The effect of Taxation on American High tech by France of three percent - Page 4
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  1. #61
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    France didnt "sue" Ireland, they went after them in the European Union's Commission- which is the equivalent of bringing an international trade dispute to court. The EU ruled in favor of France, and ordered Ireland to collect the taxes from Apple. They also sued Apple directly- but I think theyd did, indeed, "go after" Ireland, as you suggest, 10 years ago.
    The EU system allows them to avoid going to war with Ireland. The way France "makes Ireland pay the penalty" is thru the EU, which is what they did. All legal and everything.

    We, however, do not have that same avenue open to us. Apple pulled the same financial trick on the USA, and our only recourse was to attempt to exchange tax amnesty for Apple for them bringing cash back to invest in the USA. Didnt work- they still keep well over a hundred billion outside the US, to avoid paying us any taxes.

    Seems like France's way works better than trumps attempt to sweet talk em and offer them candy.

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    Quote Originally Posted by Ries View Post
    Seems like France's way works better than trumps attempt to sweet talk em and offer them candy.
    Aye, but for better or worse, he's made moves in months - sometimes days or even hours - that they took a decade or so to work through.

    And there's the rub.

    Good, bad, or indifferent legislation, fairness, moral intent, yadda yadda...

    Any bizness team worth HALF a damn can take decisions and implement them faster than even the most alert and cooperative of political entities.

    Meaning the bizness will ALWAYS have enough warning time to take an effective evasive course.

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    Quote Originally Posted by Ries View Post
    ...Apple pulled the same financial trick on the USA, and our only recourse was to attempt to exchange tax amnesty for Apple for them bringing cash back to invest in the USA. Didnt work- they still keep well over a hundred billion outside the US, to avoid paying us any taxes.

    Seems like France's way works better than trumps attempt to sweet talk em and offer them candy.
    Um, Apple will pay $38 Billion in US taxes from the TCJA.

    Companies who held large cash reserves offshore to avoid US taxes have to pay taxes on those holdings- whether they repatriate the capital or not.

    They have 8 years.

    Overseas earnings after the TCJA will not be subject to US taxes, but all that cash that was already sitting offshore is subject to the repatriation rate of 15.5%.

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    Quote Originally Posted by jancollc View Post
    Um, Apple will pay $38 Billion in US taxes from the TCJA.
    . . .subject to the repatriation rate of 15.5%.
    Really think so?

    How'd yah like to invest in a nice used bridge, proven in New York City service?

    Or Atlantic beach property going cheap because it has been stored in an abandoned strip mine in West Virginia?

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    Quote Originally Posted by thermite View Post
    Really think so?
    I called it the "repatriation rate" because it's the same rate as what is paid on repatriated capital. It doesn't have to actually be repatriated to be taxed.

    So yes, I do think so. Here's why: It's already been reported to the IRS. Under the former tax code, companies were required to report overseas earnings even if they left the money overseas.

    Did they report every penny? Probably not. But they did report a collective $2.5 Tn in earnings or something like that. So those companies are on the hook for those taxes no matter what they do in the future.

    They are also subject to an 8% rate on "assets" or non-liquid profits- I didn't mention that, but it's in addition to the 15.5% on cash holdings.

    The Fed estimated $338 Bn in taxes would be collectable under the TCJA.

    In the future they won't report overseas earnings or deferred tax liabilities, because overseas earnings are no longer subject to US taxes. But what's done is done- they've already claimed the deferral prior to the TCJA.

    Unlike what France seems to be doing, this is not an ex post facto law. The tax code always included overseas earnings as taxable income. The taxes were only deferred. That deferral is now gone, and the taxes on those earnings are now collectable.

    The IRS already knows how much taxes were deferred- it's on the company's tax return. For it to change, a company would have to file an amended return for each year and show that the deferred taxes previously reported were not correct.

    My argument is not that companies don't engage in tax avoidance schemes. My argument is that the notion that the holdings are not taxable until they are repatriated is false.
    ...Didnt work- they still keep well over a hundred billion outside the US, to avoid paying us any taxes.
    ^^^ That money is taxable regardless if it's repatriated or not.

