"Here's a novel way to drive up a company’s share price," writes the NYT's Jeff Sommer. "Pay...


"Here's a novel way to drive up a company’s share price," writes the NYT's Jeff Sommer. "Pay billions of dollars in additional taxes." Forensic accountant Robert Olstein reckons that companies such as Apple (AAPL), Microsoft (MSFT) and Cisco (CSCO) should repatriate the tens of billions dollars they hold abroad, pay tax on it, and then use the rest of the cash to repurchase stock. That would boost their share prices by at least 20%.

From other sites
Comments (80)
  • Timothy Phillips
    , contributor
    Comments (467) | Send Message
     
    Why pay tax on it, when you can get a nearly free loan against that foreign cash right here in the USA to either buy back shares, offer increased dividend or invest in the business. When the tax holiday comes (and it will come next administration whether its Clinton or a Republican) you can repatriate and pay off the loan.

     

    A low repatriation tax may just be the best stimulus the US can have right now, but the current admin's ideology won't allow it.
    24 Mar 2013, 06:53 AM Reply Like
  • DaLatin
    , contributor
    Comments (1522) | Send Message
     
    @ Timothy Phillips, well said. You stole my thunder.I can only give you 1 like ! Sorry !
    I'm wondering if the NYT's will be raised to a cabinet position !
    I would never want any symbol I own to repatriate one dollar as the Fed is sinking the dollar & the BRICS are meeting this week in the final summit in there 5 part series concerning a new currency swap.And, China is setting up international exchanges for the Yuan fast ! Better leave holdings outside the US for as long as it takes.The time is getting closer then Sec Geitner & IMF's Laguard said ! tic tic tic
    24 Mar 2013, 09:09 AM Reply Like
  • the_value_vulture
    , contributor
    Comments (517) | Send Message
     
    I can just hear it now in April...

     

    "We are now really super super seriously considering returning cash to shareholders."

     

    I am very much long the stock but between getting countless ideas from fund managers about ways to approach their cash hoard and continuing to stall, it is clear that concerning capital allocation the board and executive management DO NOT have a clue. Sadly it happens to be one of the main components in unlocking value in the share price. I would go far as to say a clear and effective capital deployment strategy at this stage is just as important as new products and channels.
    24 Mar 2013, 09:38 AM Reply Like
  • Wirsbo
    , contributor
    Comments (18) | Send Message
     
    The NYT is already a cabinet position - The Ministry of Information.
    24 Mar 2013, 10:03 AM Reply Like
  • debtfree1
    , contributor
    Comments (209) | Send Message
     
    My guess is TC and Apple have a plan, good or bad they won't be swayed by stock price, media, Eihorn or other share holders.
    24 Mar 2013, 10:23 AM Reply Like
  • wyostocks
    , contributor
    Comments (9115) | Send Message
     
    wirsbo
    I believe you meant "misinformation".
    24 Mar 2013, 10:35 AM Reply Like
  • MJ Pragmatist
    , contributor
    Comments (419) | Send Message
     
    You need to read the book 1984!
    24 Mar 2013, 12:32 PM Reply Like
  • Arkeh Capital
    , contributor
    Comments (395) | Send Message
     
    Question from Germany: Why can't they buyback stock via foreign subsidiary w/o paying US taxes?
    25 Mar 2013, 12:48 PM Reply Like
  • user
    , contributor
    Comments (27) | Send Message
     
    Even better, cut a deal with the federal government to direct the tax revenue ara program to put more Aaple computers in school. Win-win-win.
    24 Mar 2013, 08:36 AM Reply Like
  • bigbenorr
    , contributor
    Comments (1197) | Send Message
     
    except for the students.....
    25 Mar 2013, 08:25 PM Reply Like
  • Bret Jensen
    , contributor
    Comments (14989) | Send Message
     
    That would not be in investors best interest. Typical NY Times, never mentions the company has already paid tax on that income in country of origin......of course, liberal scribe never has problem with double taxation of the rich or bad old corporations.
    24 Mar 2013, 08:37 AM Reply Like
  • gensearch2
    , contributor
    Comments (1556) | Send Message
     
    I know when I pay foreign taxes, I get a 100% tax credit. In other words, the Federal Government fully reimburses me for foreign taxes I paid.

     

    I have no logical argument why I should get that tax break, i.e., why should the Federal Government encourage me through the tax code to invest in foreign companies. I do take it.

     

    How do you think foreign taxes paid by companies flow back into a companies US tax return?
    24 Mar 2013, 10:06 AM Reply Like
  • bigbenorr
    , contributor
    Comments (1197) | Send Message
     
    How is it a tax break?? it is just saving you from double taxation.
    24 Mar 2013, 10:13 AM Reply Like
  • gensearch2
    , contributor
    Comments (1556) | Send Message
     
    The Federal Government is paying foreign taxes on my decision to invest in a foreign company. Why should they do that?

     

    If a companies foreign taxes are paid by the Federal government then there isn't any double taxation either as Bret claims. The company just gets to defer any profits made indefinitely. What justification is there for that? They are discouraged from repatriating their profits to allegedly create jobs and invest in America. Why would we want to have a tax code that encourages companies to invest in other countries over that of the US?

