“Washington is buzzing this summer about inversions, and the chatter has nothing to do with the weather,” Richard Rubin, Derek Wallbank, Drew Armstrong, and Zachary R. Mider report for Bloomberg. “This week, Treasury Secretary Jacob J. Lew and Senate Majority Leader Harry Reid became the latest to press for a crackdown against corporate inversions. These are when U.S. companies switch their addresses to low-tax nations like Ireland, often through a takeover of a smaller company, reducing their tax bills while typically keeping their headquarters and listings in the U.S.”
“Democratic lawmakers were coalescing yesterday around their resistance to these deals, as a possible election-year rallying point. Reid, of Nevada, called for comprehensive rules against such changes of address,” the quartet reports. “A handful of bills working through Congress already include language aimed at cracking down on the practice. White House Press Secretary Josh Earnest said President Barack Obama will discuss the issue more in coming weeks.”
“Senate Finance Chairman Ron Wyden, who will chair a hearing next week on international taxes and inversions, has also hardened his stance. The Oregon Democrat, who had until recently preferred putting retroactive limits on inversions as part of tax-code changes that could be a year or more off, said yesterday he was exploring how the ‘inversion loophole’ could be plugged sooner, a move that is meeting Republican objections,” the quartet reports. “Democrats are seizing on this potential campaign weapon ahead of their midterm-election bids to defend their control of the Senate in the face of foreign policy crises, a slow economic recovery and sagging popularity of Obama’s health-care law.”
“Republicans generally shrugged off the challenge as a misguided effort to treat a symptom of what they see as a broader disease. The party’s leaders want a new tax code, with lower corporate tax rates than the current 35 percent — the highest in the industrialized world — to keep companies from bolting to lower-cost venues in a bid to stay competitive,” the quartet reports. “‘The administration runs a risk — I mean, here we are well into the president’s second term and he continues to blame others for his own economic failures and underperformance,’ said Representative Peter Roskam, an Illinois Republican, in an interview.”
“The U.S., unlike most major economies, taxes the worldwide income of American-based companies. After those U.S.-based companies pay taxes to governments overseas for income earned elsewhere, they can defer residual U.S. taxes until they repatriate the money,” the quartet reports. “That system has created an incentive for companies to find ways to book profits in low-tax jurisdictions and leave them there. U.S. companies such as Apple Inc. have come under scrutiny from lawmakers for assigning profits to subsidiaries in low-tax or no-tax jurisdictions.”
Much more in the full article here.
“So far, Republicans as well as some influential Democrats in Congress have favored limiting inversions through a comprehensive overhaul. Some of those lawmakers believe a quick fix could worsen U.S. companies’ position,” John D. McKinnon reports for The Wall Street Journal. “‘I don’t want to be part of legislation that ramps up the competitive disadvantage of being a U.S.-based company or makes U.S.-based companies more attractive targets for foreign takeovers,’ Sen. Orrin Hatch of Utah, the top Republican on the Senate Finance Committee, said in a recent statement.”
“Finance Committee Chairman Ron Wyden (D., Ore.) also hasn’t pushed for a quick fix. In a Wall Street Journal op-ed in May, he said that ‘this loophole must be plugged,'” McKinnon reports. “But he indicated that he is still hopeful for a comprehensive tax rewrite that would limit inversions on a retroactive basis.”
Read more in the full article here.
MacDailyNews Take: Apple CEO Tim Cook, May 21, 2013:
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.
Related articles:
Rupert Murdoch criticizes excessive regulation, corporate tax policy for stymieing G20 growth – July 17, 2014
EU’s investigation of Apple’s taxes isn’t going to cause the company any problems – June 13, 2014
U.S. SEC ends review of Apple taxes, overseas cash – October 5, 2013
Obama, world leaders push big companies like Apple, Google to pay more taxes – September 6, 2013
Will Obama be “discussing the issue” on the front nine, at the turn, or will he wait for the back nine?
The mostly Republican controlled Congress has the clear jurisdiction to make and change laws on tax policy. That unfortunately won’t happen because of the current Congress’s aversion to “actually doing anything.”
What’s the President got to do with this? While he often asserts “executive action” to sidestep Congressional lethargy, the Constitution is abundantly clear that only Congress has the power to enact tax policy changes. I see no logical reason for you to insert your anti-Obama fetish into this particular situation. The President can’t enact tax policy changes, all he can legally do is talk about it.
“The mostly Republican controlled Congress?”
The U.S. congress is currently split. That is why nothing “gets done.” (Nothing happening in D.C. isn’t necessarily bad, by the way.)
Not true. In the Senate, rules let the minority party stop virtually all action, if they so desire. And the GOP so desires…
Sorry, that’s wrong. The Democrats changed those rules which used to require a 60% vote to a simple majority vote. Now the Republicans control the House and the Democrats control the Senate, and Obama is just off doing his own thing via Executive Orders (even the Democrats aren’t very happy with him these days).
Incorrect. This change only applied to judicial nominations. Witness the failure of the Hobby Lobby bill earlier this week. It failed even with majority support.
All members of Congress don’t want any ‘rock the boat’ actions until AFTER the November elections.
And the campaigns for the 2016 elections start in December, so don’t expect much then either.
The Republicans vowed to “just say no” as long as Obama was President. They’re sticking to that pretty tightly.
This goes to show how out of touch the Dems are lately. The Republicans have been crying about the need for corporate tax reform for a long time. Now we have the Dems swooping in, once again, to solve the symptom not the underlying problem.
Yeah, check out Kansas to see the Republicans can fix things!
Will do; right after I finish the post-mortem on Detroit
Yeh – right-wing style tax cutting, funding cutting is working SO well for Kansas. Recently got their credit rating downgraded, didn’t they?
hahaha
More talk of tax reform in Washington. I wouldn’t hold my breadth waiting for action.
