“Senators Rand Paul and Barbara Boxer are proposing a tax incentive for U.S. companies to bring home their offshore cash stockpiles and pledging to use that revenue to fund highways,” Richard Rubin reports for Bloomberg. “The bipartisan proposal would let companies repatriate money parked overseas at a 6.5 percent tax rate, a steep discount compared with existing law. ‘This would mean no new taxes, but more revenue, and it is a solution that should win support from both political parties,’ Paul, a Kentucky Republican, said in a statement Thursday in Washington. Boxer is a California Democrat.”
“Under current law, U.S. companies must pay the full 35 percent tax rate when they bring home profits from overseas, after receiving credits for foreign taxes they have paid. Because they can delay that tax until they repatriate, the tax code gives them an incentive to book profits overseas and leave them there,” Rubin reports. “It’s not clear that the Paul-Boxer plan would actually raise revenue. The nonpartisan Joint Committee on Taxation, the official scorekeeper for tax bills, said last year that a similar proposal would raise money in the first few years and then cost the government a net total of $95.8 billion over a decade. That’s because companies would interpret a repeat of a tax holiday enacted in 2004 as a sign that they should shift even more profits outside the U.S. in anticipation of another holiday.”
MacDailyNews Note: Apple currently has $178 billion dollars stockpiled, 89% of which, or $158.42 billion remains offshore.
“U.S. companies have stockpiled about $2 trillion outside the country, in part because that’s where they’re earning profits and in part because they have used accounting maneuvers to book profits in low-tax jurisdictions,” Rubin reports. “Companies including Apple Inc., Qualcomm Inc. and Google Inc., all based in Boxer’s home state, lobbied Congress in 2011 for a repatriation tax holiday. They didn’t succeed.”
Read 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
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