     

    The double taxation argument is bogus. There is no obligation on the part of the US Government to pay foreign taxes. Why should we borrow money from China [the Mitt Romney test] to subsidize my investment choice?

     

    When you over to Europe on vacation and pay VAT on your hotel room and food, do you expect it's fair that you get that as a tax rebate on your US return so you're not double taxed?
    24 Mar 2013, 10:24 AM Reply Like
  • gensearch2
    , contributor
    Comments (1556) | Send Message
     
    Companies were already moving manufacturing overseas before the deferment went into place. When it did go into affect there was a mass exodus of manufacturing that went overseas. The government created a tax code that was effective is destroying manufacturing jobs in the US AND make it so US corporation paid less in taxes [since the Federal government was paying foreign taxes for the company].

     

    So you the taxpayer gets burdened with additional debt so companies can move operations overseas and not pay US taxes or foreign taxes on their profits. That makes sense?
    24 Mar 2013, 10:37 AM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Bret, we had this conversation before, but please try to understand the true idea behind the tax-evasion policy of MNEs, you clearly don't get it. It makes your closing sentence look utterly pathetic..."liberal scribe never has problem with double taxation of the rich" blabla

     

    Preventing double taxation?

     

    To provide you with an example: Starbucks paid 9mln GBP over 3bln revenue.... There was no double taxation, there was no proper taxation at all.

     

    Just google for instance 'Double Irish With A Dutch Sandwich' and you will understand how it works.
    24 Mar 2013, 10:49 AM Reply Like
  • bigbenorr
    , contributor
    Comments (1197) | Send Message
     
    ummm since when is tax paid on revenue??
    24 Mar 2013, 10:59 AM Reply Like
  • Brendan O'Boyle
    , contributor
    Comments (1286) | Send Message
     
    Good point Bret,

     

    And nevermind if the company brings money back to pay a dividend.

     

    Then it would be triple taxation, first when you earn it overseas, then to repatriate it and finally the investor pays capital gains tax.

     

    Imagine instead of a company that you earned $100k overseas and paid taxes on it there. Would you want to bring it back to spend it in the good old USA if you had to pay taxes again? Wouldn't it be in your best interest to spend it where you earned it?
    24 Mar 2013, 11:02 AM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Bigbenorr....

     

    These numbers should be sufficient to make someone understand the ratio is unbalanced. I guess in your case it was not. Sorry.
    24 Mar 2013, 11:17 AM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Brendan, why not use a 4th taxation, VAT or sales tax... The problem is that they do not pay taxes overseas, or something negligible.

     

    I would highly recommend you to spend just a few hours of your time trying to understand the logic behind this tax-policy, and you will understand it has nothing to do with double-taxation, but everything with tax-evasion.
    24 Mar 2013, 11:51 AM Reply Like
  • gensearch2
    , contributor
    Comments (1556) | Send Message
     
    Timothy, It appears there are more people than Bret that don't have a clue about the shell games and tax code being used to avoid taxes. I think it's hopeless.

     

    There has been so much published about how the shell game works, if they haven't seen it by now, it's only because they don't want to see it.
    24 Mar 2013, 11:54 AM Reply Like
  • wyostocks
    , contributor
    Comments (9115) | Send Message
     
    Timothy
    Tax evasion is the non payment of taxes in violation of tax laws. The corporations we are talking about here are in full compliance with Americam tax laws. You might take your own advice and "spend a few hours..............."
    24 Mar 2013, 11:57 AM Reply Like
  • JUDOKA
    , contributor
    Comments (404) | Send Message
     
    The NYTmakes Pravda look legit.
    24 Mar 2013, 12:38 PM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Ok, technically spoken it is not tax evasion, the effects for societies are still the same: big corporations finding creative ways not pay taxes.

     

    Common sense, that goes beyond the typical short-term shareholders' interest, should make you realize it is wrong. Individuals pay their taxes, let MNE's do the same.
    24 Mar 2013, 03:09 PM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    TimothyF,

     

    Ignoring the fact that any corporate taxes are the most regressive taxes paid in the US and that there is actually Quadruple taxation in the US (Foreign taxes, domestic corp taxes - federal, state, etc..., distribution taxes - dividends/capital gains, and misc taxes - payroll, property, sales, etc...), MNE's are only doing what they are incentivized to do. To say: "it is wrong" has to be one of the most emotional, silly, and uneducated statements I have heard in awhile - there is nothing wrong about it at all.

     

    Also, saying "individuals pay their taxes, let MNEs do the same" is another head scratcher... What the hell are you talking about?
    24 Mar 2013, 04:17 PM Reply Like
  • CincinnatiRick
    , contributor
    Comments (799) | Send Message
     
    When you over to Europe on vacation and pay VAT on your hotel room and food, do you expect it's fair that you get that as a tax rebate on your US return so you're not double taxed?
    -----------
    You are confounding VAT (essentially a sales tax) with income tax. The argument is that earnings that have been taxed at its source by the host country should not then be taxed again. The equivalent would be for your home state to be charging a sales tax on the purchases you made in a foreign country that had already been subject to a VAT tax.
    24 Mar 2013, 06:24 PM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Pts177
    Wake up and smell the coffee: tax treaties are revoked, countries and institutions facilitating these practices are under increasing pressure from governments (why do you think the EU is so tough on Cyprus), and the public is becoming aware (Starbucks in the UK).

