Tuesday, April 24, 2012

Repatriation lobby disbands

Apple's anti-tax shill group, the WIN America Campaign, has apparently ended.   Not just Apple's, of course, but Apple has been particularly noisy on the subject.  Bloomberg reports that while it looked like the group was making headway last year, the political climate has changed:
"The repatriation campaign ran into resistance in part because the money held outside the U.S. was seen in Congress as a way to help finance an overhaul of the tax code, the lobbyist said."
I will accept that as a political/pragmatic reason why repatriation amnesty might have been killed in this instance but I still hold out hope that (1) the principle of the thing and (2) the fact of its empirically observable outright failure as a stimulus policy, might have had some sort of impact, so that it's not just a political change that keeps the U.S. from re-adopting this patently outrageous program (first seen in the 2004 JOBS Act).

WIN America's anti-tax twitter screed feed was last updated a month ago March, ending with this gem: "Apple CFO: 35% tax rate is an "economic disincentive."  We need to take down barriers, not keep them up."  Pithy.  But so self-serving as to be embarrassing.  It's pretty clear Apple's actual tax rate undoubtedly gets no where close to that figure and the company seem to be fully able to pay its taxes as a matter of cash flow.


  1. In the US context what would be the problem with a territorial based corporate income taxation system only on active business income and only from countries the US had a tax treaty with.(Effectively the Canadian corporate tax system)Would there be a substantial loss of revenue?

  2. I am not sure about the substantial loss of revenue since as Peroni Fleming & Shay have said, the US system is better than exemption from a taxpayer point of view; our system really is leaky and ought to be patched up, and it could be that you could raise more under a system like you suggest if the residence-based tax for nontreaty countries really was that, i.e., not what the US does now. But I don't see why on principle such a system makes sense. First, from the political economy point of view, you're increasing the pressure on what is already a problem for nontreaty countries, i.e., being excluded from the treaty network for being too small or too unimportant for the Treasury to bother signing agreements with. Remember Canada has a lot of treaties with so-called developing countries but that is decidedly not the case for the U.S., where basically if you are a developing country you don't get a treaty, with very few exceptions, and it doesn't matter much what your tax system looks like. And second, from a more systemic point of view, I don't think you can properly call it an income tax if whether you are taxed depends on where you earned your income. If a country exercises residence based taxation, it has at least the possibility of calculating its taxpayers' incomes (and can give credit for foreign tax where credit is necessary) but if it exercises territorial taxation, it plainly can't since it can't measure income accurately. A territorial system is to an income tax what a tariff is to a VAT in that regard. So I can't say for sure about the revenue stream but on principle I'd think there are some pretty big reasons not to go that route, at least here in the U.S.

  3. To your point about treaties as of a few years ago Canada now gives the exemption for active business income to both treaty partners and now TIEA partners(of which Canada will sign with just about anyone). I don't necessarily agree with a territorial system in principle it just seems as that they way the world is going. I know in Canada the shift to a territorial CIT happened back in the early 1970s so it was a long time ago.