

Google Joins Apple in Push for Tax Holiday - zerostar07
http://www.bloomberg.com/news/2011-09-29/google-joins-apple-mobilizing-lobbyists-to-push-for-tax-holiday-on-profits.html

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iamelgringo
Suck it up, boys. Pay your taxes like the rest of us. You're sitting on huge
war chests of cash. You can afford to contribute a little bit of that to the
common good.

US companies in general are sitting on $2Trillion in cash. Productivity is sky
high, because of all the lay offs across the economy, and profits are
generally up across the board in most sectors of the economy.

US companies aren't spending because they don't want to spend. They aren't
hiring because they are productive enough and are profitable enough without
hiring. They are also scared because of all the uncertainty in the financial
sector, not necessarily because of the high taxes.

The few people that are actually putting money to work in this economy are
angel investors and VC's by giving small engineering teams small amounts of
cash as well as leeway to experiment at building interesting products.

~~~
sunsu
I don't consider paying taxes to a bloated and inefficient government to be
the "common good".

~~~
erikpukinskis
Do you ever receive packages from UPS? Do buy food from a grocery store?

How do you think those things get paid for? You really think the $2 per pound
you pay for tomatoes includes the true cost of growing a tomato and getting it
into your car? If so, I've got a bridge you might be interested in...

~~~
kiba
Some people are not grateful for the roads that government build, like critics
of suburban development, enemies of car culture, etc.

~~~
thematt
Please stop promoting this nonsense that our current level of taxation is
needed because of infrastructure needs. Transportation accounts for a measly
4% of the federal budget. Most of our tax dollars go towards military and
paying for the old people in society, both of which are politically-charged
budget items that politicians refuse to address.

<http://www.investorguide.com/taxtrackr/>

~~~
lurker19
Lowering taxes does not stop the military. Spending is one side, taxing is the
other. Bills that run up must be paid, or war fought over them. The solution
to overspending is to find a way to stop the spending.

Regarding old people, as a group they worked pretty hard to build the modern
world and its conveniences and efficiencies that we enjoy, so I don't mind
paying them dividends.

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vsl2
Given the past experience with the 2004 tax holiday (little economic
investment effect), the current proposal should be rejected. And to allow
another tax holiday only sets the expectations that additional ones can be
lobbyed for in the future, meaning these companies will again hoard foreign
profits offshore in hopes of repeating this request again and again and
thereby depriving the government of timely tax revenue.

This is a quite blatant attempt by these companies to game the tax system for
their own (not public) benefit. As others have stated, these companies
obviously held the foreign profits abroad hoping to have/create this type of
lower tax opportunity to bring back those profits.

However, I don't blame these corporations for trying this - corporations' jobs
are to make and keep as much money as possible, mostly in response to
shareholders' desires for greatest economic returns. Anyone who owns stock in
Apple and Google is a part of the reason for this attempt. If this tactic
works, the market value of Apple and Google will increase and isn't that what
essentially all shareholders want? Frankly, if these companies voluntarily
paid all taxes without trying to find ways to minimize them, most shareholders
will be furious at management.

Government, through its various corporate/tax laws, sets the limitations on
what is permissible and not for corporations, and it hopefully tries to do it
in the way that maximizes overall public benefit (balance regulation against
enough corporate freedom to incentivize economic growth). The problem I see is
that special interest groups have disproportionate power through buying
influence. In order to prevent recurring instances of this same situations,
the government should firmly show that it will not grant tax holidays now or
in the future (then maybe companies will bring foreign profits back right away
to the US, thereby paying taxes on time and maybe hopefully spurring economic
investment).

My Conclusion: Companies (at least public companies) aren't wrong to try to
maximize their value in every way within the controlled environment created by
governments. The government should act in the way to incentive corporate
actions in the best interests of the public (whether it be more tax dollars or
economic growth or another objective). Just say no to the tax holiday.

~~~
lurker19
The corporations' managers cross the line from self-interested to sociopatgic
when they pass from enjoying current laws to lobbying (bribing) for new laws
to suit heir interests.

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gwright
I don't know enough about this particular tax rule to say something useful but
on the general idea of a 'tax holiday' I do have some thoughts.

Ad-hoc government policies are wrong. Tax holidays, cash for clunkers, amnesty
for illegal immigrants, tax credits for favored businesses, loan-gurantees for
that new stadium or 'preferred' manufacturers (e.g. Solyandra), health care
'waivers' for certain companies, are all examples of ad-hoc government.

These sorts of policies shred the idea of equality under the law, encourage
rampant lobbying in order to gain 'legal' favors, enable politicians and
bureaucrats to wield power preferentially, reduce the predictability of the
legal and financial environment (taxes, fees, licenses, etc), and skew
economic decisions to fit into legislative time windows.

Laws should be uniform and consistent rather than moving targets with varying
applicability.

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orijing
I totally agree. Not only does it make the tax code much more complicated than
it needs to be, but it also discredits the "fairness" of taxes, damaging the
very legitimacy of it.

