TSMC may not expand in US if double taxation rule continues

Posted:
in General Discussion
As Apple's major chip manufacturer TSMC nears the opening of its Arizona plant, US officials want it to build more -- but US versus China politics are complicating matters.

TSMC investing $40 billion in Arizona fabs
TSMC investing $40 billion in Arizona fabs


Taiwanese company TSMC has already invested $40 billion in its new Arizona factory, which it says will open in 2024. But since the US does not have a income tax agreement with Taiwan, TSMC faces double taxation on its profits from this or any other factory it could build in the States.

According to the Financial Times, unless there is a change in the law, TSMC will be paying out over 50% of its profits earned in the US. In comparison, Samsung pays much less because its home country of South Korea has a tax treaty with the States.

Naturally, then, US politicians who want to see the firm expand in the States argue that President Biden should negotiate a tax accord with Taiwan. TSMC officials have reportedly also asked for such an agreement to ease this double taxation burden.

However, at present the US does not recognize Taiwan as a separate country or sovereign nation. Instead, it sees it as part of China.

Consequently, creating a separate tax deal for Taiwan would legally be acknowledging the country's sovereign status. That could be seen by China as provocative, worsening the US/China trade tensions.

There are also political issues over staffing both TSMC's Arizona plant and more. TSMC has previously been reported to prefer bringing its existing staff to the US, as company management claims that "Americans are the most difficult to manage."

Read on AppleInsider
waveparticle

Comments

  • Reply 1 of 17
    It’s hard to believe that TSMC’s lawyers and accountants didn’t know and point this out to the C-suite before they committed to build in the US?
    dewmeravnorodomwilliamlondondarkvaderwatto_cobraSerqetry
  • Reply 2 of 17
    keithwkeithw Posts: 119member
    flyingdp said:
    It’s hard to believe that TSMC’s lawyers and accountants didn’t know and point this out to the C-suite before they committed to build in the US?
    Of course they knew. The gambit, I'm sure, is to force the US to change the tax laws specifically for their situation.  My bet is they get their way somehow.

    freeassociate2darkvaderwatto_cobrabadmonk
  • Reply 3 of 17
    danoxdanox Posts: 1,871member
    keithw said:
    flyingdp said:
    It’s hard to believe that TSMC’s lawyers and accountants didn’t know and point this out to the C-suite before they committed to build in the US?
    Of course they knew. The gambit, I'm sure, is to force the US to change the tax laws specifically for their situation.  My bet is they get their way somehow.

    Corporations rule, too bad average people can’t fake, dodge and drop down as easy when it comes to taxes like corporations.
    williamlondondarkvaderwatto_cobra
  • Reply 4 of 17
    cpsrocpsro Posts: 3,099member
    So the U.S. makes an exception for one corporation, not an entire country.
    williamlondonwatto_cobra
  • Reply 5 of 17
    nerudaneruda Posts: 438member
    1. There was an Apple shareholder motion asking Apple to diversity its supply chain (Vietnam/India) so that it relies less on China.  I voted yes on that motion, and I would say that this also applies to the US as a whole. We need to lessen our manufacturing dependence on China: it's a brutal authoritarian state.
    2. There's speculation that in a war with China, the US and/or its allies would destroy all of TSMC's facilities in Taiwan if China invaded and if it becomes likely that they would fall under CCP control.  Both of these issues are national security concerns that have to be addressed. I think that it is reasonable to assume that the US would not be able to depend on Chinese made goods/manufacturing if there is a conflict over Taiwan.  

    TDLR: dear Apple, diversify your supply chain, or better yet, get out to China. 


    williamlondondarkvaderwatto_cobrabadmonk
  • Reply 6 of 17
    chasmchasm Posts: 2,778member
    TDLR: dear Apple, diversify your supply chain, or better yet, get out to China. 


    I don’t disagree, but as a thinking adult you undoubtedly know that this is not something that could be arranged in a few weeks. It would take at least a decade if not longer for this to happen, and indeed Apple is already well underway on its plan to diversify.

    Apple also has to handle this transition diplomatically, as it also is caught between a rock and a hard place with regard to US-China relations. Not to mention the ability of the Chinese to amass gigantic, well-trained workforces that come (by western standards) extremely cheap.

    I have no doubt Apple would be happy to have most iPhones made in stable democracies like Canada, the UK, and … well okay, we’ll call America stable for the moment … but are consumers prepared to pay (minimum) three times as much for your iPhone as you do now? I don’t think so.
    williamlondonmuthuk_vanalingamtokyojimuwatto_cobrabadmonk
  • Reply 7 of 17
    DAalsethDAalseth Posts: 2,783member
    keithw said:
    flyingdp said:
    It’s hard to believe that TSMC’s lawyers and accountants didn’t know and point this out to the C-suite before they committed to build in the US?
    Of course they knew. The gambit, I'm sure, is to force the US to change the tax laws specifically for their situation.  My bet is they get their way somehow.

