t is a loophole; which is not the same thing as tax evasion. A loophole is essentially a legally valid exploit that leverages an opportunity resulting in an outcome that was unforeseen or unintended by those who legislated the opportunity. In Australia, Apple paid a paltry AU$80.3 M in tax on revenue of AU$6 Billion. That is around 1.3% in tax I think. The tax legislation which allowed that sort of outcome, was never formulated with the intent to legitimately allow it. It was allowed by a loophole.
We're talking about something other than a loophole. The IRS doesn't have jurisdiction over foreign business operations. If you're a US citizen unwilling to hand in your passport, YES the government wants to to report and pay tax on income you may earn outside the country. But they don't do that (yet) to American corporations. No one seriously said "how do we tax Apple Germany? Or how to we tax Nokia Finland, since they sell a lot of product in the USA?" Whatever a company does outside the U.S. has not been in the purview of the IRS, so it's not a "loophole" being exploited, it's simply Apple making money in Germany and paying German taxes.
Keep in mind that even if the proposed tax break takes effect, there is no guarantee that companies will choose to "repatriate" this overseas money. I could easily see companies being sued by investors for paying additional taxes as there is technically no reason to do so. In fact, the host countries may provide a counter-offer to eliminate the local taxes entirely to incentivize companies to leave their funds offshore, or they may in fact levy additional taxes as a disincentive! We live in a competitive global economy. Companies have their choice of business friendly countries in which to locate.
Yes I understand that the money is usually sitting in US bank accounts which are owned by the Apple foreign subsidiary.
My larger point is if Congress were to pass a law which says that the foreign subsidiaries of American-headquartered companies WILL be taxed in the US then the outcome of that would be fairly predictable. If facing a $70b tax bill Apple would be prudent to shutter Campus 2, move headquarters to a less-retarded jurisdiction, and maintain a SUBSIDIARY in the US, just like every other non-American company doing business in the US now does without harassment.
You can't be the only country on the planet imposing a draconian tax grab on OVERSEAS earnings and expect too many multinationals to ever headquarter there.
It wouldn't actually be that high anyway, even in the worst possible scenario. As you know there are adjustments, including credit of any tax paid to a foreign government, as long as all filings for overpayment were completed. They do need to make a decision on how to handle this kind of thing going forward, but it's mainly the tax holiday lobbying that angers me. If they're going to change tax laws, they should do so and be done with it, not simply reset the cycle.
Quote:
Originally Posted by joseph_went_south
We're talking about something other than a loophole. The IRS doesn't have jurisdiction over foreign business operations. If you're a US citizen unwilling to hand in your passport, YES the government wants to to report and pay tax on income you may earn outside the country. But they don't do that (yet) to American corporations. No one seriously said "how do we tax Apple Germany? Or how to we tax Nokia Finland, since they sell a lot of product in the USA?" Whatever a company does outside the U.S. has not been in the purview of the IRS, so it's not a "loophole" being exploited, it's simply Apple making money in Germany and paying German taxes.
Speaking of that the terms are actually pretty brutal for expatriates. The paperwork is more complicated, and it requires tracking exchange rates at the time funds are received, which may be an issue if cost of living and income are in a tight balance.
Quote:
Originally Posted by SpamSandwich
Keep in mind that even if the proposed tax break takes effect, there is no guarantee that companies will choose to "repatriate" this overseas money. I could easily see companies being sued by investors for paying additional taxes as there is technically no reason to do so. In fact, the host countries may provide a counter-offer to eliminate the local taxes entirely to incentivize companies to leave their funds offshore, or they may in fact levy additional taxes as a disincentive! We live in a competitive global economy. Companies have their choice of business friendly countries in which to locate.
We're talking about something other than a loophole. The IRS doesn't have jurisdiction over foreign business operations. If you're a US citizen unwilling to hand in your passport, YES the government wants to to report and pay tax on income you may earn outside the country. But they don't do that (yet) to American corporations. No one seriously said "how do we tax Apple Germany? Or how to we tax Nokia Finland, since they sell a lot of product in the USA?" Whatever a company does outside the U.S. has not been in the purview of the IRS, so it's not a "loophole" being exploited, it's simply Apple making money in Germany and paying German taxes.
The machinations and creative efforts Apple and others go to in order to minimise their tax are a lot more complicated than your simplistic example. The IRS seems to think it has jurisdiction over the income of US citizens living and working overseas, so why should US companies be any different?