     

    You can call make 'uneducated', and classify what I am saying is 'silly', but times are changing.

     

    I pay real-estate tax, capital (+gain), VAT, additional taxes for cars, fuel, etc etc, but does this exempt me from the obligation paying income tax?
    24 Mar 2013, 06:26 PM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    It seems like it. But things are (slowly) changing. With increasing national debts it is just a matter of time, and even an army of lobbyist will prove useless.
    24 Mar 2013, 06:46 PM Reply Like
  • wyostocks
    , contributor
    Comments (9115) | Send Message
     
    timothyf

     

    You don't get it.

     

    If taxpayers pay taxes according to the current tax law, screw society. I'll bet you don't ignore tax deductions on your return and pay more than you are obligated to for the good of society. Your problem is with the tax code, not the tax payers.

     

    If you feel guilty why not write a nice check to the treasury for 100% of your income and do the right thing. You'll feel better about society this way.
    24 Mar 2013, 10:35 PM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    are you a corporation?
    do you have operations in other countries?
    are you generating around half of your sales in other countries?

     

    you should pay taxes in the country where the income is earned, not on all income regardless of source.

     

    The US tax code is complicated for one reason: the US government is not competative. Instead of becoming competative, their solution is to add rules, complexities, and regulations to try and avoid the need to compete.

     

    I am a US citizen and live outside of the US - last year I submitted a 78 page tax return to the IRS while having no US earned income. My tax return in country was 5 pages. I am relatvely small potatoes, so it is shocking that even a small fish like myself has to deal with this complete mess - if the US government was competative, they would not need to worry about high net worth individuals leaving for tax havens, so the complexity of the code drops considerably. The same thing applies to US based companies.
    25 Mar 2013, 03:03 AM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Wyostocks...
    I do get it. Perhaps you need to remove your share-holders glasses and look at the bigger picture for once.

     

    If I can use my national deductions I will do it. But I am not transferring a share of my income to my HKG account, to avoid paying taxes.

     

    And I understand that firms basically have a choice, since they feel the WS pressure. That's why these regulations should be reviewed, make it more attractive for firms to deal with the matter responsible.

     

    'Screw society'.... really?
    25 Mar 2013, 08:48 AM Reply Like
  • tigersam
    , contributor
    Comments (1707) | Send Message
     
    20% is nothing. Apple can go up 50% without doing anything if Apple beat earnings next quarters. Apple can open up 20% up in a day.
    24 Mar 2013, 08:48 AM Reply Like
  • kg82
    , contributor
    Comments (14) | Send Message
     
    Why not just buy back the stock over there? Is there a law against that?

     

    Also, ignores that the US Govt is just creating an incentive to invest in P&E and people abroad thru double taxation. Rather than fix their error, they would rather call smart business people acting in the best interests of their owners greedy and unamerican.

     

    Apparently in politics you can play the blame game for a full 8 years. In business, we know a CEO get a free pass for a quarter or at most a full year.
    24 Mar 2013, 08:56 AM Reply Like
  • aperture1
    , contributor
    Comments (200) | Send Message
     
    I believe income taxes paid to foreign countries are credited against US income tax. If the foreign income tax is lower than the US rate the company would have to pay the difference.
    24 Mar 2013, 09:04 AM Reply Like
  • milehr
    , contributor
    Comments (693) | Send Message
     
    The idea may be novel, but dumb.
    24 Mar 2013, 09:06 AM Reply Like
  • romilar
    , contributor
    Comments (778) | Send Message
     
    Bret,thanks for the thoughts.If the companies in question(lets not forget GOOG) cared about their stock price,they might bring the money home.But they don't,so they wont.None of them glean revenue of any consequence from their stock price.They make their dough selling advertiseing,product and access to intelectual property.

     

    A huge infusion of cash would not change the way any of these cos' do basic business anyway.So it might be a nice,quick ride up followed by lots of profit taking and,were back where we started - without the off shore stash......Rom
    24 Mar 2013, 09:15 AM Reply Like
  • wyostocks
    , contributor
    Comments (9115) | Send Message
     
    Financial advice from the NYT? They can't even run their own company and they are telling others how to run theirs? Typical.
    24 Mar 2013, 09:26 AM Reply Like
  • David2011
    , contributor
    Comments (13) | Send Message
     
    Jeff Sommer providing business advice to AAPl, MSFT, and CSCO? LOL. Thank the editors at SA for their sense of humor.
    24 Mar 2013, 09:41 AM Reply Like
  • gensearch2
    , contributor
    Comments (1556) | Send Message
     
    Apple will assume that some day there will be a tax holiday for repatriating profits. They'll wait for that to occur.

     

    For them to repatriate any sooner, they would have to come to the conclusion that there will never be a tax holiday for repatriation. For that to occur, the tax code would have to be modified to close the deferrment of taxes paid overseas exemption. IF that happened then the next tax code change might be along the lines of a company must pay taxes on tax deferred foreign profits over five years.