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    This seems complicated. I suppose it is designed that way so that these kinds of charges would be ignored. Imagine if the US decided to place a tax on foreign companies in any field of three percent. Huawei , Toyota, and many others would pay. What is done in France with three companies could be done with more.

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    Quote Originally Posted by jancollc View Post
    ^^^ That money is taxable regardless if it's repatriated or not.
    Believe what you like. Show us when it actually happens.

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    Quote Originally Posted by thermite View Post
    Believe what you like. Show us when it actually happens.
    The rules haven't been finalized by the IRS yet. Companies will wait until then to make their announcements.

    They have to figure out how to allocate the liquid vs. non-liquid earnings. Earnings are reported, deferred taxes are reported. What isn't reported is how much is held in cash and treasuries and how much has been reinvested in plants or R&D- which are not liquid assets and won't be taxed at the higher rate.

    All of the big accounting firms and publicly held MNE's have people working on it, and the IRS and Treasury, Fed, etc.

    The narrative surrounding "repatriation" is a smokescreen. It is just a way of resolving back taxes- so that moving forward, companies can bring profits they earn overseas into the US without paying taxes on that money.

    You know that companies don't make investment decisions based on one-shot deals. Repatriation was never really expected to create a bunch of jobs or huge investments in the US. It's the long term effects of the lower rates and territorial tax system that will do that.

    A company's assets don't have to be repatriated, but the back taxes will be- at a reduced rate and accelerated time frame.

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    Quote Originally Posted by Spinit View Post
    This seems complicated. I suppose it is designed that way so that these kinds of charges would be ignored. Imagine if the US decided to place a tax on foreign companies in any field of three percent. Huawei , Toyota, and many others would pay. What is done in France with three companies could be done with more.
    Huawei, Toyota etc. would not be affected by the French tax. They have a taxable physical presence and a physical product and are not just selling digits on the interwebs.

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    Quote Originally Posted by Ries View Post
    and pay zero taxes, as Amazon does,
    Have you read their annual report? According to what I read they do pay tax. (well, it comes from their account...as anyone knowledgeable in economics knows, ultimately only people pay tax, the rest is optics). And are you aware that they have just recently got to positive retained earnings?

    Perhaps you are suggesting that's wrong? Losses carried forward as a tax deduction? What do you think it would do to investment in start ups with anticipated big long burns without it? America has tech ascendancy - you want to lose that too?

    Didnt work- they still keep well over a hundred billion outside the US, to avoid paying us any taxes.
    Sounds more like a cutting indictment of your tax system perhaps?

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    Quote Originally Posted by Mcgyver View Post
    Have you read their annual report? According to what I read they do pay tax. (well, it comes from their account...as anyone knowledgeable in economics knows, ultimately only people pay tax, the rest is optics). And are you aware that they have just recently got to positive retained earnings?

    Perhaps you are suggesting that's wrong? Losses carried forward as a tax deduction? What do you think it would do to investment in start ups with anticipated big long burns without it? America has tech ascendancy - you want to lose that too?



    Sounds more like a cutting indictment of your tax system perhaps?
    I do have criticisms of our tax system.
    The difference between the effective tax rate and the nominal one is seldom discussed or publicized, but quite large.
    And, yes, I think Trumps claims that he passed the repatriation bill to bring back $4 Trillion in cash which then, he claimed would be invested to produce jobs- I have my questions about that, too...

    And the idea that the taxes will be payable over ten years, without interest- in my world, thats basically about a 75% discount, due to inflation over ten years. If I owe taxes, it would be PLUS penalty and interest, which, of course, would grow at the rate of .5% interest per MONTH.
    Seems like ten years, zero interest is more like the deal you get buying a mattress.

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    Quote Originally Posted by Ries View Post
    ...And the idea that the taxes will be payable over ten years, without interest- in my world, thats basically about a 75% discount, due to inflation over ten years. If I owe taxes, it would be PLUS penalty and interest, which, of course, would grow at the rate of .5% interest per MONTH.
    If you owe back taxes and you aren't some kind of habitual tax cheat, the IRS will waive interest and penalties, and put you on a payment plan.

    It's 8 years, not 10. From the date of enactment, which was January 2018. Since the taxes we are talking about were deferred, there was no interest stacking up. Companies will have to make estimated payments, and the accounting can happen later. Just like your quarterlies.