US companies are different because they can much more easily shift operations to a competing country, than can a private individual. As I mentioned earlier, we Canadians don't face this obstacle, we can decide to relocate and if the other country accepts us, we're free to go. The US basically forces you to renounce your citizenship if you want to live elsewhere and NOT report back to the IRS. It doesn't try that with multi-national corporations (yet) because it would be economic suicide to do so.
Keep in mind that even if the proposed tax break takes effect, there is no guarantee that companies will choose to "repatriate" this overseas money. I could easily see companies being sued by investors for paying additional taxes as there is technically no reason to do so.
How would shareholders ever see the benefit of the cash if it's permanently left overseas?
It's the same principle people use to justify the low tax rate - it's a smaller percentage of something vs nothing.
Right now shareholders get nothing because the cash is overseas. With a 14% rate, they get access to 86% of a massive amount of cash. Unless they think they'll ever get above 86% then suing wouldn't be in their best interests.
They don't sue over paying other taxes like 26% on income in the US when they could be in some other tax haven and avoiding that.
How would shareholders ever see the benefit of the cash if it's permanently left overseas?
It's the same principle people use to justify the low tax rate - it's a smaller percentage of something vs nothing.
Right now shareholders get nothing because the cash is overseas. With a 14% rate, they get access to 86% of a massive amount of cash. Unless they think they'll ever get above 86% then suing wouldn't be in their best interests.
They don't sue over paying other taxes like 26% on income in the US when they could be in some other tax haven and avoiding that.
From my point of view, the cash is best used in a lower tax location without the additional taxes paid until a better, more favorable political environment comes about and Apple should be in no rush.
From my point of view, the cash is best used in a lower tax location without the additional taxes paid until a better, more favorable political environment comes about and Apple should be in no rush.
Political environment more favorable to corporations = corporatist government. Corporatist government is bad when it bails out the banks using taxpayer money but corporatist government is good when it reduces the tax expenditure of a major corporation? Apple isn't using its cash in the limbo it is stuck in now because it wants to invest it in the US. One billionaire shareholder talks about it here:
"Occasionally, a U.S. company finds a foreign acquisition where it can deploy some offshore cash, but in general overseas earnings remain overseas.
In contrast, companies have complete access to their domestic cash. So this generally gets used, while the foreign cash accumulates.
In 2004 the U.S. had a one-time tax holiday where companies were able to repatriate their trapped cash by paying approximately 5% in taxes. And many did.
Many companies figure that if it happened before, it might happen again. Now they are waiting around for the next tax holiday. ‘Waiting around’ isn’t exactly right. We mean they are lobbying Congress aggressively.
Maybe they are upset that the tax rate on repatriation seems too high, or maybe they think that by building up obscene amounts of cash, Washington will accommodate them.
The anticipation of a tax repatriation holiday allows companies to tell their shareholders that bringing the cash back too soon would be a ‘waste of shareholder money.’
In reality, no CFO wants to risk bringing cash back to the U.S. this year, only to find out that there will be a tax holiday next year.
??In some ways, the cash sitting unused year after year is analogous to having an inventory problem.
The opportunity cost of trapped foreign cash is very high. The money sits earning only a small amount of interest and generates a return less than inflation. Like decaying inventory, the real value of the cash decays a little bit every day.
Even worse, the return is far below the cost of capital. For companies with all-equity balance sheets, the cost of capital is particularly high, because expensive equity capital supports both the business and the foreign cash.
Finance theory suggests that an unlevered or net cash balance sheet should be rewarded with higher P/E multiples. In practice, the market assigns a discount for this level of overly conservative long- term capital management.
Not only does the cash earn a return below the cost of capital, it is evident that future profits will probably also be reinvested at a low return. As a result, the market not only discounts the cash sitting on the balance sheet, it also drives down the P/E multiple due to the anticipated suboptimal re- investment rate for future cash flows.
??While cash hoarding is prevalent in the tech industry, it isn’t practiced universally. Consider Texas Instruments and IBM.
Both have net debt, illustrating that large tech companies can operate with debt.
Both return the majority of free cash flow to shareholders via dividends and repurchases.
??Though one can find convenient examples for buybacks and dividends being bad for the share price, failing to return excess cash in the face of a low multiple usually depresses share price and valuations further.
IBM and Texas Instruments are considered shareholder friendly and are rewarded for their behavior.
You can see that they have better P/E multiples net of cash despite expected earnings growth rates comparable to peers with excessive cash balances.