     

    Apple could buy Cyprus pretty cheap right now.
    24 Mar 2013, 10:14 AM Reply Like
  • szeducate
    , contributor
    Comments (209) | Send Message
     
    The money American companies like Apple keep offshore is doing this nation no good. Allow that money to come back home at a much reduced tax rate or no tax at all will ultimately create greater wealth in the United States. Only a ideology such as President Obama has is less about creating jobs, wealth or prosperity and more about attacking U.S. corporations that are doing well. He fails to realize that all of that money spent here as dividends or buy backs gives Americans more money to spend and as it makes it way into the consumers hands help this ailing economy.
    24 Mar 2013, 10:26 AM Reply Like
  • combatcorpsmanVN
    , contributor
    Comments (1372) | Send Message
     
    Last time I looked, Congress (not Obama, Bush jr, Clinton, Reagan) have a real impact on who pays takes, how much they pay, or when it has to be paid. Stop blaming Obama and read a 6th grade civics book to see what Congress does and doesn't do. GEEZ!!!
    24 Mar 2013, 01:58 PM Reply Like
  • kg82
    , contributor
    Comments (14) | Send Message
     
    So, the President, the titular head of the party in power has nothing to do with setting the legislative agenda and signing whatever bill into law (particularly when the same party controls one or both of the legislative branches)? Last I heard they call it "Obamacare" not "Reidcare" or "Pilosicare". Also call them the "Bush" tax cuts. Etc etc etc.

     

    Maybe you should re-read that 6th grade civics book you reference.
    26 Mar 2013, 10:43 AM Reply Like
  • Chris DeMuth Jr.
    , contributor
    Comments (11478) | Send Message
     
    Wow that was a silly article. On the other hand, while actually repatriating this cash for non-economic reasons would be terrible, I recently wrote up DELL as a long idea ( here: http://seekingalpha.co... ) and think that its cash held abroad is undervalued by the markets.
    24 Mar 2013, 10:38 AM Reply Like
  • ribsey
    , contributor
    Comments (6) | Send Message
     
    I don't like the idea of share repurchase for most tech companies. Look at RIM spending billions on buy backs when it should have gone into R&D or ads. They need to keep innovative and keep the brand cool.
    24 Mar 2013, 10:43 AM Reply Like
  • Archman Investor
    , contributor
    Comments (3379) | Send Message
     
    What is comical about this is Robert Olstien is supposed to know better, is an expert forensic accountant and yet he wants to resort to cute parlor tricks to boost stock prices of certain companies a mere 20%.

     

    Creating wealth over the long term should be the real goal of investors not short term trickery.
    24 Mar 2013, 10:43 AM Reply Like
  • Banarasi69
    , contributor
    Comments (5) | Send Message
     
    Why not use the cash abroad to buy growth companies outside the US?
    24 Mar 2013, 10:45 AM Reply Like
  • Endresj
    , contributor
    Comments (2) | Send Message
     
    I agree with Timothy Phillips. Paying a U.S. tax on repatriated earnings to facilitate a shareholder distribution does not make good business sense. I too agree that a tax holiday will be coming in the future.
    24 Mar 2013, 10:46 AM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    It's a company's moral obligation to dutifully pay taxes, just like individuals do. Personally I think all these tax-loopholes, while legal, are criminal.

     

    Yes, as a shareholder I like dividend, but am not blinded by greed to understand, that there are other stakeholders than shareholders as well.

     

    You can ask yourself if all this offshore cash really is in the interest of the shareholder, now it's doing nothing....
    24 Mar 2013, 11:13 AM Reply Like
  • Cifmiller
    , contributor
    Comments (21) | Send Message
     
    It would be almost criminal for a corporation not to take advantage of whatever tax advantages (or loopholes as you and Mr. Obama like to beat into everyone's head) it can to benefit shareholders.
    24 Mar 2013, 12:29 PM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    From a share-holders perspective yes.

     

    Governments should stop these loopholes, so MNE's will pay their taxes and contribute to the societies in which they operate.

     

    I know, it's a shift from the typical shareholders short-term view on the world.
    24 Mar 2013, 01:32 PM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    Timothy -

     

    You don't have a clue. The problem is that the US global tax system forces US corporations to pay taxes on income earned in a society in which they do not operate - the US. Under the current system, if a company develops a product, manufactures, and sells it completely OUS, the US federal government expects taxes on this income. How is that "paying taxes in the society in which they operate?"

     

    Also, although it may sound smart to parrot the silly lines of the second coming of Jesus Christ, the lord and savior (Obama) - your statement completely ignores property taxes, sales taxes, state and local taxes, foreign taxes, payroll taxes, Dividend taxes, capital gains taxes, etc...

     

    MNEs are optimizing the use of incentive systems provided by hundreds of governments around the world. People like you, that clearly don't understand this are the reason why more and more jobs are leaving the US... Instead of putting a smart tax system in place that incentivizes investments, manufacturing, and setting up HQs in the US we have a president playing populist games pushing us in the wrong direction. He is successful because there are enough people like you out there buying the story...
    24 Mar 2013, 04:59 PM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    I never said the current system is flawless, I am just saying that these constructions enhance this MNE behavior, resulting in hundreds of billions dollars parked overseas.

