In addition to this, there's little citizens abroad can do to affect change in the US. Sure, we can vote; your "residence" for voting purposes is presumed to be where you last lived in the US. But say I write my Congressman about an issue that matters to me as one of his constituents who lives abroad? I'd probably safely guess I'm the only person who'd have done so within his district. I'd guess there are dozens of people in my situation in his district.
From across the US, there are estimated to be 3 to 6 million non-military American citizens living abroad. That's more than a number of states. Yet any hope of responsive representation is a fantasy.
Part of the hardship of deciding to live abroad, I suppose.
edit: State Dept. estimated 9 million abroad in 2016.
We still don't even have representation for the 680k people living in Washington DC, also more populous than a number of states. So sadly I'm not optimistic.
The 580k people of Wyoming have two senators and a house representative, while DC gets one non-voting representative. It's somewhat absurd.
Imagine if the EU also did this. It would go a damn long way to ending this absurd practice of offshoring profits.
Let’s not forget the problem that not all tax systems are very compatible, they all define income differently, some of them rely more on taxes that aren’t income based.
It's also worth noting that there has been and is a strong effort to harmonize accounting across countries (eg GAAP). Countries might tax differently but that really doesn't matter since you're just slicing up the same pie differently.
Don't get me wrong: this isn't simple. For one thing, once a company likes Apple gets into a position of choosing how to divide up $20B in taxes between countries, this gives them a lot of power. Countries will try and incentivize them to pay taxes to them instead of someone else.
Again there is precedent for this sort of thing and arrangements can be treated by the like of the EU or even the WTO as unfair tax subsidies. But it could get complicated. Like what if Ireland decides to exempt Apple from sales taxes and the UK decides to exempt Apple from payroll taxes to incentivize them to pay taxes their instead of somewhere else?
This is one reason why it'd be important to, at the same time, establish a minimum baseline for what taxes a multinational owes in each jurisdiction. The fact that a company can do billions of pounds in business in the UK and report all that income Ireland thus paying a few million pounds in taxes each year is ridiculous.
How about this for an idea: establish how much revenue comes from each country based on the source so if someone in UK hands you money then that money is attributed to the UK. Divide that by total global revenue and then at least that percentage of profit has to be taxed in that counry.
So companies like Amazon which are profitable domestically but are losing money overseas would pay taxes on profits from US sales to countries where they're losing money?
Presumably companies would just find ways to have high revenue and little to no profit in low tax countries.
Laws can be written to say things like "substantial operations" in the US. Software engineers tend to have a problem with the discretionary and subjective language that is common in the law. But such language would allow the likes of the IRS to capture most of the squirrelled trillions. And if some of it isn't who cares?
In case you're not from or familiar with the US system, there are countless examples of this. Take sales tax. By the US constitution, the Federal government has the right to tax interstate commerce. The states don't. This led to a problem in the Internet era where people were shopping online and Internet retailers were under no obligation to collect state sales taxes. Technically consumers were liable for them anyway (so-called "use taxes") but many never reported them.
Companies with a presence in the state however were obligated to collect those sales taxes as their presence made them subject to state laws. This is why if you shop from B&H or Adorama you only pay taxes if you live in the state of New York (NJ too for Adorama IIRC).
But some years ago the state of New York went after the likes of Amazon with a so-called "Amazon tax". Such a move by the states was inevitable and I believe now Amazon collects sales taxes everywhere. This puts them on the same footing as the likes of Walmart.
So there are still retailers around that are small enough they don't merit the Amazon treatment but who cares? The point was to get to a "good enough" solution rather than a perfect solution.
If you eliminate corporate income tax and compensate by making captital gains and dividends ordinary income so you paid regular income tax rates on them, you’d encourage more US investment. There would be no repatriation or tax loophole issues. Hundreds of thousands of tax accountant accountants would be freed to work on actual value creating activities.
Apple shareholders lose 50-70% of dividend payouts to 5 layers of taxes. That’s true of the wealthy as well as the poor retirees on fixed incomes. Eliminating corporate taxes means the retirees pay very little tax while the wealthy still pay over 40% state and federal. That’s what progressivity should look like.
That some companies are getting low effective tax rates largely comes down to incompetent tax regulation in the EU and a few of its member states. If they really want that money so bad, they can change their laws. The US shouldn't try to take it until they do. If nothing else, when the EU does get around to fixing its laws it would be a nasty shock to the department of the treasury as that money stops flowing in.
Samsung could invest more in more opportunities, while Apple would get eaten away.
The US already taxes corporate worldwide income. Eliminating the deferral would cause every US multinational corporation to move its parent company overseas. The tax advantages would be humongous.
The US already has the worst corporate income tax structure, not only one of the highest rates, but also taxing worldwide income. We should be making it better to attract more capital/jobs, not worse.
