Repatriation: GOP split on tax that affects Apple most

Draft bills in the Senate and the House seem to have gone their separate ways.

From the New York Times:

The Senate is also including a provision to prevent large multinational corporations from stashing profits overseas. The bill will propose a new business tax on American and foreign companies — effectively a minimum tax on their income earned in the United States — while also levying a 12.5 percent tax on income that American companies receive overseas from their intellectual property.

Preliminary estimates indicate the provision would raise more than $130 billion in tax revenue over 10 years to help offset revenue lost from rate cuts, committee staff members said. The original House approach, which would have levied a 20 percent “excise tax” on payments between American and foreign companies that are affiliated with each other, would have raised an estimated $155 billion in revenue.

From the Wall Street Journal:

The Senate proposes different rules on international taxes than the House. Those include a 12.5% tax on certain foreign profits produced from intangible assets such as patents and copyrights, whether those assets are in the U.S. or abroad. That would affect U.S.-based technology and pharmaceutical companies. The plan also includes a new rule to limit tax avoidance by foreign-based companies operating in the U.S.

From Morningstar:

Senate Republicans plan to propose a new, 12.5% tax on the foreign income that U.S. companies generate from patents, copyrights and other intellectual property.

The tax is meant to address U.S. companies — especially pharmaceutical and technology businesses — that transfer intangible assets to low-tax countries outside the U.S. to reduce their overall tax bills.

Under the plan, the new tax would be applied to a company’s foreign income regardless of whether the intellectual property is located in the U.S. or abroad, according to Senate Finance Committee aides. It is meant to incentivize U.S. companies to keep their existing patents in the U.S. and move those abroad back home. It would be levied alongside a new, lower 20% corporate tax rate on all domestic profits…

The House tax plan has a provision aimed at addressing the same issue. It would create a 10% tax on foreign subsidiaries with high profits.

My take: The GOP tax bill has bigger problems than this. The repatriation bit—the part that addresses the $252 billion Apple has parked overseas—seems reconcilable.

For background, Apple recommends Shawn Tully’s deep dive in Fortune.

4 Comments

  1. David Drinkwater said:

    How do you determine where intellectual property is “located”? I think the problem of intellectual property is more one of where it is or is not protected.

    Much of this seems rather stupid to me. IP wrangling, in particular.

    Assume Apple pays taxes on sales in foreign countries in those countries: I am sure it must. They are getting “retaxed” to repatriate those funds. OK, so be it. To argue for a reasonable rate for those repatriation taxes seems totally fair and obvious. Until that point, it has to sty somewhere. It makes sense to put it somewhere that it is not highly taxed.

    This is not rocket science, it is home economics.

    Query: I know that in my US taxes, there is a (small) provision for foreign taxes paid. Is there such a provision in US corporate taxes? I honestly don’t know, which is why I’m asking.

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    November 10, 2017
  2. Fred Stein said:

    Disclosure: Fanboy, liberal, not a progressive.

    Now, NYT: Can you do arithmetic? $130B over ten years? There is already $2T (estimates about a year ago). That would be $250B in the first year. Adding the next 9 years, my guess, we’re in the range of $1T added to tax receipts.

    0
    November 10, 2017
  3. Ken Cheng said:

    A tax on IP, so as to prevent IP shifting? I suppose that’s the Google tax.

    0
    November 10, 2017

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