     

    But I guess you understand I am not the libertarian-type, since I do understand that my government in return for providing affordable healthcare and education, safety, and infrastructure, needs me to pay my taxes.
    Btw, as you are thinking 'we don't have any of these', yes, I am not living in the US. I am living in a country which has a very important part in this tax-story.

     

    Last thing, your Obama-obsession is worrying.
    24 Mar 2013, 07:10 PM Reply Like
  • justaminute
    , contributor
    Comments (1817) | Send Message
     
    Taxes and morality have nothing to do with each other.

     

    It would be criminal to contribute any more money to the corrupt, wasteful and bloated US government.
    24 Mar 2013, 10:08 PM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    Timothy -

     

    I also live in a country that is a big part of this story and happen to know more than a little how this actually works in the real world. I also understand that taxes need to be paid (but don't agree that healthcare is the government's resp), but corporations are not people and quadruple taxation is incredibly burdensome.

     

    I do not have an obsession with Obama - you're the one blindly parroting his rhetoric.
    25 Mar 2013, 01:18 AM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    one more thing... narrow minded people assume that the only reason that companies have cash outside of the US is because of their ability to take advantage of the system, but this is not true. the real reason why companies have hundreds of billions of dollars parked over seas is because they have operations over seas. Look at pretty much any US based multinational - they all generate around half of their sales over seas. Sales generate cash and income, so money is made and sits over seas because of the global US tax system. This has three deadly results:

     

    1. US cash is used for distributions - meaning less cash available for US investments
    2. Cash accumulates outside of the US and is reinvested in businesses outside of the US
    3. Companies prefer to set up HQs outside of the US because it is easier to manage their business.
    25 Mar 2013, 03:18 AM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Ok Pts177....
    So what are Csco and AAPL going to do with their piles of cash? Nothing. They are just sitting it out until the government will throws them a bone, in the shape of a one-time waiver. Repatriate it, pay taxes, and invest it or return it to the shareholders. Cisco alone has enough euro's to basically buy all its router-business competitors.

     

    I have no problem with MNE's not paying US taxes over their foreign taxable income, as long as they pay it overseas, where it is generated. The problem however, is that sometimes even US taxable income goes overseas, using all kinds of fancy licensing constructions, resulting in paying taxes in Luxemburg and Bermuda. That's a joke.

     

    Besides that the country will need to deal with 100 bln in missing revenues a years, it's bad for small businesses.

     

    I don't know where you are from, but in Europe, people are waking up. How it will change I cannot predict, but that it will change is without a doubt.

     

    My concern about the topic has very little to do with Obama, whom a find rather weak on these issues anyway. I live in the Netherlands, and actually gonna do some research about this topic. Since this country is home to many global companies, without activities here. Did you know ACDC, Rolling Stones, and U2 are all Dutch bands? On paper at least ;-)
    http://bit.ly/YCE9vb
    25 Mar 2013, 08:35 AM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    Companies are going to do the following with their cash overseas:
    1. Reinvest it in their business - upgrade facilities, invest in R&D, hire more staff to handle the ever increasing complexities of the world, etc... Because of the global tax system, this will not be spent in the US - so it has a compounding result over time.
    2. Make acquisitions - this has already started and will continue...
    3. Hold it as an economic buffer
    4. Use it as collateral on domestic debt issues
    It is absurd that you think companies should pay taxes on income earned outside of the US borders to protect an uncompetitive government rather than create a smart competitive tax policy that works with the economy. Especially since corporate taxes are one of the most regressive taxes in the US.

     

    Can you please define what you consider "US income" to be and explain to me how it "goes overseas?" It does not sound like you actually have a deep understanding of what is actually happening, so I recommend doing more research. For example, Luxemburg and Bermuda are minimally used by US based MNEs relative to other locations as a result of Subpart F constraints (excluding companies who move their HQ out of the US). The NL, BE, CH, and IE are the big four in Europe because of the manufacturing base and other countries outside of Europe are becoming more competitive as we speak - Singapore, Canada, etc... Corporate tax income is a surprisingly small proportion of total US tax revenue - in addition is a regressive tax system, so trying to play populist games rather than becoming competitive is pretty stupid considering the number of the jobs MNEs create in their home countries. The US would be much better served to aim for a competitive tax system rather than trying to shield itself from the impacts of a poorly managed federal government.

     

    For reference, US companies are the only ones operating under these ridiculous constraints since the US is the only developed country in the world with a global tax system...
    25 Mar 2013, 10:38 AM Reply Like
  • CincinnatiRick
    , contributor
    Comments (799) | Send Message
     
    pts and Timothy: this is a forum for personal investment concerns. You need to understand that you will never come to a meeting of the minds with one another because your differences concern political ideology. And I am not referring to petty partisan politics.

     

    The most important distinction between liberal thought and progressive thought is in how they define the public interest: liberal thought (Locke) begins with the premise that it must be an amalgam, an arithmetic composition of all the individual interests found in a society. Progressives, like every other species of authoritarian, believe that the common good exists outside, apart from and, most importantly ABOVE individual interests. Moreover, having this independent existence, it can be identified by intellectual processes.

     

    For the liberal, liberty is "essential" in the sense that it is the natural condition of man, preceding government in any form. By definition then, government does not grant rights (life, liberty and the pursuit of happiness) but must respect them. That's the founding myth of the United States.

