“President Barack Obama’s fiscal 2016 budget will seek new taxes on trillions of dollars in profits accumulated overseas by U.S. companies, and a new approach to taxing foreign profits in the future, but Republicans were skeptical of the plan on Sunday,” Jeff Mason and Kevin Drawbaugh report for Reuters. “Reviving a long-running debate about corporate tax avoidance, Obama will target a loophole that lets companies pay no tax on earnings held abroad, the White House said. “But his proposal was certain to encounter stiff resistance from Republicans.”
“In his budget plan to be unveiled on Monday, Obama will call for a one-time, 14 percent tax on an estimated $2.1 trillion in profits piled up abroad over the years by multinationals such as General Electric, Microsoft, Pfizer Inc. and Apple Inc,” Mason and Drawbaugh report. “He will also seek to impose a 19 percent tax on U.S. companies’ future foreign earnings, the White House said.”
“The annual budget proposal is as much a political document as a fiscal roadmap, requiring approval from Congress. Given Washington’s current political division, much of what will be laid out on Monday is unlikely to become law,” Mason and Drawbaugh report. “On proposed tax increases for the wealthy and large companies that are part of that package, Paul Ryan, the top Republican tax writer in the House of Representatives, said on NBC’s Meet the Press: ‘What I think the president is trying to do here is to, again, exploit envy economics.'”
“Ryan aide Brendan Buck said in an emailed reply to questions that tax reform should be about simplifying the code and lowering rates,” Mason and Drawbaugh report. “‘If that’s the approach the administration is willing to take, there may be room to find common ground,’ he said. ‘There won’t be, however, if the president instead tries to sock American businesses with big tax hikes just to increase spending and add even more complexity to the code.'”
Read more in the full article here.
“A proposal last year from Dave Camp, then the Republican chairman of the House Ways and Means Committee, would have taxed the one-time profits at 8.75 percent for cash and 3.5 percent for other assets. Camp didn’t use a pure minimum-tax system for future profits, and still, his plan didn’t get universal acclaim from U.S. multinational corporations,” Richard Rubin and Jonathan Allen report for Bloomberg. “Under current law, U.S. companies owe the full 35 percent U.S. tax on income they earn around the world. They get tax credits for payments to foreign governments and don’t have to pay the U.S. tax until they bring the money home.
That system gives companies an incentive to push profits outside the U.S. and leave them there. Apple Inc. and Google Inc. are among the many U.S. companies doing that, and companies’ disclosures indicate how little foreign tax they pay.”
Read more in the full article here.
MacDailyNews Take:
Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth. – Apple CEO Tim Cook, May 21, 2013
[Thanks to MacDailyNews readers too numerous to mention individually for the heads up.]
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