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lubos
yep. don't be evil (but only when it suits us)

anyway, this is absolutely unacceptable. those corporations knew what they
were doing right from the beginning. they kept their profits overseas and were
hoping government will decrease corporate tax at some point. it didn't happen,
now they are applying political pressure so they don't have to pay the same
tax rate as rest of America. THIS IS BULLSHIT and is not fair to rest of the
society. damn you Google, Apple and Cisco

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adaml_623
Here's a better idea. Google and Apple take their taxes back to the US AND
they pay tax on those profits. That would definitely help the economy and the
budget.

It's so sad that corporations can't seem to actually apply ethical judgements
in situations like this. Apparently the shareholders are better served by
overseas unrepatriated profits than by actually receiving dividends which have
had tax paid on them. And having a national government that can fund the
infrastructure for their US offices.

(Not a tax laywer so reality may differ from opinion)

~~~
SamReidHughes
_That would definitely help the economy and the budget._

And hurt other countries' economies. You have a strange sense of ethics.

~~~
ajays
Why should they hurt anyone else? The money's just sitting in a bank
somewhere.

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kalleboo
> Though the studies found that money brought home in 2004 ended up benefiting
> a narrow set of shareholders, support is growing in Congress for the tax
> holiday as companies expand their roster of lobbyists.

It's really sad how U.S. government policy is now so openly for sale to the
highest bidder.

~~~
mcantelon
If what was going on in the US took place in another country we'd call it
corruption and bribery, yet we're supposed to accept the current rule by
lobbyists and campaign donations as acceptable. It seem inevitable that the
increasing economic inequality and lack of real democracy will lead to
significant unrest.

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jimworm
The title of the article should be "Google, Apple now powerful enough to hold
the entire world to ransom". Given the numbers in the article, that's ~$520
billion of tax revenues they're withholding from the state, and ~$1.5 trillion
of liquidity they're withdrawing from Ireland or wherever (someone check the
numbers?).

The thing going for the US is that it's still a good place to spend that
money, otherwise they wouldn't be contemplating repatriation in the first
place.

Arguably, if these companies steadfastly hold on and do not repatriate their
funds without a tax holiday, their shareholders should punish them for only
making imaginary money... not that it'll hurt them in a real way.

If the US were to grant this tax holiday, they should've set a 0% (or 5.25% or
whatever) corporate tax rate to begin with. At least it'll be fair to
everyone.

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wildmXranat
How is this idea even on the table considering current deficit budgets.
Regular people don't have the luxury of pulling a fast one on the IRS and pay
their dues.

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RexRollman
I don't understand why corporations don't have to pay taxes on overseas
earnings when US citizens living abroad do.

~~~
sjwright
Corporations do have to pay taxes on overseas earnings if they want to bring
those earnings back to the US. As far as I'm aware, it's the same for US human
citizens. (It's certainly the case for Australian citizens.)

~~~
yardie
No, US citizens have to pay taxes while abroad whether or not they are
returning to the US with it. In fact, some US citizens who have never lived in
the US bur have citizenship through inheritance are having a hard time
understanding why they are being taxed by a country they have never lived in.

