at a much lower rate.

Furthermore, there is not solid ethical ground for these companies to stand on, they are making terrific sums of money and don't want to pay back into the system that allowed them to make these profits.
 
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