IBM is a mature business with little to no revenue growth, is dependent on acquisitions and has debt on its balance sheet. Even so, because it is seen as shareholder friendly through continued reductions in the share count, it trades at a premium multiple and even attracted Warren Buffett. IBM gets a higher value, in part, because it cares about its shareholders.
In contrast, cash-rich balance sheets have led to poor P/E multiples. And then we have the story of Dell, which has the lowest P/E of all.
?Dell’s Go-Private transaction exposes the disingenuous nature of the cash hoarding rationalizations.
Last year, we were large shareholders of Dell. We were told that foreign cash couldn’t be repatriated, and that domestic cash needed to be saved for strategic acquisitions, financial flexibility and tough times.
We found their attitude toward capital allocation to be so unappealing that we sold the stock. We suspect that we weren’t the only shareholders who were frustrated. The frustration helped depress the stock."
They weren't recommending repatriating at the full rate but pointing out that keeping cash overseas is a bad thing. If the 14% rate is considered acceptable (it's bipartisan remember), I don't see why Apple wouldn't take advantage of it.
I very much doubt the people who work at Apple care about there being a more favorable (i.e anti-tax) government in place given the side-effects:
"Redefining marriage leads to economic and moral problems. (Jun 2013)
No national law on same-sex marriage; leave it to states. (May 2013)
Let states decide same-sex marriage; don't federalize it. (Mar 2013)
Opposes same-sex marriage. (Nov 2009)"
The last thing Apple would do is help promote people who are against their core values for a little extra cash. It might be hard to believe but not everyone is driven by money.
And what do you say to Barbara Boxer, the other half behind this bill? I personally feel she's been a disgrace to her office, but this is the first decent thing she's backed.
Sorry, I just can't stand him at all.
But this is a terrible bill. There are too many, you can'ts, and too many you musts for it to be useful.
Marvin, Marvin. Increasing taxation leads to tax dictatorships like the Netherlands (and Europe for that matter). This means that you are forced to give 70%, 80% or sometimes even more of your salary to the government that chooses to spend it unwisely, effectively even worse than burning your money. Tax once allowed is also never given back, so take care not to allow anything how ever rational it may sound. Taxation in Europe is an epidemic and a severe violation of human rights, even in the Middle Ages taking more than 50% of someone's crop was seen as extortion.
As a matter of interest, what percentage of a person's income in the US goes towards health insurance that would give you the same level of treatment and excess, as say, one might expect from the NHS in the UK?
As a matter of interest, what percentage of a person's income in the US goes towards health insurance that would give you the same level of treatment and excess, as say, one might expect from the NHS in the UK?
It varies, I pay $950 per month
Which represents about 9% of my salary
I'm 55 and single with excellent health non smoker and non drinker
I'm 55 and single with excellent health non smoker and non drinker
I pay about that for a years private cover. Other details similar. I could choose not to have any but it would smooth things were I to get ill and wanted to get treated a bit more quickly than might otherwise be the case, though if it were really serious, it wouldn't make any difference really over being treated by the public system.
I think public healthcare is worth considering when contemplating the evils of European taxation regimes - and the cost of tertiary education for your children.
"None of the funds would be eligible for use in executive compensation, shareholder dividends, or stock buybacks for three years after the repatriation scheme ends."
Most shareholder dividends would be taxed a second time at minmum 15%. Why not allow that?
Most executive compensation lands in America and is also taxed a second time, usually averaging more then 15% as well. Only stock buybacks escape secondary taxation. That is the only thing they should be worried about.
You clearly missed the point of their political posturing. The typical claim is one that companies are held back from investing in domestic infrastructure due to tax policy. It won't work out that way, but if they were honest about the legislation, most people would not be in support of it.
Increasing taxation leads to tax dictatorships like the Netherlands (and Europe for that matter).
This means that you are forced to give 70%, 80% or sometimes even more of your salary to the government that chooses to spend it unwisely, effectively even worse than burning your money.
Tax once allowed is also never given back, so take care not to allow anything how ever rational it may sound.
Taxation in Europe is an epidemic and a severe violation of human rights, even in the Middle Ages taking more than 50% of someone's crop was seen as extortion.
It depends on who's getting that tax rate. I would agree that tax rates above 50% are oppressive for anything below $2-3m. If someone is making $100m and is left with $30m then it wouldn't be nice to be on the receiving end of that but you still get $30m. It's not like government jobs come close to this, the highest salary there is about $400k. So taking home $30m is still 75x better than being president.
Tax rates can be reduced after they've risen, they were 90% under Reagan.
