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Corporations might not repatriate just because of changes in laws. They might worry that in the next administration and the next congress, the laws might change back to what they were before, or worse.
A corporation has to evaluate the costs of doing business in a location and the alternatives. In the past doing business outside the US was more difficult but today it can be effective and more profitable. The US is now competing with countries across the world. Moving a business in and out of the country can be very costly so going back and forth is less likely.
It may be that the way the US taxes overseas profits is a bigger deal. A US corporation that operates and earns profits in an other country must pay taxes in that country but the US government also want to tax those profits that were earned elsewhere and already taxed. This results in very large amounts of funds that are left and used elsewhere rather than brought back into the US.
Yep. And this is the only major country on the planet that does this. Essentially, our Rube Goldberg tax system not only creates conditions that make it more advantageous to establish operations overseas, but it also keeps trillions of dollars from returning to this country.
By the way, the only two countries that have corporate taxes as high as the US are the United Arab Emirates and that economic juggernaut, Chad. Meanwhile, the EU has corporate tax rates that, on average, are about ten points lower than the US. Sweden, that paragon of Keynesian aspirations, has a corporate tax rate of around 22%. Meanwhile, when you throw average state tax rates into the mix, the total tax rate in the US is close to 39%.
Let's stop for a moment and think about what a corporation is, by the way. It isn't just Microsoft and Apple. It's your favorite coffee shop, your dentist, or your dry cleaner. You know, the small businessmen and women who generate 55% of the jobs in this country. And when the government swoops in and takes away more than a third of the profits at the end of the fiscal year, that's money those people can't use to hire, buy equipment, give raises and, yes, dividend themselves.
Even if you look at publicly-held corporations, stop using the childish stereotype of plutocrats lighting cigars with $100 bills. Profits fuel their growth as well. And if you own a retirement fund, even if you're just salting back money every month from your paycheck, those profits grow your portfolio. Not to mention your prospects for the future.
So if you don't think lowering the tax rate and eliminating the ridiculous taxes on overseas corporate earnings wouldn't have a salutary effect, you're smoking crack.
Yep. And this is the only major country on the planet that does this. Essentially, our Rube Goldberg tax system not only creates conditions that make it more advantageous to establish operations overseas, but it also keeps trillions of dollars from returning to this country.
By the way, the only two countries that have corporate taxes as high as the US are the United Arab Emirates and that economic juggernaut, Chad. Meanwhile, the EU has corporate tax rates that, on average, are about ten points lower than the US. Sweden, that paragon of Keynesian aspirations, has a corporate tax rate of around 22%. Meanwhile, when you throw average state tax rates into the mix, the total tax rate in the US is close to 39%.
Let's stop for a moment and think about what a corporation is, by the way. It isn't just Microsoft and Apple. It's your favorite coffee shop, your dentist, or your dry cleaner. You know, the people who provide 55% of the jobs in this country. And when the government swoops in and takes away more than a third of the profits at the end of the fiscal year, that's money those people can't use to hire, buy equipment, give raises and, yes, dividend themselves.
Even if you look at publicly-held corporations, stop using the childish stereotype of plutocrats lighting cigars with $100 bills. Profits fuel their growth as well. And if you own a retirement fund, even if you're just salting back money every month from your paycheck, those profits grow your portfolio. Not to mention your prospects for the future.
So if you don't think lowering the tax rate and eliminating the ridiculous taxes on overseas corporate earnings wouldn't have a salutary effect, you're smoking crack.
Tax rates are not what matter per se, rather actual payments. On that score many American companies and businesses do not pay anywhere near the highest tax rates.
This argument is the same as when persons go on about restoring the near 90% personal income tax rates of old. Yeah, that was the rate but very few actually paid anywhere near thanks to scores of deductions or credits.
So if you don't think lowering the tax rate and eliminating the ridiculous taxes on overseas corporate earnings wouldn't have a salutary effect, you're smoking crack.
Suggesting that others are "smoking crack" is usually a sign that someone's argument doesn't have a very sound basis. As for taxes, if corporations want and expect to enjoy many of the rights that individual citizens have, perhaps they should be prepared to deal with the same sorts of responsibilities as well. The notion that corporate taxes are somehow "too onerous" when corporate profits flit up and down around $1.5 trillion per year is an idea that comes directly from corporate propaganda mills.
