“On the last page of a nine-page tax plan that calls for slashing business rates, President Donald Trump and congressional Republicans proposed a little-noticed, brand-new tax that may hit companies like Apple Inc.,” Lynnley Browning reports for Bloomberg. “It’s contained in one sentence: ‘To prevent companies from shifting profits to tax havens, the framework includes rules to protect the U.S. tax base by taxing at a reduced rate and on a global basis the foreign profits of U.S. multinational corporations.” The rate and formula aren’t specified, but that lone sentence carries multibillion-dollar implications for multinationals.'”

“Trump and congressional leaders buoyed U.S. stocks and seized national attention last week as they released a broad tax plan that would cut the corporate rate to 20 percent from 35 percent while also cutting rates for pass-through businesses and individuals,” Browning reports. “It’s not all bad news for multinationals. On the positive side, the framework would allow them to bring back to the U.S., or repatriate, years’ worth of foreign earnings after paying a low tax rate — perhaps 10 percent –on them.”

“And even the new minimum foreign tax might not be as bad as it could have been. Four tax experts told Bloomberg News the framework’s wording suggests that despite the tax’s goal, multinationals will be able to keep using sophisticated tax-winnowing techniques and tax havens. While they may still face billions of dollars in new tax payments, it won’t be as bad as it could have been for them thanks to one word in the framework’s language: ‘global,'” Browning reports. “Here’s a general idea: Congress would set a low tax rate — say 15 percent — that would serve as a minimum rate for companies on their offshore subsidiaries’ earnings. Any multinational that paid more than that minimum to foreign governments wouldn’t owe the tax in the U.S. But if a company’s overseas taxes fell below the minimum — a sign that it made heavy use of tax havens — the company would pay the U.S. the difference.”

“The word ‘global’ means that the minimum tax would be calculated worldwide — an aggregate approach that would account for high-tax countries like Germany along with tax havens,” Browning reports. “Currently the U.S. taxes corporate profits worldwide, no matter where they’re earned… Robert Pozen, a senior Brookings Institution fellow who is the former chairman of MFS Investment Management and the former president of Fidelity Management & Research Company, argued that Trump’s approach — which he called ‘modified territoriality’ — would prevent offshore profit shifting that would arise in a pure territorial system that doesn’t tax any foreign earnings.”

Read more in the full article here.

MacDailyNews Take: Obviously, we’ll have to wait for the whole thing to shake out and see the actual rates and details. It would certainly be great, and long overdue, if the U.S. can modernize U.S. corporate taxation and come up with a workable solution that benefits the country and U.S. companies and their many millions of employees.

As we’ve been saying for many years now, the U.S. corporate tax rate is obviously way too high and exceedingly anachronistic.

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

SEE ALSO:
President Trump’s tax cuts could be YUGE for Apple – September 28, 2017
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Apple will eventually bring billions of dollars back to the U.S. under President Trump’s tax reform plan – July 21, 2017
President Trump’s tax reform plan includes deep cuts in corporate taxes – April 26, 2017
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After Apple’s blowout earnings, the Street looks toward ‘iPhone X’ and President Trump’s tax reforms – February 3, 2017
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Exploring Apple’s tax situation under U.S. President Donald Trump – November 21, 2016
Morgan Stanley: Apple stands to benefit the most from President Trump’s corporate tax plans – November 11, 2016
Apple and U.S. President-elect Trump: Can a tax cut for overseas cash heal wounds? – November 10, 2016
Donald Trump plan calls for cuts in corporate taxes, personal income tax rates – August 9, 2016
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Cramer: Apple’s Tim Cook is ‘patriotic’ on taxes – December 21, 2015
Apple CEO Tim Cook is absolutely right – and wrong – on U.S. corporate tax policy – December 20, 2015
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Apple avoids $59.2 billion U.S. tax bill – October 7, 2015
U.S. companies now have $2.1 trillion overseas to avoid corporate taxes – March 4, 2015