    A significant percentage of those profits have been reinvested in overseas operations, and it's not reasonable to make a company liquidate assets to pay the taxes. The company didn't know the tax bill was coming- they assumed it would never have to be paid as long as the money remained overseas.

    Allowing them to pay it off in 8 years is reasonable, it would be counterproductive to demand it all right away because you would be forcing fire sales.

    Have you noticed we haven't had any more of those high-profile corporate inversions since the law was passed?

    First things first- stop the bleeding.

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    Here's as good a summary as I've seen on what's happening with repatriated cash:

    Is Cash Still Trapped? - Strategic Finance

    Bottom line seems to be that it has almost all gone to dividends and stock buybacks rather than investment in new products and services. This has the effect of temporarily boosting stock prices (and likely C-level compensation) and the market averages -- but does little for the future of these companies. Having a more level playing field tax-wise is a good thing IMO, but we should realize it's been done in a way to look good in the short rather than the long term.

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    Quote Originally Posted by PeteM View Post
    Here's as good a summary as I've seen on what's happening with repatriated cash:

    Is Cash Still Trapped? - Strategic Finance

    Bottom line seems to be that it has almost all gone to dividends and stock buybacks rather than investment in new products and services. This has the effect of temporarily boosting stock prices (and likely C-level compensation) and the market averages -- but does little for the future of these companies. Having a more level playing field tax-wise is a good thing IMO, but we should realize it's been done in a way to look good in the short rather than the long term.
    Pete, that's a pretty good piece. They recognize that it takes time to make the capital investments, and one year is not enough time to see results on that front.

    They also recognize that repatriation does not necessarily mean the cash comes back to the US. It only means that the US taxes are paid, and the money is now available to invest in the US without penalties. At that point it's been "repatriated".

    So the short term buybacks and dividends should not surprise anyone, and that money has not evaporated from the US economy- it has only changed hands. Whoever held those shares got the cash- and presumably reinvested it somewhere else. The recipients of the dividends will pay their additional taxes on that money, and do whatever they do with it.

    What's most striking to me is the graph that shows the big dropoff of foreign reinvestments and the corresponding increase in dividends and buybacks. That is a very good picture from the US perspective- the money is now in the US economy, rather than wherever it was before.

    New capital investments take time- which is why Apple said their capital investment plan is a ten-year one. As I said earlier, the growth from the TCJA will come from the long term effects of lower taxes and increased competitiveness of US companies- this is not about a one-shot windfall, which does not change a company's behavior. It's about getting rid of the disincentive to invest profits earned overseas back in the US.

    They also noted the end of the inversions- which were happening about as frequently under Obama as Rocket Man's launching missiles over the Sea of Japan...

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    Honestly the TCJA is just another trickle down yellow shower on the average person.

    Steve

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    Quote Originally Posted by jancollc View Post
    . . That is a very good picture from the US perspective- the money is now in the US economy, rather than wherever it was before. . . ..
    Quote Originally Posted by Steve in SoCal View Post
    Honestly the TCJA is just another trickle down yellow shower on the average person.

    Steve
    Seems to me the key thing separating these two notions, is the return on investment for typical US citizens (middle class, professionals, anyone adding real value to the economy)..

    The old Keynesian stimulus idea was that any money spent (in that case in a bust, not the sort of present boom) will boost the economy. Trickle down "theory" embraces this notion that any and all money floating around the economy is the same. And there's something to this notion of all-stimulus-is-the-same.

    But far less, IMO, than many think. Especially now that so much of our economy is aimed not at creating value, but skimming it off the top.

    Imagine two investment funds:

    One holds billions for hedge fund types breaking up companies. Maybe add Perdue Pharma (main pusher of opioids), Enron gaming energy, a few of the suppliers faking material certifications, Shkreli since he has a cameo above, Trump Casinos, and just for the hell of it, Facebook.

    The other holds bank stocks financing vibrant local businesses, whoever cures cancer, the world's most carbon and cost-effective actual energy producer, heck - Janco, and also just for the hell of it, Amazon.

