“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
GOP tax plan calls for cutting the corporate tax rate from 35 percent to 20 percent – September 27, 2017
Goldman Sachs sees $1 trillion in U.S. tax cuts coming – September 20, 2017
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
Apple could be primed for profit explosion under President Trump’s big tax cut – April 26, 2017
Analyst: Apple could double dividend, buy Netflix with repatriated cash under President Trump’s U.S. corporate tax changes – March 17, 2017
Apple raises $10 billion in debt ahead of President Trump’s repatriation tax plans – February 3, 2017
After Apple’s blowout earnings, the Street looks toward ‘iPhone X’ and President Trump’s tax reforms – February 3, 2017
President-elect Trump’s corporate tax reform expected to have some positive impact on Apple EPS – January 14, 2017
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
Barring a tax holiday, Apple will need to raise over $50 billion in debt the next 2 years – July 15, 2016
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
Apple CEO calls corporate tax rap ‘total political crap’ – December 18, 2015
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
The GOP tax plan, not Trump’s tax plan has massive tax cuts on corporations and small businesses. The poor, those in the 10% bracket have their taxes increased to 12% meanwhile the middle class is a fog of promises with no details – another tax hike.
We have but to look at the Bush tax cuts that extended into the Obama administration which produced nothing. Raise wages and get people back in homes instead of renting.
Sounds like harmonization.
In order to eliminate tax shifting, they’ll lower the US rate to 20%, and set a foreign tax minimum of about 20%. With no tax rate differences, there will be no incentive to tax shift.
This doesn’t affect Apple. Apple already is booking a higher tax rate than the ones proposed, about 25 to 26%. This affects whom the tax is paid to. In the past, almost all of Apple’s tax bill was to the US. Because of the EU rules, income earned in Germany could be booked in Ireland. The tax proposal would be territorial, the way most countries do it. So income earned in Germany will be taxed there.
Are you sure that this won’t impact Apple?
It appears to me that Apple would pay a bit less tax on U.S. profits, but could end up paying considerably more tax on profits outside of the U.S. The end effect is that Apple will pay 20% or so on all profits worldwide. The only question is the distribution of the taxes.
If the U.S. passes a tax bill that includes this provision, then it would make sense for every country to charge multinationals the same tax rate (your harmonization idea). Otherwise, more of the taxes would go to the U.S.
We need to thoroughly study the tax proposal when it is released. There can potentially be all kinds of unintended consequences in terms of the distribution of the tax burden and the total amount of tax revenue collected (i.e., impact to the annual deficit and accrued national debt). It had better not be a giveaway to the POTUS’ rich and powerful friends.
Another year is practically gone and Apple still can’t repatriate that overseas cash hoard with a tax break. That money might as well be on Mars. Apple will have to do more bond financing, yet again. So annoying. Apple’s share price is stuck in neutral without that cash in hand.
Boo hoo hoo. Managing all these bags of gold is hard work. Whaaaah, i’m tired of having my tax avoidance division keep telling me that governments of the world need money to provide services that the plebians demand! Why don’t my lobbyists get me another loophole like I ordered? Whaaaaaaa!
Keep your government hands off my corporate welfare !
The Republicans and Trump wasted the first 9 months of this year in their stupid attempts to rip healthcare away from millions. They just tried to ram a turd down our throats.
They should have led with tax cuts and infrastructure, both far more popular.
Trump is a loser, no knowledge of the policy details, no credibility, manufactures distracting controversies all of the time. Worst. President. Ever.
We will see if Trump and the GOP can actually produce anything good; at this point their past track record screams “no.” If they were smart they’d work with the Dems and come up with bipartisan solutions, the way the country wants it.
Obviously you aren’t a middle class subscriber to Obamacare or else you would be calling it a turd. Since when should the federal gov’t be involved in healthcare? Personally, I think this should be a State’s issue and the gov’t should get out of healthcare completely except to pass legislation.
Obamacare has its flaws but the GOP plans were worse. Like going to a doctor with a sore toe, and he cuts off your foot. No matter what one thinks of Obamacare, the GOP plans were turds.
Healthcare is complex, which is why the GOP was wrong to try to ram down a total rework down our throats, without hearings, amendments, etc. The fact is that Obamacare has also provided healthcare to millions who otherwise would not have it. So there’s good and bad with Obamacare, But the GOP and Dems should work together to improve it, not make things even worse, as the GOP would have done.
Bottom line is that the GOP should have led with taxes and infrastructure. And when trying to tackle healthcare should go the full, thorough, way instead of the absurd way they tried. I mean they tried 3 or 4 totally different plans, which shows the absurdity.
Tax plan making headway. Obama did nothing about this and look where we are at. Obama gave us Obamacare, and look where we are at. Obama sat on his ass about North Korea, and look where we are at. Obama failed to deliver tax reform and kept regulation at all time highs, and look what happens when Trump shows up …. huge, huge growth. Employment growth, stock market growth, on and on.
Obama is the worst stinking president the US has ever had, even worse than that moron Jimmy Carter. And poor Hillary, just the perfect butt of jokes.
GotTrump!
Under Obama, we had economic growth and recovery from the Bush recession. More employment growth and stock market growth than under Trump. And the good that has happened under Trump is due to what he inherited from Obama.
Obama lowered tax rates on the middle class. Obamacare has insured millions who otherwise would not have it.
Obama wasn’t perfect, but far better than Trump. Trump cannot string together a complete sentence, doesn’t know anything about policy or history, and is the most divisive president in history.
But hey, Trump did dedicate a golf trophy to the suffering people in Puerto Rico. Let them eat trophy!
You have stated so many mistruths about both Obama and Trump I hardly know where to begin, so this time I’ll leave it at that and give examples in general terms:
I noticed you did NOT mention the national Debt increase under Obama — more than every president going back to George Washington –COMBINED. You did not mention the skyrocketing health premiums, over 20 million without healthcare, taxes going up every year, Opiod epidemic, record murder rate in his hometown, record number of people out of the labor force, record number of people in poverty, record number of people on assistance, race relations getting worse, disrespect for police, free speech under assault and censorship on the rise — I could go on.
Disingenuous post carefully crafted to make Obama look 100% good and Trump 100%. The truth is out there and not as extreme partisan as you paint it.
Take off the rose colored glasses and you will see Obama accomplished a lot of negative acts and Trump in nine short months accomplished a lot of positive …
Trump 100% BAD.
My omission, my bad …
“Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash.”
Bollocks. It meant corporations had to pay their tax at some point, which would have benefitted the US infrastructure, education, health system, etc.. If you look at the big picture then the “new” tax system is simply a massive loophole for corporations and the rich to avoid paying tax.
If you really want to benefit “employees” then increase EVERYONES income by a fixed amount for once. A 2% increase might be $50 more a month for an employee, but $20,000 more each month for a manager. Why not give everyone $500 more each month? THAT would make a massive difference to those who need it most, and not change much for those who have more than enough anyway.
Socialistsayswhat?
Calling Trump’s paper a “Tax Plan” is hillarious. It’s yet another give away to the rich at the expense of the middle class and poor.
Not My president, bigots, fascists, and homophobes. He’s ALL YOURS.
Well, if you are a U.S. citizen Trump is your president.
Denial is not a river in Egypt …