When you quote the number of tax professionals working on GE or corporate returns and the money spent is that purely on US based issues or is it for the entire worldwide obligations? Meaning keeping the laws and account straight for all countries GE or any other corporation will do business with
Ps as a frame of reference 1400 workers is less than 1/2 of 1% of GE's workforce is relatively small when you put it into perspective. With 300k+ employees and 140 billion in annual revenue you'd need more than a couple of accountants working on the numbers
Those are US based tax professionals. Some of them are "impats"-- tax professional citizens of, say, Singapore or Malaysia or Germany who are working in the US for a time. Similarly, there are some US based tax professionals who work as expats in, say, Singapore or Malaysia or Germany.
There are separate tax professionals in various countries around the world. In many of those countries, GE will just use outside tax firms to do most of the work.
At the same time the distinction between working on US or international obligations is sometimes a gray area. For example, tax departments are involved in "transfer pricing" between subsidiaries in different in different countries.
Let me make up an example to illustrate. Let's say a part is manufactured at a plant in GE Israel, and sold to a GE plant in GE Costa Rica, where it is then combined with something GE Costa Rica procured from GE Brazil, and the result is then sold to GE USA, where it is incorporated into a final product, and then sold to an end customer. Each of those host countries have their own set of tax laws and tax rates.
Transfer pricing is setting the price for each of those components at the various stages along the way. So, GE must set the price for the part sold from GE Israel to GE Costa Rica. However, this is not an arms-length transaction as there is no market price for the part. There is a single producer (Israel) and a single customer (Costa Rica), and both are owned by GE. If GE sets the price of that part high, more profit is realized in Israel. If GE sets the price low, less profit is realized in Israel. This affects taxable income in Israel and in Costa Rica. If the price is high, then Costa Rica has a high input cost for the part it builds and sells to GE USA, which affects the profit of the end product sold by GE USA to an end customer.
And yes, the IRS looks at all of that chain. The IRS may decide these transfer prices are unreasonable and thereby lower the profit seen in the USA, and then force GE to change the transfer prices so that more profit is realized in the USA. Naturally, the governments of foreign countries would prefer the profit be realized overseas.
Those are US based tax professionals. Some of them are "impats"-- tax professional citizens of, say, Singapore or Malaysia or Germany who are working in the US for a time. Similarly, there are some US based tax professionals who work as expats in, say, Singapore or Malaysia or Germany.
There are separate tax professionals in various countries around the world. In many of those countries, GE will just use outside tax firms to do most of the work.
At the same time the distinction between working on US or international obligations is sometimes a gray area. For example, tax departments are involved in "transfer pricing" between subsidiaries in different in different countries.
Let me make up an example to illustrate. Let's say a part is manufactured at a plant in GE Israel, and sold to a GE plant in GE Costa Rica, where it is then combined with something GE Costa Rica procured from GE Brazil, and the result is then sold to GE USA, where it is incorporated into a final product, and then sold to an end customer. Each of those host countries have their own set of tax laws and tax rates.
Transfer pricing is setting the price for each of those components at the various stages along the way. So, GE must set the price for the part sold from GE Israel to GE Costa Rica. However, this is not an arms-length transaction as there is no market price for the part. There is a single producer (Israel) and a single customer (Costa Rica), and both are owned by GE. If GE sets the price of that part high, more profit is realized in Israel. If GE sets the price low, less profit is realized in Israel. This affects taxable income in Israel and in Costa Rica. If the price is high, then Costa Rica has a high input cost for the part it builds and sells to GE USA, which affects the profit of the end product sold by GE USA to an end customer.
And yes, the IRS looks at all of that chain. The IRS may decide these transfer prices are unreasonable and thereby lower the profit seen in the USA, and then force GE to change the transfer prices so that more profit is realized in the USA. Naturally, the governments of foreign countries would prefer the profit be realized overseas.
I could work from the US and still be part of a Ireland team so the long winded response really doesn't address my question nor does it take into account that your stated headcount is less than 1/2 of 1% of GE's total employees which really when in perspective doesn't seem very high
10-22-2016, 09:22 AM
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Quote:
Originally Posted by Lowexpectations
When you quote the number of tax professionals working on GE or corporate returns and the money spent is that purely on US based issues or is it for the entire worldwide obligations? Meaning keeping the laws and account straight for all countries GE or any other corporation will do business with
Ps as a frame of reference 1400 workers is less than 1/2 of 1% of GE's workforce is relatively small when you put it into perspective. With 300k+ employees and 140 billion in annual revenue you'd need more than a couple of accountants working on the numbers
And let's not forget, the tax laws are only that complex because corporations lobbied for them to be that complex.