Perhaps it's just the case that people only approve of high tax rates if they happen to support the people in power at the time. When it's someone they don't like, it's theft because it's paying for causes they don't approve of e.g reforming immigration vs building a bigger fence. Yes take the money for the fence but don't you dare steal it to make people feel welcome. Oh you want to bomb people, well ok that'll make us safer but don't steal it to educate people. A campaign against contraception and fertility treatment, I'll get my wallet but don't steal it to treat poor people now.
Nobody is in favor of taxes getting out of control and I'm sure everyone accepts there can't be zero taxation. I think ideally taxes would never exceed 50% for any income bracket and it would scale down to 0% somewhere around the minimum wage. If spending can be cut then it should be but people need to realise that spending can't be cut everywhere. Education costs are irrelevant. The big ones are healthcare, military and social security - combined it's 75%. Some might say to cut healthcare and social security because they think it's down to unemployed and immigrants being housed and treated but it's old people.
Western countries have an old people problem because they live too long. The solution to that is euthanasia, not tax cuts. Or there can be a push to stop people getting into debt, living healthier lifestyles and people would own their own homes before retirement and require less healthcare.
Solving income inequality (it should really be called income disproportionality, divergence or imbalance because the aim isn't equality) is a way to keep the top tax rates down because more people at the bottom would be earning and taxed. That's partly what taxation does because it is used to fund government jobs but government jobs rarely take money from the general public in return for their work so it's not self-sustaining employment. The solution to getting more jobs is to have more and regular consumption. If people lived perfectly efficient lives not requiring food, social interaction, shelter or entertainment, every world economy would be gone:
In fact, all recent monopolies in American history have been created via collusion between government lawmakers and Washington-connected businesses.
You just presented the evidence. I can't believe you're using the tobacco, oil and steel industries as examples of government-formed monopolies. The government broke them up. You're saying they made them happen and then decided to change their minds?
"International Harvester produced cheap agricultural equipment for a largely agrarian nation, and was thus considered untouchable lest the voters rebel"
"The ruling in United States v. American Tobacco Co. stated that the combination of the tobacco companies “in and of itself, as well as each and all of the elements composing it whether corporate or individual, whether considered collectively or separately [was] in restraint of trade and an attempt to monopolize, and a monopolization within the first and second sections of the Anti-Trust Act"."
"In 1938 Thurman Arnold in the United States Department of Justice Antitrust Division began hosting hearings in the Temporary National Economic Committee to determine whether the four companies were further engaged together in monopolistic practices. That committee found that 3 of the 4 companies where guilty of the charges presented to the court."
"The oil industry was prone to a natural monopoly because of the rarity of the deposits. Rockefeller and his partners took advantage of both the rarity of oil and the revenue produced from it to set up a monopoly."
"U.S. Steel: Andrew Carnegie, a Scot of the penny-pinching Braveheart variety, went a long way in creating a monopoly in the steel industry when J.P. Morgan bought his steel company and melded it into U.S. Steel. A monstrous corporation approaching the size of Standard Oil, U.S. Steel actually did very little with the resources in its grasp - which can point to the limitations to having only one owner with a single vision."
Just follow your own logic:
People are self-interested, not interested in sharing so they want to win against their competitors.
They win by being far more profitable than their competition and when the competition is small enough, they either go out of business or get bought out by a larger competitor.
The winner then has no competition and is a big company. That's what a success in the free market is - a monopoly.
Tax avoidance is not your duty at all. Just because it's legal doesn't mean you're expected to do it.
Marvin, as I mentioned in post #118, (directly above yours), “Responsibility” would have been a better choice than “duty”.
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It’s interesting that you use the UK government, or any government’s thoughts on this matter because, as you may know, it sometimes seems most governments falsely believe that they’re “entitled” to everything we own. Like I’m fond of saying: The deeper my pockets get, the longer the arms of government get.
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In my opinion, until the taxman shows me he’s handling the revenues collected in a fair and responsible fashion, it is my responsibility to pay the smallest amount possible by using every legal tax break the government gives to me. To not do so robs my family and gives my hard earned dollars to a body of individuals who, by and large, spend my money a lot more foolishly than they do their own.
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I guess we’ll just have to agree to disagree on this one, Marvin.
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I couldn't agree more.
The less money the government here in the UK receives, the better. When they pay off their debt and start spending our money wisely, then, and only then, will they justify increased taxes.
Is she crazy?! I would expect that from a Republican, but not from a progressive Democrat. Why should Apple pay less in taxes than I? Unbelievable! And, Apple should be ashamed of themselves.