    I have a feeling it’s deeper then that. The Taiwan Govt wants this recognition of Taiwan as a separate country. That, I suspect is where this is coming from. 
    watto_cobra
  • Reply 8 of 17
    chadbagchadbag Posts: 1,889member
    danox said:
    keithw said:
    flyingdp said:
    It’s hard to believe that TSMC’s lawyers and accountants didn’t know and point this out to the C-suite before they committed to build in the US?
    Of course they knew. The gambit, I'm sure, is to force the US to change the tax laws specifically for their situation.  My bet is they get their way somehow.

    Corporations rule, too bad average people can’t fake, dodge and drop down as easy when it comes to taxes like corporations.
    What is that supposed to mean?  Do you know what the issue is here?  And that it applies to individuals and corporations?   If you took a job in Taiwan, you to would have to pay US income taxes on your Taiwan income, in addition to paying Taiwan taxes (but if you took a job in S Korea you’d get credit in the US for your S Korean taxes paid).  (I don’t know how it works for companies but for individuals there is a blanket exclusion amount you can apply against your income before calculating US taxes but that does change the point that this story is not about special benefits for corporations that individuals don’t get). 
    watto_cobraSerqetry
  • Reply 9 of 17
    AlexeyVAlexeyV Posts: 11member
    chasm said:
    TDLR: dear Apple, diversify your supply chain, or better yet, get out to China. 


    I don’t disagree, but as a thinking adult you undoubtedly know that this is not something that could be arranged in a few weeks. It would take at least a decade if not longer for this to happen, and indeed Apple is already well underway on its plan to diversify.

    Apple also has to handle this transition diplomatically, as it also is caught between a rock and a hard place with regard to US-China relations. Not to mention the ability of the Chinese to amass gigantic, well-trained workforces that come (by western standards) extremely cheap.

    I have no doubt Apple would be happy to have most iPhones made in stable democracies like …
    And one more thing, China citizens are very important customers for the Apple. If Apple move away, their goods becomes lot more expensive for Chinese. And then Apple will lose they huge profits in there.
    Don’t forget, Apple is transnational corporation. 
    watto_cobra
  • Reply 10 of 17
    darkvaderdarkvader Posts: 1,001member
    chadbag said:
    danox said:
    Corporations rule, too bad average people can’t fake, dodge and drop down as easy when it comes to taxes like corporations.
    What is that supposed to mean?  Do you know what the issue is here?  And that it applies to individuals and corporations?   If you took a job in Taiwan, you to would have to pay US income taxes on your Taiwan income, in addition to paying Taiwan taxes (but if you took a job in S Korea you’d get credit in the US for your S Korean taxes paid).  (I don’t know how it works for companies but for individuals there is a blanket exclusion amount you can apply against your income before calculating US taxes but that does change the point that this story is not about special benefits for corporations that individuals don’t get). 
    This story is about a giant multinational corporation lobbying for a special tax break, something that an individual would have absolutely no chance of pulling off.

    And the giant corporation is, as part of that lobbying, acting like they're "surprised" by the tax law that you can be assured they were fully aware of the entire time.
    muthuk_vanalingam
  • Reply 11 of 17
    darkvaderdarkvader Posts: 1,001member
    chasm said:
    TDLR: dear Apple, diversify your supply chain, or better yet, get out to China. 


    I don’t disagree, but as a thinking adult you undoubtedly know that this is not something that could be arranged in a few weeks. It would take at least a decade if not longer for this to happen, and indeed Apple is already well underway on its plan to diversify.

    Apple also has to handle this transition diplomatically, as it also is caught between a rock and a hard place with regard to US-China relations. Not to mention the ability of the Chinese to amass gigantic, well-trained workforces that come (by western standards) extremely cheap.

    I have no doubt Apple would be happy to have most iPhones made in stable democracies like Canada, the UK, and … well okay, we’ll call America stable for the moment … but are consumers prepared to pay (minimum) three times as much for your iPhone as you do now? I don’t think so.
    Apple may not have a decade.  If PRC decides to attack ROC, trade will be shut down immediately because we will effectively be at war with PRC.  Doing business with PRC would be trading with the enemy.

    Apple can either get out before that happens or be effectively shut down on hardware production.


    tmay
  • Reply 12 of 17
    waveparticlewaveparticle Posts: 1,334member
    darkvader said:
    chasm said:
    TDLR: dear Apple, diversify your supply chain, or better yet, get out to China. 


    I don’t disagree, but as a thinking adult you undoubtedly know that this is not something that could be arranged in a few weeks. It would take at least a decade if not longer for this to happen, and indeed Apple is already well underway on its plan to diversify.

    Apple also has to handle this transition diplomatically, as it also is caught between a rock and a hard place with regard to US-China relations. Not to mention the ability of the Chinese to amass gigantic, well-trained workforces that come (by western standards) extremely cheap.

    I have no doubt Apple would be happy to have most iPhones made in stable democracies like Canada, the UK, and … well okay, we’ll call America stable for the moment … but are consumers prepared to pay (minimum) three times as much for your iPhone as you do now? I don’t think so.
    Apple may not have a decade.  If PRC decides to attack ROC, trade will be shut down immediately because we will effectively be at war with PRC.  Doing business with PRC would be trading with the enemy.