First 2014, Then 2016.
I’ve been on this blog/forum for quite some time. I distinctly remember a user named First 2010, then 2012, which in November of 2010 changed to first 2012, then 2014, only to change yet again in November 2012 (or thereabouts) to First 2014, then 2016. How many more American election cycles will we have go through (with this user diligently, and wishfully changing user name) before it becomes obvious to everyone (including the user himself) how embarrassing this persistent (and apparently futile) changing has become?
It’s now a tired old meme, this First… Then….
We’re screwed from both sides at this point in time. I can only support sane, honest and insightful third parties these days. The two party system in the USA had driven us into self-destruction.
And sorry folks who still think one of the two parties is better than the other: They’ve both proven themselves to be criminal and WORTHLESS. I’d happily see both parties drop dead with intelligent third parties rising from the ashes. If that’s too complicated a thought for you, go rant about it to the mirror please, NOT me.
What happen to 2012,…oh yea.
Well, republicans are what we used to be able to call a retard.
You know, the short bus riders who generally are pretty slow and do socially inappropriate things.
My snarky terms:
DemoCRAPS
RETARDlicans
Sarah Palin is coming to get us. Ooo. Be scared. 😆
I personally like the Repugnicans.
The liberal parasites who suck the life out of businesses is back at it I hear!
Interesting how arch enemy of foreign income tax reform Carl Levin is keeping his big mouth shut.
Reid needs a clown car.
Reid only requires “a” car.
“Comprehensive” again!
A word that should be dropped from a politicians list of words too big for them to grasp and too open ended to ever know if they understand the subject.
Does this mean that in reality Apple is an Irish company?!
Not in the USA, just in the rest of the world. The whole thing is a sick joke because of certain malefactors in #MyStupidGovernment who insist upon over-taxing foreign made profits.
Look at Medtronic; they bought a Irish company and are moving their HQ to Ireland.
And look at the tax bill this is creating for long-time Medtronic shareholders!
These corporations made their great wealth in the US, but it’s not enough. For decades manufacturing jobs have been going overseas and now even white collar jobs. Not to mention H1B foreign workers being bought in the US to replace US workers, but that’s not enough.
Then there are tax loopholes that allow many corporations to pay a small tax rate even almost no taxes during some years, but that’s not enough. Now they want to move their address overseas just to shave a few more percentages off their taxes.
Meanwhile the American worker is broke, has lost their home and is struggling with jobs that don’t pay enough to live let alone save and is struggling to purchase items that are made by modern day slaves.
Christmas 2013 was bad, followed by a retraction in the economy in the last quarter by 3.0%. Retail sales are down. Yet corporation are only concern in squeezing another percentage in profit never realizing their destroying themselves and this country.
Way to simplistic of a comment. The companies this issue affects in the least bit are global companies like Apple, GM, GE, Boeing, Microsoft, IBM, McDonalds, Dow, etc. To say they made their wealth in the U.S. is incorrect. While they certainly were successful in the U.S. before branching out globally, they derive a large part of their profits from overseas. I believe Apple had somewhere around 50% or more of its sales were outside the U.S. last year.
Manufacturing jobs went overseas for a wide variety of reasons, everything from stricter and expensive environmental controls to cheaper labor and cheaper materials. And while some foreign workers come to the U.S., there are also plenty of U.S. workers to go overseas to work in U.S. and foreign companies.
Your view is very myopic.
So what you just said indicates how little you know about how Apple operates.
Apple pays billions in taxes each year for US sales. More billions for outside sales. And yet congress wants even more billions…….. Just because Apple has them. So sad.
The reality is that politicians on both sides of the fence are too scared to do anything about tax reform. They are too worried about the effect on the lobby and their financial support to rock the boat. For every loophole there are multiple lobbying groups making sure the legislation stays intact. Politicians may talk loudly about tax reform but no-one has the balls to do anything about it.
Here is the key problem: the US taxes all the income of a corporation whether than income originated within the US or outside the US. Our tax code handles individuals the same way.
Therefore, if Apple makes and sells and iPhone in China, they must pay an income tax to China on the profit of selling the iPhone and they must also pay the US for the profit made selling that iPhone. The same applies to individuals. If you are a US citizen who works in Canada, you pay Canadian employment taxes and then you must pay US income taxes. Now the US tax code has a “loophole” for individuals that let you deduct the first $X you make in a foreign land, but how long that loophole will last when our government is so hungry for money is anyone’s guess.
So with our unique tax code, is it any wonder that US companies are doing all kinds of gymnastics to avoid what they view as an unfair tax system, a system where the US demands it money, whether or not the money was even made in the US.
And while people complain that Congress has lowered corporate tax rates since Reagan, the reality is the rates are still high and the U.S. is virtually the only country in the world that taxes profits made overseas. The true reason for the entire “loophole” problem (it’s not a problem, except for the U.S. Treasury) is that U.S. tax laws are at odds with the rest of the world, and U.S. companies have simply figured out a way to avoid being taxed — legally.
Just the same way as you or I do on our personal taxes.
The Republicans and “Business Friendly” Democrats (in name only) love to trot out the line about the high rate of US corporate taxation. On paper it is high and in reality it is not. When the numbers compared are effective (not listed) tax rates, our are not higher than average for OECD countries.
As usual with Republicans: figures do not lie, but liars figure.
If that is so, then why are companies spending the bucks to move their HQs to overseas locations? For the climate? Even if the tax rates are the same, the fact that companies would have to pay taxes to China, and then pay US taxes on the same revenue when they take the $ back to the US is reason enough. No other country does that.
There are places with lower taxes, but chasing them is a zero-sum game. The point is that US taxes are not the high margin burden that we constantly hear preached at us.