     

    Democracy, even through the filtration of representative government, represents the same (no more and no less) challenge to limited government and individual freedom (remember, those are our founding myths) as does any other form of government. While we must come together for some common purposes, there is always a tension surrounding the legitimacy of those purposes and the limits on the sacrifices we are called upon to make in the name of those purposes.

     

    Authoritarian forces, whatever their stated philosophy, goals and good intentions, can use the power of government, however constituted or chosen, to pursue those goals against the selfish interests of the individual. They all mean well: the religious zealots would save our souls, the fascists would save the nation and the progressives would protect the public interest or common good. And each have their "priests", possessed of the special wisdom, knowledge and training to tell us what God requires, what the nation needs and what the public interest is...whatever their mythical basis requires.

     

    What I find intriguing is that the progressive intelligentsia, who so instinctively dismiss God and Der Fuhrer, have such a blind eye where their own myths, scripture and priesthood are concerned. The reification of "the public interest" as something other and above the amalgam of all the private interests in society is far more of a threat to liberty today than the more traditional religious and ethnic appeals to subordinate our liberty to some "higher" cause.

     

    And now back to the important stuff at SA: trying to make money more reliably by learning from the mistakes and triumphs of others...and selfishly hoping that the government will allow us to keep as much of it as possible.
    25 Mar 2013, 12:18 PM Reply Like
  • wyostocks
    , contributor
    Comments (9115) | Send Message
     
    cincinnatikid
    "That's the founding myth of the United States."

     

    After that nothing you write is worth reading.
    25 Mar 2013, 12:27 PM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    good stuff cincin - agree 100%!

     

    I have always had an interest in philosophy, but making money has always gotten in the way! started out my freshmen year in college as a philosophy major but switched to finance based on the obvious economics of a philosophy degree.
    25 Mar 2013, 12:39 PM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    PTE...
    I keep on repeating myself, but these foreign cash reserves are much bigger than your point 1-4 require.

     

    They are just sitting out their time, till another one time tax Holiday...

     

    "A similar amnesty was offered in 2004, when the federal government allowed companies to transfer money to the United States at a 5.25 percent tax rate, provided it was spent on research and development and to spur job growth. A 2009 study by the National Bureau of Economic Research, however, found that 92 percent of the $300 billion that companies transferred to the U.S. ended up as dividends to shareholders.

     

    “There was really no effect on jobs or investment,” said Clausing, the economics professor. “It was basically a windfall for shareholders.” (Source:NBER.org).

     

    Regarding how they do it? For instance a royalty payment to a foreign subsidiary, it is already as simple as that.

     

    I do acknowledge that he current (US) tax system might be flawed, I guess you know more about that system than I do. But nonetheless, MNEs are using all kinds of constructions to knock down their effective rates.

     

    I am not convinced that it is the right thing.

     

    But again, I guess my opinion has been shaped by my own background. What could you expect from someone who favors the Rhineland model over the Anglo Saxon. ;-)
    25 Mar 2013, 01:36 PM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Rick,
    Although I like your comment, I do believe that an exploding inequality (Gini-coef.) poses a greater threat to societies than a bunch of progressive intelligentsia desperately trying to remain a balance. It is poverty that turns people to extremism, as we have seen with the stark increase of the nazi movement in Greece.
    25 Mar 2013, 03:10 PM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    "They are just sitting out their time, till another one time taxholiday."

     

    You are missing the entire point, they shouldn't have to "sit out theirtime" because the whole idea of taxing global profits is insane.

     

    "Regarding how they do it? For instance a royalty payment to aforeign subsidiary, it is already as simple as that."

     

    Royalties are Subpart F relevant income because they areconsidered foreign personal holding income, meaning they areimmediately subject to US taxation and do nothing to avoid the USdouble taxation.

     

    Can you please define what you consider "US income" and how it"goes over seas?"
    25 Mar 2013, 03:29 PM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    PTE....

     

    "You are missing the entire point, they shouldn't have to "sit out their time" because the whole idea of taxing global profits is insane."

     

    You know what, since this is clearly not working out. What do you think would be appropriate? Let's say for a company that generates 50% of its business in the US, 25% UK, and 25% elsewhere. How should it pay its taxes?

     

    http://bit.ly/13ryLmu
    25 Mar 2013, 06:54 PM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    your link is nonsense because it (at best) only shows part of the story. Also, read the disclaimer and notice the statement: "it may be worthwhile for USCo to transfer the IP to IRCoA early (i.e. when the IP has low value) in order to limit the amount of US tax payable." At what point do you know the IP is "low value" relative to what it will be in the future? That's like picking which stock will outperform the market - it is not easy... you tend to only know if it is "low value" after the fact, so there are huge and very real financial risks associated with this strategy. Also your link does not explain how a US multinational avoids paying US tax on the royalties earned at all of the affiliates involved.

     

    You seem to think that it is as simple as shuffling a deck of cards and your tax liability shrinks - this is so far from reality that I don't know where to start. Tax planning has benefits, but also limitations, drawbacks, organizational complexities, and a number of variables to consider - you can't just move things around and pay royalties to reduce you tax liability.

     

    "You know what, since... how should it pay its taxes?"