As others have said, they may pay their "required" tax, but they sure don't pay their "fair share" of taxes. Shame on Apple, and shame on Senator Boxer.
What is a "fair share"? A flat tax is considered inherently regressive. Nonprofits and religious groups (even political groups who call themselves a religion to escape paying taxes) don't pay taxes at all. Neither does the government (groups that duplicate corporate efforts, but don't pay an equivalent corporate tax). The money a corporation brings in is paid out to employees and shareholders, who each pay taxes at identical rates to you.
US companies are told to pay taxes far in excess of other countries. Apple pays an effective tax rate of 26%, while Samsung only pays <5%. Google was recently paying 11%. "Fair share" is sort of a meaningless phrase.
I agree with your snub against religious groups paying no taxes.
Only Christian groups should pay no taxes. All other religions should be treated as normal businesses and taxed accordingly.
Increasing taxation leads to tax dictatorships like the Netherlands (and Europe for that matter).
This means that you are forced to give 70%, 80% or sometimes even more of your salary to the government that chooses to spend it unwisely, effectively even worse than burning your money.
Tax once allowed is also never given back, so take care not to allow anything how ever rational it may sound.
Taxation in Europe is an epidemic and a severe violation of human rights, even in the Middle Ages taking more than 50% of someone's crop was seen as extortion.
And amazingly these people are all happier, healthier, and better educated than all us 'Mericans' who think we're paying too much tax. By the way taxes are the lowest in like 50 years.
Comments
We're talking about something other than a loophole. The IRS doesn't have jurisdiction over foreign business operations. If you're a US citizen unwilling to hand in your passport, YES the government wants to to report and pay tax on income you may earn outside the country. But they don't do that (yet) to American corporations. No one seriously said "how do we tax Apple Germany? Or how to we tax Nokia Finland, since they sell a lot of product in the USA?" Whatever a company does outside the U.S. has not been in the purview of the IRS, so it's not a "loophole" being exploited, it's simply Apple making money in Germany and paying German taxes.
Keep in mind that even if the proposed tax break takes effect, there is no guarantee that companies will choose to "repatriate" this overseas money. I could easily see companies being sued by investors for paying additional taxes as there is technically no reason to do so. In fact, the host countries may provide a counter-offer to eliminate the local taxes entirely to incentivize companies to leave their funds offshore, or they may in fact levy additional taxes as a disincentive! We live in a competitive global economy. Companies have their choice of business friendly countries in which to locate.
Yes I understand that the money is usually sitting in US bank accounts which are owned by the Apple foreign subsidiary.
My larger point is if Congress were to pass a law which says that the foreign subsidiaries of American-headquartered companies WILL be taxed in the US then the outcome of that would be fairly predictable. If facing a $70b tax bill Apple would be prudent to shutter Campus 2, move headquarters to a less-retarded jurisdiction, and maintain a SUBSIDIARY in the US, just like every other non-American company doing business in the US now does without harassment.
You can't be the only country on the planet imposing a draconian tax grab on OVERSEAS earnings and expect too many multinationals to ever headquarter there.
It wouldn't actually be that high anyway, even in the worst possible scenario. As you know there are adjustments, including credit of any tax paid to a foreign government, as long as all filings for overpayment were completed. They do need to make a decision on how to handle this kind of thing going forward, but it's mainly the tax holiday lobbying that angers me. If they're going to change tax laws, they should do so and be done with it, not simply reset the cycle.
We're talking about something other than a loophole. The IRS doesn't have jurisdiction over foreign business operations. If you're a US citizen unwilling to hand in your passport, YES the government wants to to report and pay tax on income you may earn outside the country. But they don't do that (yet) to American corporations. No one seriously said "how do we tax Apple Germany? Or how to we tax Nokia Finland, since they sell a lot of product in the USA?" Whatever a company does outside the U.S. has not been in the purview of the IRS, so it's not a "loophole" being exploited, it's simply Apple making money in Germany and paying German taxes.
Speaking of that the terms are actually pretty brutal for expatriates. The paperwork is more complicated, and it requires tracking exchange rates at the time funds are received, which may be an issue if cost of living and income are in a tight balance.
Keep in mind that even if the proposed tax break takes effect, there is no guarantee that companies will choose to "repatriate" this overseas money. I could easily see companies being sued by investors for paying additional taxes as there is technically no reason to do so. In fact, the host countries may provide a counter-offer to eliminate the local taxes entirely to incentivize companies to leave their funds offshore, or they may in fact levy additional taxes as a disincentive! We live in a competitive global economy. Companies have their choice of business friendly countries in which to locate.