~~~
jules
Does that mean that some people are paying taxes twice, once in the country
they're living in and once in the US?

~~~
teejae
You kind of pay the maximum of the US and domestic tax rates, after some
possible deduction, though not exactly the case given how it gets calculated.
But yes, all income worldwide is taxed for US citizens. If you're curious,
see:

<http://www.irs.gov/publications/p54/index.html>

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lambdasquirrel
I won't rule here on whether corporations are good/bad or if they deserve the
profits. I'd just like to posit my analysis of the situation, which is that:

1) It's been well documented in the financial press now that banks and
companies are holding more cash than ever. In fact, Apple is holding more on
hand than the gov't.

2) This tax break would be a one time infusion. Corporations can't count on it
recurring, if say, they wanted to plan on using it to fund operating expenses
(e.g. salaries).

3) Historically, older corporations do not hire sizable numbers of workers. To
what extent are these the companies with offshore profits?

Ignoring any ethical judgements, to say that it will help boost the economy
seems dubious to me.

Again, ignoring ethical judgements, I think it is fun to consider other
consequences, like what effect it may have on corporations' investments on
foreign soil. We might not be able to make jobs here, but maybe we could nudge
them away from making jobs there? It only works if you think the world economy
is not interconnected though.

Anyway, my point is that, yes, there are good moral arguments why this push is
reprehensible, and people are making interesting points as such here. Going
the other way, I'd like to think about what the hardheaded economic realities
are (and they certainly are not about direct job creation). What if it merely
adds dollars that these corporations could use for other causes, like
lobbying? To what extent do we consider these activities to be good or bad?
Donations to charity and contributions to PACs are often one-off.

One thing that tickles me is that when donations are big, they go into
endowments, which are managed by various financial companies. Good for the
charities, but it's not that there are other vested interests. ;-)

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eddieplan9
I am very curious to see what would happen if, instead of a tax holiday, the
US Government announces that it would permanently _increase_ the tax from next
year. Would that be an alternative way to encourage big corps to bring profit
back now?

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ajays
The sad part is: both Democrats and Republicans are beholden to the
corporations, and not to the voters.

Every law that gets passed has these hidden loopholes and exemptions that
benefit a select few corporations. Who puts these loopholes in? This is all
done surreptitiously, and I've yet to see any accounting for these loopholes.

What we need is a Wiki-like system while drafting legislation, so that every
edit can be tracked to the author(s).

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jshort
This is the exact sort of "tax loophole" that should be put to an end. I
almost wish someone pushed back by proposing a raise in taxes for such
behavior, and maybe next time these big companies would think twice before
they tried to avoid paying taxes that everyone else does.

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jeffool
So, if this is the "carrot" to get corporations to repatriate this wealth,
(ignoring business as usual), what would the "stick" look like?

Maybe a small, token increase? Or some method of increasing the tax rate
dependant upon the length of time between the date the money was earned versus
payed out as dividends? Surely stockholders wouldn't let companies sit on cash
(that would eventually come back here anyway) if that were the case.

You wouldn't even have to be successful, just make a boisterous push to ram
THAT through Congress. See how quickly these same companies try to get their
assets here under the current tax law.

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rmrm
our corporate tax rates as I understand it are second highest in the world.
That is offset by the fact that they are riddled with loopholes and
deductions.

We really need to eliminate special loopholes and deductions and then reduce
corporate rates.

Having a large spread between US and offshore tax rates obviously gives an
incentive for US corps to move factories and such overseas, rather than to
export from the US. I don't see any reason to have incentives for that
behavior.

Reduce all of the paid for deductions and bring rates down. Simplify.

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nl
Wouldn't this be a good thing? The money would come back into the US, and if
the tax break isn't given then it won't be coming back.

I'm as cynical about corporations as anyone, but in this case.. they use 100%
legal means to reduce their tax, behaving exactly how anyone would expect
them.

Some argue that it is an ethical issue, but that neglects the fact that these
companies make a large proportion of their profits offshore, and bringing
_that_ money gets taxed too. Ethics in this argument are much more subtle than
some would have you believe.

~~~
tomelders
They use 100% legal means to keep money off shore. True. But then they ask for
a Tax Holiday when that arrangement no longer suits them.

One way or another, that money will return to the US, and the tax will be paid
accordingly. This will happen over a long period of time. If the US allows
this tax holiday to happen, it will be throwing away billions of dollars in
the long term with no real short term advantage, whilst sending a very
dangerous message to people who use tax avoidance as a long term fiscal
strategy.

It's corporate Americas job to make try and make the system work for them.
It's the governments job to try and make the system work for everyone.

~~~
nl
_One way or another, that money will return to the US, and the tax will be
paid accordingly._

See, that's where I disagree. All those companies can _easily_ invest that
money offshore, either in financial institutions or in building new
facilities. Both seem to be worse outcomes for the US than this.

To be clear: I don't believe in the "trickle down effect" - I think a
progressive system is the only sensible one. _BUT_ I do think _any_ trickle
down is better than nothing.

 _sending a very dangerous message to people who use tax avoidance as a long
term fiscal strategy_

It's not tax avoidance, it's tax minimization. There is a _big_ difference.

The message I see at the moment is "shift your profits and investment
offshore, because it is cheaper". I'm not convinced that is beneficial.

 _It's the governments job to try and make the system work for everyone._

I agree with this completely.

~~~
lsc
>It's not tax avoidance, it's tax minimization. There is a big difference.

I thought "Tax avoidance" was the legal term for legally minimizing your tax
burden, so "avoidance" and "minimization" would be largely synonymous. "Tax
evasion" I thought, was the term for avoiding taxes through illegal means.

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rockarage
There is going to be a rush to judgement, but I'm not convinced that the
government is going to use the tax money wisely. There are too many people in
the business of defrauding our government, trillions are wasted on wars, and
millions on earmarks. The government knows how to bail out wall street, but
they can't turn the economy around.

Out of all big international corporations in the US, I would argue that Google
and Apple are the most socially responsible (apart from privacy concerns). It
won't make sense to bring it back to USA so it can sit in bank accounts and
accumulate interests, because those funds are currently accumulating interest
as we speak.

The obvious uses would be for spending, perhaps for acquisition and growth.
The money would eventually be taxed. Keeping the Government in the pinch has
forced them to crack down on waste and fraud. It would be much harder for them
to bail out wall street this time around.

~~~
othermaciej
The money wouldn't just be taxed eventually, it would also be taxed
immediately, though at a reduced 5.25% rate instead of the usual corporate tax
rate. And if a corporation repatriating income uses it to pay dividends, or
for share buybacks (resulting in capital gains), this will result in taxable
income for the shareholders.

~~~
Retric
Shares owned by people outside the US would not pay any capital gain to the US
gov on any dividends.