     

    This question can only be asked by somebody who does not understand this stuff because there are hundreds of variables to consider:
    What drives the value of the business? Is it an IP heavy business (pharma, tech, etc...) or a commoditized business (consumer goods, materials, etc...)?
    Is a product or service being sold, and where is the service/product being created, provided, and managed?
    Which legal entity in the corporation has taken the investment risk?
    What is the distribution model - do local affiliates enjoy limited risk, or do they participate in the risk of succcess/failure?
    ...I could go on for days...

     

    My personal view is that the corporate tax rate should be zero in every country and taxation of earnings should occur when cash is distributed to shareholders via either dividends or share buybacks - the tax should be based on the individual shareholder's income levels. this would avoid all of this nutty behavior, would progressivively tax corporate earnings, and would make stock investments more valuable for the retail investor because cash distributions would be more valuable post tax than they are for the big boys.
    26 Mar 2013, 03:26 AM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Pts...
    I never claimed it was simple, GE alone has about 1000 people working on this. But looking at the numbers it is still very beneficial. And increasingly, considering Google's trackrecord of lowering it taxes y-t-y.

     

    Your proposal might work, its is different. Is this your idea, or can I find more about it somewhere else (link). Upcoming months I will be interviewing a bunch of people about this topic, among them couple of professors, so it could be an interesting one to see how they think about it.
    26 Mar 2013, 03:11 PM Reply Like
  • CincinnatiRick
    , contributor
    Comments (799) | Send Message
     
    pts and Timothy: I had the choice between the practical (law school) and the indulgent (grad school). In a fit of whimsy, I became a political theorist...your discussion in this most unexpected venue simply got the old juices flowing and I hope not so as to bore you.

     

    I appreciate the importance of mythology in any political order and I have observed (with some concern for the future of this one) the fate of any society that disrespects and deviates from it..whatever it might be. The elites have always been skeptic...Pharaoh knew he was no God (though only Ikhnaton was foolish enough to publicly acknowledge it)...the danger comes when the hoi polloi lose faith. That is not an endorsement of any myth, simply a recognition of its functional importance.

     

    Myth and scripture are both open to interpretation and yin needs yang. I salute your expression of differences without the usual acrimony.

     

    26 Mar 2013, 05:26 PM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    Timothy,

     

    you are eating up too many sensationalist news stories - with the double irish, Starbucks, Google, GE tax department and all... STOP LISTENING to the BS news stories about this stuff because 99% of the time the real (full) story is not being told.

     

    It is my idea, but it would never work in this environment because the current administration is dead set on playing populist political games rather than rewriting the tax code and fixing our long term fiscal problems. The problem is that the optics of it would not work because there are too many people who don't understand this stuff, so they would think it is a "tax cut for the wealthy" when in reality it would be a tax increase - same thing with the narrative last year... There were enough stupid people out there who actually thought that the GOP wants to reduce the tax burden for top earners when in reality they have been trying to increase it for a few years now.
    27 Mar 2013, 03:14 AM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Pts, I don't really agree that I only consume sensational stories.

     

    First of all, I am not too much involved in the polarized debate which is taking place in the US. Additionally, I think very low about the quality of the US media, and I consider the Dutch media both less skewed to a political side, and better informed about this topic, since this country has a very important part in this story. I guess you haven't heard about countries thinking about revoking tax treaties with the Netherlands because of this? So things are getting hot.

     

    Regarding the GOP, so you are claiming that the GOPs real intentions would actually increase taxes for the wealthy? Do you understand that I find that hard to believe? But I am not saying it's untrue.
    The GOP just has an incredible reliability and integrity problem. The only primary candidates that made any sense, were Huntsman and Ron Paul, and they were hopeless, the former to moderate, while the latter wasn't approved by the AIPAC.
    27 Mar 2013, 06:48 AM Reply Like
  • Pts117
    , contributor
    Comments (155) | Send Message
     
    Timothy -

     

    I have heard these discussions, but the whole concept of breaking tax or trading agreements is ridiculous because it is focused on protecting rather than competing. This is what losers do - they try to protect what they have rather than evolving to the changing world around them.

     

    The reason why you find it hard to believe is because you are listening to the spin about the GOP and not the actual GOP. They have said over and over that they want to reduce tax rates across the board and limit deductions/loopholes and that the result would be higher (or at minimum equal) tax payments for the upper middle class which makes a hell of a lot of sense. You have heard the sensationalist BS coming from the current administration - his strategy is to demonize, distract, and polarize to push his agenda forward. Obama will go down in history as one of the best politicians this world has ever known, but also one of the worst leaders this world has ever known.
    27 Mar 2013, 08:20 AM Reply Like
  • TimothyF
    , contributor
    Comments (223) | Send Message
     
    Pts117
    Protecting? Perhaps in the sense that commodity rich countries, such as Mongolia, have the impression they are missing out on the revenues of their resources.

     

    And Obama, we'll see about him. Still a lot of stuff he needs to address. So what do you consider a great leader?