So this wouldn't be taxing borrowing. If you had no foreign profits then you pay no taxes. The point here is that companies borrow are near-zero interest rates because it's MUCH cheaper than repatriating profits and paying 35% tax on them. I can't blame them for that either.
What I'm saying is that borrowing in lieu of repatriating profits basically is repatriating profits and should be taxed as such.
Just stop taxing corporate income, it’s a corrosive tax that makes us poorer by driving off investment.
Apple doesn’t need to manufacture in the US. It doesn’t need to base most marketing/sales/finance in the US. It could leave just software and design in CA, and honestly report far lower US profits, and it wouldn’t owe the US another dime on foreign profits.
In fact, given 2/3s of their profits are international, they should do this now. Why pay the US an additional $10B a year in taxes on computers and phones made in China and shipped everywhere but the US?
Under current tax law, US corporations pay taxes on any income generated in another country. There is of course a loophole with regards to re-investing profits, but in general, companies have a tax liability on any profit they make anywhere in the world.
In the article it talks about 3 different classifications of foreign income. Interest/Passive Income (has to have tax paid on it), non-reinvested income and re-invested (or promised to be) income. The 3rd category is the biggest loop hole, but the first 2 make a company pay taxes on that income to the US Treasury (after foreign tax credits). The third category basically is where all the deferred money sits - as long as the company promises it will be using that profit to invest in foreign parts of the company.
Would you then also force Samsung to pay US taxes on all profits it made in Korea and elsewhere? The same for Huawei and the profits it makes in China? There are some obvious reasons why no other developed country in the world has a corporate tax system like the US. We should try to reform it, not actually make it worse.
Are you sure ? Most of the developed world tax resident individuals and corporates on worldwide income. US is only unique in taxing non-resident individuals. Very few developed nations have territorial taxation such as HK, SGP and Panama.
Yes, citizens are taxes on worldwide income, but not corporations.
>...US is only unique in taxing non-resident individuals.
The US and Eritrea.
>...Very few developed nations have territorial taxation such as HK, SGP and Panama.
I don't think that is correct:
>...As of 2012, 28 of the 34 current OECD member countries (82 percent) have adopted territorial tax systems that exempt 95-100 percent of qualifying dividends received from foreign affiliates resident in some or all countries. Twenty countries exempt 100 percent and eight exempt between 95 and 100 percent of qualifying foreign dividends.
>The number of current OECD member countries with territorial tax systems has doubled since 2000.
http://www.techceocouncil.org/clientuploads/reports/Report%2...
The ones who do tax worldwide income also have lower rates than the US.
>...Research by Reed College economist Kimberly Clausing [PDF] and others has found that high rates in the United States have had a measurable effect on encouraging firms to invest more in low-tax countries than they otherwise would have.
https://www.cfr.org/backgrounder/us-corporate-tax-reform
https://www.ntanet.org/NTJ/62/4/ntj-v62n04p703-25-multinatio...
Where it starts to go bonkers is for US citizens and PRs who live overseas. They still have to file taxes with the IRS for all worldwide income and report foreign assets and income as if they were present in the US. They get a certain amount of income (<$100k) each yeah exempted from US income taxes. Most countries do not do this.
My first problem is this: why exactly can't we treat companies the same way? I would be all for a 20% corporate tax rate if it meant a tax on worldwide income with credits for any taxes paid to foreign governments... exactly like individuals are treated. Why isn't this on the table? Is it that hard?
Second problem: in this world of multinationals and particularly when dealing with IP, companies seem to have free reign to book income in any country they like. Like any sales in the UK (and probably the EU as a whole) are reported to Irish subsidiaries.
To me this is fundamentally wrong. In other instances this is called transfer pricing and is illegal. For completeness, the classic case of transfer pricing is this:
Acme Inc buys a sofa from China for $200 in China and sells it in the US for $1000. That's $800 taxable profit right? Not so fast. Acme Inc instead forms a subsidiary in the Cayman Islands who buys that sofa from China for $200 and then sells it to the parent company for $990. Now only $10 is taxable in the US and $790 is taxed in the Cayman Islands at a zero or near-zero rate.
Now if that money is ever repatriated it's taxed. Thing is, it never is. Not until an ill-advised tax holiday and then the whole cycle repeats.
This brings me to the third problem: to get around the fact that all their money is offshore, companies borrow money in the US, which up until 1-2 years ago was at zero or near-zero levels. This debt covers their expenses and saves them from repatriating foreign profits and paying tax on them.
So why exactly don't we treat ever $1 borrow as repatriating $1 in foreign profits and tax it?
Now that would be true tax reform. Well, if we also got rid of the noticeably absent carried interest tax credit.
What a joke.