    Apple can either get out before that happens or be effectively shut down on hardware production.


    A more probable scenario is Taiwan decided to reunite with mainland China peacefully. Isn't this the goal US seeks? Why would US be at war with PRC then? Only China haters do. 
  • Reply 13 of 17
    chutzpahchutzpah Posts: 214member
    darkvader said:
    chasm said:
    TDLR: dear Apple, diversify your supply chain, or better yet, get out to China. 


    I don’t disagree, but as a thinking adult you undoubtedly know that this is not something that could be arranged in a few weeks. It would take at least a decade if not longer for this to happen, and indeed Apple is already well underway on its plan to diversify.

    Apple also has to handle this transition diplomatically, as it also is caught between a rock and a hard place with regard to US-China relations. Not to mention the ability of the Chinese to amass gigantic, well-trained workforces that come (by western standards) extremely cheap.

    I have no doubt Apple would be happy to have most iPhones made in stable democracies like Canada, the UK, and … well okay, we’ll call America stable for the moment … but are consumers prepared to pay (minimum) three times as much for your iPhone as you do now? I don’t think so.
    Apple may not have a decade.  If PRC decides to attack ROC, trade will be shut down immediately because we will effectively be at war with PRC.  Doing business with PRC would be trading with the enemy.

    Apple can either get out before that happens or be effectively shut down on hardware production.
    If something that won't happen happens then something that won't happen might happen, and then who knows what will happen?!
    watto_cobramuthuk_vanalingam
  • Reply 14 of 17
    tmaytmay Posts: 5,930member
    darkvader said:
    chasm said:
    TDLR: dear Apple, diversify your supply chain, or better yet, get out to China. 


    I don’t disagree, but as a thinking adult you undoubtedly know that this is not something that could be arranged in a few weeks. It would take at least a decade if not longer for this to happen, and indeed Apple is already well underway on its plan to diversify.

    Apple also has to handle this transition diplomatically, as it also is caught between a rock and a hard place with regard to US-China relations. Not to mention the ability of the Chinese to amass gigantic, well-trained workforces that come (by western standards) extremely cheap.

    I have no doubt Apple would be happy to have most iPhones made in stable democracies like Canada, the UK, and … well okay, we’ll call America stable for the moment … but are consumers prepared to pay (minimum) three times as much for your iPhone as you do now? I don’t think so.
    Apple may not have a decade.  If PRC decides to attack ROC, trade will be shut down immediately because we will effectively be at war with PRC.  Doing business with PRC would be trading with the enemy.

    Apple can either get out before that happens or be effectively shut down on hardware production.


    A more probable scenario is Taiwan decided to reunite with mainland China peacefully. Isn't this the goal US seeks? Why would US be at war with PRC then? Only China haters do. 
    Why would Taiwan want to reunite with the People's Republic of China at all, peacefully or otherwise? They would have to be oblivious to what happened to Hong Kong under Xi, and as a thriving democracy, they would be throwing themselves into the abyss of authoritarianism, which will ultimately fail in China with Xi.

    More to the point, the CCP/PRC never, ever, controlled Taiwan, and in fact, during the formation of the CCP, Japan held Taiwan, only giving it back to the Nationalists after WWII. The only reason we are talking of this is that the U.S., et al, decided that the PRC should get China's seat at the U.N., and that was primarily about the U.S. assuring that  China would not ally at that time with Russia. 

    The only reason that the PRC has not successfully invaded Taiwan to date, is that their military was incapable of doing so. That is less true today, but may change in the next five to ten years when the PRC becomes a regional peer power to the U.S. and our allies. 

    Still, the PRC would have to be confident that they could weather a massive dislocation of world trade, which would certainly be part and parcel of the punitive actions and sanctions from the West. Meanwhile, the West is accelerating its buildup in the Pacific, so its a race to see if the PRC can act before the West is fully capable of protecting Taiwan.

    Xi doesn't want to live by the rules of order that were the very reason that the PRC economy had such rapid growth, but that economy has matured, and China will never get rich before it gets old. Good luck on on keeping companies from moving elsewhere. 
    badmonk
  • Reply 15 of 17
    badmonkbadmonk Posts: 1,178member
    Thanks for the informative post Tmay (and the other great posts).  The other thing that concerns me is that the Taiwanese are unsure of what they really want and not sure they know what is coming in the next 3-10 years.  They are not a warrior culture like Israel or Ukraine.
  • Reply 16 of 17
    tmaytmay Posts: 5,930member
    badmonk said:
    Thanks for the informative post Tmay (and the other great posts).  The other thing that concerns me is that the Taiwanese are unsure of what they really want and not sure they know what is coming in the next 3-10 years.  They are not a warrior culture like Israel or Ukraine.
    https://worldcrunch.com/world-affairs/taiwan-ukraine-china

    I think Taiwan has woken up to its military inadequacies, but time isn't on their side. 
  • Reply 17 of 17
    jccjcc Posts: 315member
    Just adopt the same policy as China. Problem solved. If China says Taiwan is China then we use China's policy with the U.S.
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