Corporate Taxes, Taxes, and More Damn Taxes, and None of Them Work
It’s no secret that the corporate tax environment in the United States is fubar. The diagnosis — corroborated by the public, policymakers, and enterprising advocacy groups — is multifaceted, but there is really only one general course of treatment to take, and that is reform. Deep, structural reform (call it an overhaul) that reduces complexity, discourages gamesmanship, and encourages the repatriation of cash held overseas.
Repatriation has become a headline issue over the past couple of years as U.S. tech companies increase their participation in the high-profile game of international tax arbitrage that most multinational corporations play. Consumer tech giant Apple Inc. (NASDAQ:AAPL) was placed front and center in this conversation when Chief Executive Officer Tim Cook made an appearance before the Senate Permanent Subcommittee on Investigations in 2013.
During the hearing, it came to light that Apple had avoided paying U.S. income taxes on profits of $74 billion it made between 2009 and 2012 by using multiple subsidiaries in low-tax countries such as Ireland. Moreover, the company is holding as much as $111 billion at its foreign subsidiaries, money that is untaxable by the U.S. government unless it is repatriated.
Whether Uncle Sam should be able to get his hands on this cash is a good topic for any speech and debate club, and it’s a huge fiscal issue for U.S. policymakers. According to an analysis done by Bloomberg, multinational companies held a combined $1.95 trillion outside of the U.S. at the end of 2013, a cash hoard that was up 11.8 percent from 2012.