     

    And regarding the GOP, who is the real GOP, if they are not the religious fundamentalists we have seen recently. I understood the wacko's from the highjacked tea-party are not them, but I do hope, that the real GOP are not the ones responsible for the dark decade under Bush' reign....
    27 Mar 2013, 09:19 AM Reply Like
  • CincinnatiRick
    , contributor
    Comments (799) | Send Message
     
    Timothy: I would guess that if the GOP screws up again ala Bush, who expanded rather than contracted government, the budget and the deficit, the Republican Party may no longer be a viable force...as extinct as the Whigs who couldn't get their arms around another great American crisis.

     

    Historically, the progressive ethos permeated the elites of both parties. This pretty much works for Democrats because their base is largely clientele (or managers) of the nanny state, the progressive Utopia. The Republican elite has had a much tougher row to hoe of late with their base, which is increasingly unwilling to follow their “betters”…hence you get a populist movement like the TEA Party. And the transformation of our political landscape is now virtually complete: the GOP has lost its capacity and chic as the vehicle of choice for the elite...which it most decidedly was when I first became conscious of politics and society, circa 1950.

     

    The Republican ideology is nominally focused on preventing the government from doing things to the individual rather than what the government can/should do for you...a natural opposition party. The best and brightest with this philosophy will not naturally gravitate towards politics or positions in government. The career Republican politicians are a barren and self-serving wasteland, all tactics and small ball, no vision...no positive agenda for putting political power to use. Perhaps a step up from Hastert, Boehner and McConnell…but did Romney really hold out any more promise than simply being a more effective administrator of the nanny state?

     

    From my perspective, the progressive agenda is wrong and even dangerous but it does attract a better caliber of people…simply because they can aspire to apply their considerable talents to use the government as a tool for doing “good.” The road to Hell on Earth is forever paved with their good intentions (and they live to bore us, endlessly lecturing us about what they have and will do for us).

     

    While, in the public square, currently, the progressives, those who would enslave you to create a utopia on earth have the ascendency, it will be interesting to see whether (and for how long) those who would enslave you to save your soul will be able to coalition with those who say “save yourself and stay the hell out of my business.” In short, the social conservatives and the TEA Party quasi-libertarians are a difficult but plausible coalition in opposition (where all they need agree on is “no”) but almost certainly not able to provide a coherent government. A natural opposition party but not a plausible vehicle for any Presidential bid...unless "the Party of Government" has total control of that government and things do not go well. And, even then, there is the problem of finding a relatable "American Idol" that does not offend either wing of the "Party of Opposition."
    27 Mar 2013, 07:29 PM Reply Like
  • bgold1955
    , contributor
    Comments (2352) | Send Message
     
    Why not just re-charter the corporate structure from a C Corp to a PE (private equity) Partnership where you will calculate earnings as "carried interest" and will not pay more than 15% ever unless tax laws are changed.

     

    The answer to the tax problem lies between the 2 extremes as it always does for any issue. Not saying I have the answer as I don't, but nor does anyone else that is posting here.
    24 Mar 2013, 12:22 PM Reply Like
  • catbird
    , contributor
    Comments (117) | Send Message
     
    The purpose of the last repatriation amnesty was to enable corporations to create new jobs here. Well, it didn't happen. Instead corporations used those funds for stock buybacks and to fatten executive salaries and parachutes.

     

    If repatriation tax consequences were to be offset by a corporate deduction to the extent of increased dividends distributed, the stockholders would benefit by the increased dividends, IRS benefits by increased tax revenues from the stockholders, so it could be a win-win situation all around.

     

    If only our legislators could come up with creative thinking like that!
    24 Mar 2013, 12:49 PM Reply Like
  • TheRabble
    , contributor
    Comments (118) | Send Message
     
    Never take financial advice from a newspaper that takes Paul Krugman seriously.
    24 Mar 2013, 04:31 PM Reply Like
  • bgold1955
    , contributor
    Comments (2352) | Send Message
     
    Somewhere between Krugman and the UK stance appears to be the way to go. Don't like it but when Wall Street rips the global economy for what ended up to be 12t+ dollars in lost equity gov't across the globe had to do stimulus to prevent WWIII.
    24 Mar 2013, 06:14 PM Reply Like
  • robehifi
    , contributor
    Comments (186) | Send Message
     
    If it was Jeff's money, the he would have a different opinion, i'm sure about that!!,
    25 Mar 2013, 01:05 AM Reply Like
  • nelsonsdad
    , contributor
    Comments (26) | Send Message
     
    Since when should corporations not do their civic duty and pay taxes? Guess what - they could buy the European version of ADS shares, and accomplish the same thing without paying taxes.
    25 Mar 2013, 08:54 AM Reply Like
  • ktyhwkpete
    , contributor
    Comments (4) | Send Message
     
    Maybe I don't understand. If Apple held their cash foreign accounts and just bought shares of Apple thru their local foreign brokerage accounts, would not the float be reduced worldwide by the whole 50 or 60 billion dollar equivalents without repatriation? Holding its cash in it's own stock would be both profitable to itself and it's stockholders.
    25 Mar 2013, 01:36 PM Reply Like
  • kg82
    , contributor
    Comments (14) | Send Message
     
    We should not be so quick to dismiss the comments of CinncinatiRick. It is a fundamental question of "who's money is it anyway?" Applies to both corp and ind taxes, which are just different levels of the same thing.
    27 Mar 2013, 07:45 AM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs