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There is a the tax structure, but there is also the liability structure. If you hurt a worker's feelings in the USA he sues for millions of dollars.
Also the cost of insurance (which is mandatory for all your workers) and the cost of retirement programs.
The bottom line is that American workers have priced themselves out of the job market.
This. It really boils down to labor and its associated costs.
Taxes are a lesser consideration. Keeping profits overseas only defers taxes, it doesn't lower them. Deferred taxes are still a liability against shareholder's equity. And unlike labor, taxes are not an operating expense affecting core profitability.
Yes, labor costs. Why pay American workers when you can pay Chinese workers peanuts? Also, in China, you don't have to follow pesky environmental regulations? Water pollution crisis in China | Rainharvest.co.za
All of which leaves more money for executive bonuses, which have skyrocketed.
Actually, the CEO of Intel gave a very interesting interview three or four years ago. The upshot was that if a plant costs a billion per year to operate overseas, the same plant costs two billion to operate in the United States, and only 10% of those additional costs are in labor. Higher taxes and more regulations were the culprits.
The other thing to consider is that the United States has the second highest corporate taxes in the industrial world, second only to Japan. And Japan's industry and government are wedded so tightly and corruptly that one can play games there that one cannot play in the States. The United States corporate tax rate is well north of 33%, the next highest corporate tax rate belongs to Sweden, a full 10% lower.
So not only is it a labor and regulatory cost, but it means a huge windfall if one sets up a corporation overseas and keeps the profits over there. Even now, American corporations are sitting on untold billions in profits overseas that they simply do not want to bring home lest the government skim a third right off the top.
On the other hand, no one actually pays the marginal tax rate. Eg, Apple passes everything through Ireland. So a digital download sale about 70 cents of a .99 track is profit. The sale "occurs" in Apple's server in Ireland since Ireland's tax law taxes where the item was "made," which for a US artist would be America. So Apple pays no tax revenues on any digital income anywhere. Not unique, they all do it and it's completely legal.
A large reason Apple produces its goods in China is the prevalence of engineers and because Chinese factories are made to be able to easily change things. US factories problems is in order to make changes, often requieres a new factory. We saw that we the advantage of foreign auto makers factories over domestic.
Our **** is outdated.
Actually, having done biz with several companies that manufacture overseas, this is not really the case. The educational attainment and ability of what the Chinese term an engineer to be and his American counterpart is is really night and day. Sit around with a few operations guys and listen to them carp about the ability of Chinese 'engineers' and you might revise your thesis somewhat. The QC on products coming out of there is a nightmare.
The sole consideration for basing manufacturing in China is labor and labor only. Even now, due to Chinese labor costs rising roughly 25% a year, manufacturers are beginning to look elsewhere to places such as Indonesia, Vietnam, and India. This is especially true when you realize that about 94% of Chinese tech manufacturing is assembling imported parts and exporting them again.
A large reason Apple produces its goods in China is the prevalence of engineers and because Chinese factories are made to be able to easily change things. US factories problems is in order to make changes, often requieres a new factory. We saw that we the advantage of foreign auto makers factories over domestic.
FTA:
“They (the Chinese)could hire 3,000 people overnight,” said Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010, but declined to discuss specifics of her work. “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?”
Another critical advantage for Apple was that China provided engineers at a scale the United States could not match. Apple’s executives had estimated that about 8,700 industrial engineers were needed to oversee and guide the 200,000 assembly-line workers eventually involved in manufacturing iPhones. The company’s analysts had forecast it would take as long as nine months to find that many qualified engineers in the United States.
On the other hand, no one actually pays the marginal tax rate. Eg, Apple passes everything through Ireland. So a digital download sale about 70 cents of a .99 track is profit. The sale "occurs" in Apple's server in Ireland since Ireland's tax law taxes where the item was "made," which for a US artist would be America. So Apple pays no tax revenues on any digital income anywhere. Not unique, they all do it and it's completely legal.
This is correct, although I think the poster you responded to was way-off.
Anyone with a meaningful opinion must understand taxes paid vs. taxes owed.
Whatever isn't paid - but still owed - is deferred, not avoided. People get so worked up about corporations not paying enough. What they don't pay is still recorded as a deferred tax liability against shareholder's equity.
That liability does not expire - it's essentially a form of interest-free debt.
The companies does consider the wage rate and other things because this increases or decreases their profits. Giving lower wages increases the profit and china have a lower wage rate and transportation cost, which is beneficial for the company. In america there are many laws which the companies have to imply if they want to stay in the business.
it could not be labor cost. many of those product is highly automated. living wage in many area could not be that much impact to the profit. is it because the US does not have knowledge how to manufacture thing from the designed to the final product?.
Quite the opposite, many firms are discovering that 3rd world countries often lack the ability to do complex manufacturing.
As a result, some companies are bringing manufacturing back to the U.S.
Manufacturing in China is not complex for Apple. the component parts are often made elsewhere and the Chinese factory just slaps the pieces together (a slight simplification).
Labor cost is the main motivating force (along with whatever spurious tax loopholes might exist for manufacturing offshore) in outsourcing.
A Foxconn worker makes about 400 a month. If Apple employed the same person in the U.S, once you factor in taxes (social security, medicare, etc), benefits (health care, etc), and the wages, you're probably looking at closer to 5,000 to 6,000 a month.
it could not be labor cost. many of those product is highly automated. living wage in many area could not be that much impact to the profit. is it because the US does not have knowledge how to manufacture thing from the designed to the final product?.
Speaking of Google, Google is a good source for your answer.
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