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There are lots of opinions and misinformation about this issue, and since I am not a tax expert I might repeat some of it which is not right, so beware. That said, I have done a fair amount of reading on the subject and here is what I understand:

The first misconception is that companies will have to pay the full "nominal" corporate income tax rate to bring back the money. Untrue. First, very few pay the full nominal rate (35%) anyway, thanks to deductions, credits, etc. The average rate paid is something in the low 20's, IIRC. Second, the repatriation tax only matters on the differential between what is paid in the foreign country and the corporate rate the US home corporation pays.

So, for instance, if you have already paid 14% in (for example) Great Britain and your rate in the US is 25%, you will pay not the higher nominal 35% rate, but an additional 11%.

(The reasons for this are pretty easy to see: if you decide to recognize all your income and profits in the foreign country with a lower tax rate, you save taxes in the home country with a higher rate. Microsoft, for instance, might decide that all the programming costs actually happened in Ireland and recognize European revenue there, amounting to lots and lots of profits - but a low tax bill because Irish taxes are low. Then they could say "Hey, we already paid taxes on this" and bring all the profits back to the US tax free, even though many of the costs - and profits from their work actually originated in the US and were supported in some fashion by US taxpayers. Cost shifting, especially for "soft" products - as opposed to those which require trackable inventory - is frightfully easy to do. Basically you can assign costs almost however you like, and without a full audit which rarely happens, you are unchallenged.

And this is not a hypothetical example: Ireland is a favorite location for US companies to headquarter for Europe for exactly that reason. Starbucks is expanding like wildfire over there but manages to show no profit in Great Britain - and GB is not too happy about it, as you might imagine.)

Another issue is that there was a "tax repatriation holiday" in 2004 during the Bush administration, where companies got to bring back their then accumulated foreign profits at a very low rate. Billions came back, which is good, except oops, corporations figured out that if they wait they will be able to do it again. How would you like to be the CEO who decides to bring it back and pay 20% tax, and two days later have Congress pass legislation allowing it to come back with only a 5% tax? Your shareholders would be out 15 cents on the dollar, and that might not please a lot of them.

Finally, I'll just mention that there has been some discussion on the Apple board (as Apple has this "foreign profits" issue in spades, larger probably than Microsoft) that the foreign profits are held on the balance sheet as though the taxes have already been paid so there's not a huge hit if/when the money is repatriated (assuming it ever is). I'm not sure this is true, having never examined the books that closely, but Apple, at least, has the "advantage" of requiring a lot of foreign capital to build hardware, open stores, purchase parts inventory, etc. so they have some use for foreign profits. Perhaps Microsoft does too, I don't really know enough about the MSFT foreign operations to know.

That's a start and I'm tired of typing. Hopefully others will jump in and amplify, correct, or flame.
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