Complexity means those with the resources to use the tax code to their advantage make out very well (sometimes paying nothing at all), while their smaller, less savvy, less resourceful competitors suffer.
And to top it off, on occasion we'll have a repatriation tax holiday as an extra giveaway. Last time we did that (2004), it cost billions in lost tax revenue and the companies that received it actually cut jobs while the overall economy was growing.
Simply lowering the rate has been talked about for years. Obama wanted to slash it and close loopholes so everyone would be on a more level playing field. You can guess how well that went over...
Of course, "filing legal tax returns" is done with the click of a mouse, but that isn't the point.
"Preparing" legal tax returns is the result of a huge undertaking. "Planning" is a huge effort to ensure that an entity will have the necessary data available 3 years from now to prepare that year's return.
Moreover, the IRS has agent auditors on-site full-time at every major corporation in America. Maybe just a couple dozen, but in some cases they will have a legion. They have "contractor badges" that allow them entrance to the building. These auditors have their own locked work areas with their own offices & conference rooms where they, and only they, have access -- all inside the company they audit.
Again, these IRS agents are on-site 5 days/week 50 weeks/year. They continuously audit the corporation. There is never a moment during working hours when the IRS is NOT auditing the corporation's tax positions. As you would expect, the IRS rotates staff and managers so that they do not become "too cozy" with the company they are auditing in the same way public accounting firms rotate staff working with any given client.
The corporation spends a ton of effort providing the IRS access to all manner of supporting documents and working papers, all to support the IRS' audit of the corporations's tax returns.
Actually, they may not audit the corporation during all working hours. At one company where I worked, the corporation's IT department noticed unusual network activity traffic emanating from the locked offices of the IRS' work area. After doing a bit of packet inspection, they determined some people in the IRS work areas were (a) accessing quite a bit of porn, and (b) engaging in quite a bit of day trading.
The IT people didn't connect the dots that the offenders were IRS agents - they just knew they were "contractors" who had access to be in the building. So, IT went to these contractor's sponsors inside the company (the tax department) to give advance notice they were going to restrict network access so these misbehaving contractors couldn't day-trade or watch porn and so the sponsors could reprimand these contractors.
"NO, NO, NO!!!" said the VP of Tax. "You cannot restrict the IRS! They can do whatever they want! Besides, do you want to embarrass and ****-off an IRS agent? They cannot be restricted in any way."
Quote:
Originally Posted by Pub-911
Tax returns are confidential. The public is likely never to see them.
True - but I'm missing your point.
In addition to the accounting books kept & prepared by the corporation for GAAP purposes to be reported at quarterly & annual SEC filings, the corporation must keep a SEPARATE set of "tax books" for the IRS.
These "tax books" do not follow GAAP; they follow tax laws and regulations, which is why they are separate. These separate tax books also are not seen by the public. They exist to prepare the tax returns and prepare the line item for tax obligation on the financial statements.
Quote:
Originally Posted by Pub-911
Income taxes are actually just a cost of doing business.
Yes, they are. The primary purpose of income taxes should be to raise the appropriate amount of revenue required for the country. Imagine a world where the costs of planning for & preparing & filing the returns was actually pennies as you say, yet it still raised at least as much tax revenue generated today.
This would be better for almost everyone: the IRS still collects the same amount of tax revenue from corporations, but corporations didn't need to keep armies of tax accountants and tax attorneys on staff, and the IRS didn't need to audit corporations continuously.
The only people it would be bad for would be the future-unemployed-tax-attorneys whose positions are no longer needed. Yes, they are out of a job, but they are bright people and could easily find replacement work in, say, the fast food preparation industry.
I could work from the US and still be part of a Ireland team
In that situation, you are working on the US stuff, not the native Irish stuff.
But sometimes, things are not merely black or white.
Quote:
Originally Posted by Lowexpectations
your stated headcount is less than 1/2 of 1% of GE's total employees which really when in perspective doesn't seem very high
I'm not sure of your point. When thinking of the Federal Income Taxes, it is not just about the $$$ actually wired to Treasury
It is also the costs incurred by the company to get to that point. And, after the fact, it is all about the costs incurred by the company & by the IRS during its continuous auditing of returns until a given tax year is closed (which, not surprisingly, takes about a year for the IRS to do its job).
It is not merely about the headcount involved. It is about total costs to plan for and administer the tax return.
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