I think you have the US mixed up with France.
We're talking about something other than a loophole. The IRS doesn't have jurisdiction over foreign business operations. If you're a US citizen unwilling to hand in your passport, YES the government wants to to report and pay tax on income you may earn outside the country. But they don't do that (yet) to American corporations. No one seriously said "how do we tax Apple Germany? Or how to we tax Nokia Finland, since they sell a lot of product in the USA?" Whatever a company does outside the U.S. has not been in the purview of the IRS, so it's not a "loophole" being exploited, it's simply Apple making money in Germany and paying German taxes.
The machinations and creative efforts Apple and others go to in order to minimise their tax are a lot more complicated than your simplistic example. The IRS seems to think it has jurisdiction over the income of US citizens living and working overseas, so why should US companies be any different?
US companies are different because they can much more easily shift operations to a competing country, than can a private individual. As I mentioned earlier, we Canadians don't face this obstacle, we can decide to relocate and if the other country accepts us, we're free to go. The US basically forces you to renounce your citizenship if you want to live elsewhere and NOT report back to the IRS. It doesn't try that with multi-national corporations (yet) because it would be economic suicide to do so.
How would shareholders ever see the benefit of the cash if it's permanently left overseas?
It's the same principle people use to justify the low tax rate - it's a smaller percentage of something vs nothing.
Right now shareholders get nothing because the cash is overseas. With a 14% rate, they get access to 86% of a massive amount of cash. Unless they think they'll ever get above 86% then suing wouldn't be in their best interests.
They don't sue over paying other taxes like 26% on income in the US when they could be in some other tax haven and avoiding that.
From my point of view, the cash is best used in a lower tax location without the additional taxes paid until a better, more favorable political environment comes about and Apple should be in no rush.
Political environment more favorable to corporations = corporatist government. Corporatist government is bad when it bails out the banks using taxpayer money but corporatist government is good when it reduces the tax expenditure of a major corporation? Apple isn't using its cash in the limbo it is stuck in now because it wants to invest it in the US. One billionaire shareholder talks about it here:
https://www.greenlightcapital.com/905284.pdf
"Occasionally, a U.S. company finds a foreign acquisition where it can deploy some offshore cash, but in general overseas earnings remain overseas.
In contrast, companies have complete access to their domestic cash. So this generally gets used, while the foreign cash accumulates.
In 2004 the U.S. had a one-time tax holiday where companies were able to repatriate their trapped cash by paying approximately 5% in taxes. And many did.
Many companies figure that if it happened before, it might happen again. Now they are waiting around for the next tax holiday. ‘Waiting around’ isn’t exactly right. We mean they are lobbying Congress aggressively.
Maybe they are upset that the tax rate on repatriation seems too high, or maybe they think that by building up obscene amounts of cash, Washington will accommodate them.
The anticipation of a tax repatriation holiday allows companies to tell their shareholders that bringing the cash back too soon would be a ‘waste of shareholder money.’
In reality, no CFO wants to risk bringing cash back to the U.S. this year, only to find out that there will be a tax holiday next year.
??In some ways, the cash sitting unused year after year is analogous to having an inventory problem.
The opportunity cost of trapped foreign cash is very high. The money sits earning only a small amount of interest and generates a return less than inflation. Like decaying inventory, the real value of the cash decays a little bit every day.
Even worse, the return is far below the cost of capital. For companies with all-equity balance sheets, the cost of capital is particularly high, because expensive equity capital supports both the business and the foreign cash.
Finance theory suggests that an unlevered or net cash balance sheet should be rewarded with higher P/E multiples. In practice, the market assigns a discount for this level of overly conservative long- term capital management.
Not only does the cash earn a return below the cost of capital, it is evident that future profits will probably also be reinvested at a low return. As a result, the market not only discounts the cash sitting on the balance sheet, it also drives down the P/E multiple due to the anticipated suboptimal re- investment rate for future cash flows.
??While cash hoarding is prevalent in the tech industry, it isn’t practiced universally. Consider Texas Instruments and IBM.
Both have net debt, illustrating that large tech companies can operate with debt.
Both return the majority of free cash flow to shareholders via dividends and repurchases.
??Though one can find convenient examples for buybacks and dividends being bad for the share price, failing to return excess cash in the face of a low multiple usually depresses share price and valuations further.
IBM and Texas Instruments are considered shareholder friendly and are rewarded for their behavior.
