“The media spotlight has recently been on Apple Inc. for shifting profits overseas to avoid U.S. taxes,” Charles Kane writes for MarketWatch. “In its international tax strategy, though, Apple is no different from other American technology companies, which (like Apple) began moving manufacturing overseas starting in the early 1980s.”
MacDailyNews Note: Apple does not “shift profits overseas.”
“Initially, U.S. technology firms that went abroad during this period were drawn by the lower labor, sourcing, and procurement costs. They also found they could eliminate exchange-rate risk by producing and selling in the same currency,” Kane writes. “But these companies soon discovered another important advantage of being global: favorable taxation.”
Kane writes, “Foreign countries, eager to become part of the high-tech boom started in the United States, began courting U.S. companies with very attractive tax deals. Ireland, for example, sent representatives from its development authority to the headquarters of high tech firms in the United States. These emissaries offered qualified corporations a 10% tax rate — less than a third of the U.S. rate. Thus was born the Celtic Tiger.”
“There is plenty of blame to go around for this unfortunate situation. Both major political parties and a series of administrations contributed to the inefficient corporate tax structure we have today,” Kane writes. “We now have the highest tax structure in the industrialized world. As a result, many American companies, particularly in the technology sector, have created tremendous earnings and cash flow by locating manufacturing and services in locations outside the U.S.”
“We have thus created jobs overseas that could otherwise have been American jobs. And then there are the lost jobs that foreign companies might have located here if our tax rates were more attractive,” Kane writes. “The solutions are obvious. Don’t tax repatriated funds so long as they are being used to create American jobs. And going forward, we need a reduced corporate tax rate.”
Read more in the full article here.
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