    Facebook and Amazon are wildcards, it's hard to know where they'll end, but IMO the real return for customers and society (and LONG term investors) is very different between the two investment funds -- even if they both start with the same amount of repatriated, trickled down, or whatever cash.

    It matters whether you piss money away or not (as Steve felt, that yellow trickle down). This was my problem with how we exited 2008 -- it was pretty much Keynesian stimulus for not-really-shovel-ready projects. It got us slowly out of the great recession, but we don't really have super productive infrastructure from all of that, paying a return each day. I'd agree with those who thought it was a B- to C+ effort, at a time when we needed an "A."

    Also -- instead of giving a trillion to a few big banks would have been a lot better (IMO) if we knew how to give it to local lenders, who knew their clients and would hold the loans, for credit-worthy local businesses and the like.

    There's lots not to like about Trump. Just yesterday, the revelation from the UK ambassador that he trashed the Iran deal just to spite Obama -- with absolutely no plan of where to go from there. But on the handling of the economy, it's certainly clear he's keeping up the any-stimulus-will-do notion even in good times.

    Far as I can tell the "plan" is to find or borrow quick pots of money (mainly debt), dump it in at the top, and enjoy the boom for a couple more years. I see little or no investment in the sort of jobs we'll need in the future and a trashing of our "equity" in everything from national debt and overseas capital to trade, climate, allies, trust in the US and dollar, even a respect for truth.

    It's a shame, too, since you, Steve, and I might agree we really did/do need sensible tax reform, repatriation of corporate cash, an end to tax breaks for shipping jobs overseas, and financial companies less able to game the system (adding no value, but extracting resources from the productive economy).

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    "Far as I can tell the "plan" is to find or borrow quick pots of money (mainly debt), dump it in at the top, and enjoy the boom for a couple more years."

    He's been doing that ponzi scheme trick for years. No suprise. Ultimate flim flam artist.

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    Quote Originally Posted by jim rozen View Post
    "Far as I can tell the "plan" is to find or borrow quick pots of money (mainly debt), dump it in at the top, and enjoy the boom for a couple more years."

    He's been doing that ponzi scheme trick for years. No suprise. Ultimate flim flam artist.
    So what's the diff between orange hair and your man obummer ? Bernanke didn't even borrow pots of money, he just conjured it up out of thin air then handed it over to the very same people who caused the 2009 depression.

    But we still get to pay for it ...

    The only difference I see is the frosting on the cake. Inside, same-o same-o .... flambé de dogge shitte.

    I do have a question tho .... why do we persist in calling Google Mickeysoft and Bapple "high tech" ? It's addition and subtraction. Plus none of their garbage actually works. They are about first-graders in the understanding or use of technology (except for spying, which google is pretty good at). All they are is white-shoes Madison Avenue hucksters. What's "high-tech" about that ?

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    Quote Originally Posted by PeteM View Post
    Seems to me the key thing separating these two notions, is the return on investment for typical US citizens (middle class, professionals, anyone adding real value to the economy)..
    Except the money injected into the economy has nothing to do with Keynesian spending. It is private capital that moved from from overseas accounts to the US.

    The windfall to the Treasury is a bonus, since that money would otherwise remain where it was.

    If you can't see the qualitative difference between the points I made, vs. slapping a meaningless label on something and dismissing it- well, clearly I am wasting my time.

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    Quote Originally Posted by jancollc View Post
    Except the money injected into the economy has nothing to do with Keynesian spending. It is private capital that moved from from overseas accounts to the US.
    ..except that it adds to "M1 money". Where velocity matters as well as amount, and "perception" of available coverage for loans matters as much as actual reserves NOT available for loans at all [1].

    So yes, it DOES affect money, banking, and all who traffic with either. Not because it necessarily trickles-down nor is shared.

    More akin to the tide flowing more water into a bay, and all boats being lifted, even though none of them has changed its hull displacement, sprung a leak, pumped bilges, altered mass of cargo, nor exchanged items from their cargo with each other.

    [1] Which is unlikely. MOST such reserves are NOT held in cash atall. Most are working to earn T-Bill rates or "money-market" rates at the very least. Others are but numbers representing a surplus that is real enough - but would require assets to be liquidated or loans called-in if they DID have to be managed as cash. Surplus - and those who mangle it - abhor the idle state of being.


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