You can see that they have better P/E multiples net of cash despite expected earnings growth rates comparable to peers with excessive cash balances.
IBM is a mature business with little to no revenue growth, is dependent on acquisitions and has debt on its balance sheet. Even so, because it is seen as shareholder friendly through continued reductions in the share count, it trades at a premium multiple and even attracted Warren Buffett. IBM gets a higher value, in part, because it cares about its shareholders.
In contrast, cash-rich balance sheets have led to poor P/E multiples. And then we have the story of Dell, which has the lowest P/E of all.
?Dell’s Go-Private transaction exposes the disingenuous nature of the cash hoarding rationalizations.
Last year, we were large shareholders of Dell. We were told that foreign cash couldn’t be repatriated, and that domestic cash needed to be saved for strategic acquisitions, financial flexibility and tough times.
We found their attitude toward capital allocation to be so unappealing that we sold the stock. We suspect that we weren’t the only shareholders who were frustrated. The frustration helped depress the stock."
They weren't recommending repatriating at the full rate but pointing out that keeping cash overseas is a bad thing. If the 14% rate is considered acceptable (it's bipartisan remember), I don't see why Apple wouldn't take advantage of it.
I very much doubt the people who work at Apple care about there being a more favorable (i.e anti-tax) government in place given the side-effects:
http://www.ontheissues.org/senate/Rand_Paul.htm
"Redefining marriage leads to economic and moral problems. (Jun 2013)
No national law on same-sex marriage; leave it to states. (May 2013)
Let states decide same-sex marriage; don't federalize it. (Mar 2013)
Opposes same-sex marriage. (Nov 2009)"
The last thing Apple would do is help promote people who are against their core values for a little extra cash. It might be hard to believe but not everyone is driven by money.
Sorry, I just can't stand him at all.
But this is a terrible bill. There are too many, you can'ts, and too many you musts for it to be useful.
Increasing taxation leads to tax dictatorships like the Netherlands (and Europe for that matter).
This means that you are forced to give 70%, 80% or sometimes even more of your salary to the government that chooses to spend it unwisely, effectively even worse than burning your money.
Tax once allowed is also never given back, so take care not to allow anything how ever rational it may sound.
Taxation in Europe is an epidemic and a severe violation of human rights, even in the Middle Ages taking more than 50% of someone's crop was seen as extortion.
As a matter of interest, what percentage of a person's income in the US goes towards health insurance that would give you the same level of treatment and excess, as say, one might expect from the NHS in the UK?
It varies, I pay $950 per month
Which represents about 9% of my salary
I'm 55 and single with excellent health non smoker and non drinker
It varies, I pay $950 per month
Which represents about 9% of my salary
I'm 55 and single with excellent health non smoker and non drinker
I pay about that for a years private cover. Other details similar. I could choose not to have any but it would smooth things were I to get ill and wanted to get treated a bit more quickly than might otherwise be the case, though if it were really serious, it wouldn't make any difference really over being treated by the public system.
I think public healthcare is worth considering when contemplating the evils of European taxation regimes - and the cost of tertiary education for your children.
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Unless it's to break up a free-market-formed monopoly.
Despite all evidence to the contrary, you continue to insist that so-called "natural monopolies" are running rampant.
Here is a history of monopolies in the US and as you can clearly see, what you like to call "natural monopolies" don't last long:
http://www.investopedia.com/articles/economics/08/hammer-antitrust.asp
In fact, all recent monopolies in American history have been created via collusion between government lawmakers and Washington-connected businesses.
Good idea but this part sucks:
"None of the funds would be eligible for use in executive compensation, shareholder dividends, or stock buybacks for three years after the repatriation scheme ends."
Most shareholder dividends would be taxed a second time at minmum 15%. Why not allow that?
Most executive compensation lands in America and is also taxed a second time, usually averaging more then 15% as well. Only stock buybacks escape secondary taxation. That is the only thing they should be worried about.
You clearly missed the point of their political posturing. The typical claim is one that companies are held back from investing in domestic infrastructure due to tax policy. It won't work out that way, but if they were honest about the legislation, most people would not be in support of it.
It depends on who's getting that tax rate. I would agree that tax rates above 50% are oppressive for anything below $2-3m. If someone is making $100m and is left with $30m then it wouldn't be nice to be on the receiving end of that but you still get $30m. It's not like government jobs come close to this, the highest salary there is about $400k. So taking home $30m is still 75x better than being president.
