“The U.S. is working with other major economies to curb corporate tax avoidance, an issue that has become a popular political cause in the U.K. and France. The Obama administration wants to prevent U.S. companies from being singled out by European regulators and to ensure that the U.S. doesn’t miss out on any taxes its companies start paying,” Richard Rubin and Jesse Drucker report for Bloomberg. “Obama’s efforts to win congressional backing for his tax proposals have stalled. That stalemate has turned the attention of companies and countries to the Organization for Economic Cooperation and Development, a government-funded group in Paris seeking to combat what’s known as base erosion and profit shifting, or the movement of income to low-tax jurisdictions.”
“In his sixth year in office, Obama can claim relatively few accomplishments on international taxation — an issue he used as a populist applause line during his campaigns and as recently as his Jan. 28 State of the Union address,” Rubin and Drucker report. “Obama’s proposals would limit companies’ ability to defer U.S. taxes on some income they earn overseas, impose a minimum tax on international profits and raise taxes on profits generated from intangibles such as patents… Still, the U.S. doesn’t want hard-to-interpret rules that would lead to expensive tax disputes for U.S. companies or rules that would undercut the U.S. tax base, Stack said.”
“Few in Washington expect much action from the White House and Congress this year on what has become a priority in other countries: cracking down on how multinational corporations such as Google, Apple Inc., and Yahoo! Inc. avoid taxes by shifting profits into tax havens,” Rubin and Drucker report. “Those moves by companies often reduce income taxes by moving profits to jurisdictions without a corporate income tax, including the Cayman Islands and Bermuda… They don’t have to pay the taxes until they repatriate the money, giving companies an incentive to pay as little as possible in corporate taxes and hold the money outside the U.S. Accounting rules allow companies to not count the U.S. taxes on those accumulated earnings, which now total about $2 trillion.”
“The U.S. has also been reluctant to make major changes through tax regulations, even as Obama talks about taking executive actions to sidestep Congress. In particular, he hasn’t repealed the so-called check-the-box rule, which effectively prevents the U.S. from taxing profits moved into haven subsidiaries, said Reuven Avi-Yonah, an international tax law professor at the University of Michigan,” Rubin and Drucker report. “The administration proposed repeal in 2009 and then dropped it after lobbying by companies including General Electric Co. and Johnson & Johnson. The Treasury Department could repeal the regulation without congressional action and hasn’t done so. There is ‘no chance of that, so they are not serious,’ Avi-Yonah said.”
Much more in the full article here.
MacDailyNews Take: The U.S. corporate tax rate is way too high. Obviously.
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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