Tax rates can be reduced after they've risen, they were 90% under Reagan.
http://www.thefiscaltimes.com/Columns/2011/10/07/7-Top-Republicans-Who-Taxed-the-Super-Rich
Perhaps it's just the case that people only approve of high tax rates if they happen to support the people in power at the time. When it's someone they don't like, it's theft because it's paying for causes they don't approve of e.g reforming immigration vs building a bigger fence. Yes take the money for the fence but don't you dare steal it to make people feel welcome. Oh you want to bomb people, well ok that'll make us safer but don't steal it to educate people. A campaign against contraception and fertility treatment, I'll get my wallet but don't steal it to treat poor people now.
Nobody is in favor of taxes getting out of control and I'm sure everyone accepts there can't be zero taxation. I think ideally taxes would never exceed 50% for any income bracket and it would scale down to 0% somewhere around the minimum wage. If spending can be cut then it should be but people need to realise that spending can't be cut everywhere. Education costs are irrelevant. The big ones are healthcare, military and social security - combined it's 75%. Some might say to cut healthcare and social security because they think it's down to unemployed and immigrants being housed and treated but it's old people.
Western countries have an old people problem because they live too long. The solution to that is euthanasia, not tax cuts. Or there can be a push to stop people getting into debt, living healthier lifestyles and people would own their own homes before retirement and require less healthcare.
Solving income inequality (it should really be called income disproportionality, divergence or imbalance because the aim isn't equality) is a way to keep the top tax rates down because more people at the bottom would be earning and taxed. That's partly what taxation does because it is used to fund government jobs but government jobs rarely take money from the general public in return for their work so it's not self-sustaining employment. The solution to getting more jobs is to have more and regular consumption. If people lived perfectly efficient lives not requiring food, social interaction, shelter or entertainment, every world economy would be gone:
http://www.worldsrichestcountries.com/top_us_exports.html
You can't have more consumption if a huge percentage of people can barely afford to eat so income inequality is a problem for the rich too.
You just presented the evidence. I can't believe you're using the tobacco, oil and steel industries as examples of government-formed monopolies. The government broke them up. You're saying they made them happen and then decided to change their minds?
"International Harvester produced cheap agricultural equipment for a largely agrarian nation, and was thus considered untouchable lest the voters rebel"
"The ruling in United States v. American Tobacco Co. stated that the combination of the tobacco companies “in and of itself, as well as each and all of the elements composing it whether corporate or individual, whether considered collectively or separately [was] in restraint of trade and an attempt to monopolize, and a monopolization within the first and second sections of the Anti-Trust Act"."
"In 1938 Thurman Arnold in the United States Department of Justice Antitrust Division began hosting hearings in the Temporary National Economic Committee to determine whether the four companies were further engaged together in monopolistic practices. That committee found that 3 of the 4 companies where guilty of the charges presented to the court."
"The oil industry was prone to a natural monopoly because of the rarity of the deposits. Rockefeller and his partners took advantage of both the rarity of oil and the revenue produced from it to set up a monopoly."
"U.S. Steel: Andrew Carnegie, a Scot of the penny-pinching Braveheart variety, went a long way in creating a monopoly in the steel industry when J.P. Morgan bought his steel company and melded it into U.S. Steel. A monstrous corporation approaching the size of Standard Oil, U.S. Steel actually did very little with the resources in its grasp - which can point to the limitations to having only one owner with a single vision."
Just follow your own logic:
People are self-interested, not interested in sharing so they want to win against their competitors.
They win by being far more profitable than their competition and when the competition is small enough, they either go out of business or get bought out by a larger competitor.
The winner then has no competition and is a big company. That's what a success in the free market is - a monopoly.
I couldn't agree more.
The less money the government here in the UK receives, the better. When they pay off their debt and start spending our money wisely, then, and only then, will they justify increased taxes.
I agree with your snub against religious groups paying no taxes.
Only Christian groups should pay no taxes. All other religions should be treated as normal businesses and taxed accordingly.
Marvin, Marvin.
Increasing taxation leads to tax dictatorships like the Netherlands (and Europe for that matter).
This means that you are forced to give 70%, 80% or sometimes even more of your salary to the government that chooses to spend it unwisely, effectively even worse than burning your money.
Tax once allowed is also never given back, so take care not to allow anything how ever rational it may sound.
Taxation in Europe is an epidemic and a severe violation of human rights, even in the Middle Ages taking more than 50% of someone's crop was seen as extortion.
And amazingly these people are all happier, healthier, and better educated than all us 'Mericans' who think we're paying too much tax. By the way taxes are the lowest in like 50 years.