Maybe the proper framing is that Apple (through Braeburn Capital) hid this money in offshore tax shelters much like Google and pretty much any other large corporation does.
Bringing it back simply allows Tax authorities to "see" it again.
Perhaps the fact that it's even possible for companies to shelter the vast bulk of their earnings from tax is the problem in the first place?
It's perversely amusing to me that while an indiviual US citizen's overseas earnings are fair game for the IRS (and AFAIK no other country does this to their citizens), a corporation's earnings are totally invisible.
The reason is because these companies have children who are native citizens of the other country, which the parent company has full control over. They give the children some asset (e.g. intellectual property) and pay them an allowance (e.g. license fees for the IP).
The IRS can't touch that money any more than they can touch the money of your Jamaican love-child.
Actually that says China taxes residents on worldwide income, and non-residents on China-sourced income. The US taxes non-resident citizens on worldwide income.
China has a significantly broader definition of residence than does the U.S. A Chinese resident company includes companies incorporated in China as well as companies managed from China; Chinese citizens are taxed on their worldwide income for several years after they leave China, possibly indefinitely if they maintain their household, familial, or economic connections to China. In practice, this means that China effectively imposes worldwide taxation on its companies and citizens.
In the U.S. residence is a very straightforward. A company is a resident if it is incorporated in the U.S. An individual is a resident if he is a citizen, a greencard holder, or passes a mathematical "substantial presence" test.
Non-resident U.S. citizens are subject to worldwide taxation...but they have a very generous $100k floor, plus foreign tax credits for foreign taxes paid on their income.
China will tax world-wide income for non-citizens if they spend 5 contiguous years in China. I recently had my month out (ok, it was more than a year ago) to avoid this situation.
The $100k floor only applies to work done outside of the US. If you work for an American company, you'll invariably go on business trips back home, which mess up your taxes substantially as this isn't covered on the US/China tax treaty.
> Part of the problem is that the US is unique in taxing world wide income.
It's not taxing world wide income. Apple hasn't paid US taxes on these foreign profits. That's the whole point. They only have to pay taxes on that income if they bring it back in the US.
They're selling the fruits of design and engineering work that happens in the US, and so this is arguably where most of the value creation happens, and that that should be taxed despite the fact that the nominal sale and creation is happening overseas.
Since the foreign countries tax the sales, they (and the earning of all Americans overseas) should not be taxed again to get the money back into the US. It is a BS way to operate and the US is the only country who tries it.
> They're selling the fruits of design and engineering work that happens in the US, and so this is arguably where most of the value creation happens, and that that should be taxed despite the fact that the nominal sale and creation is happening overseas.
There is an easy solution: Tax the corporation's US payroll. The obvious problem with doing that (or any other thing that causes effective tax rates to increase in response to employing US workers) is that it creates a large monetary incentive to move the "value creation" somewhere else.
The whole problem is that we're trying to tax stupid things. Taxing corporate profits is stupid because profits don't have a nexus with any particular jurisdiction, so they get moved to whichever jurisdiction has the lowest taxes. The only way to avoid that is to tax something other than profits -- something that actually exists in your jurisdiction. Payroll tax, consumption tax, etc. And between them, the consumption tax is better because a disincentive to buy things made in other jurisdictions causes less harm to the local economy than a disincentive to hire the people in your jurisdiction would.
Edit: People who downvote comments without providing any reasoning are cowards.
Sort of. Personal income tax (with the exception of half of social security and medicare) is paid by the employee. Some economists say it shouldn't matter whether it's the employee or employer who pays, on the theory that people will contract around it either way. They will sometimes but not always. In practice it creates a psychological advantage for the party not paying the tax during salary negotiations, because the number being negotiated is generally pre-tax. If the taxes subsequently paid are paid by the employee then it gives a perceptual advantage to the employer because the employee will actually receive less than the number agreed upon, and vice versa if the employer pays the tax on top of the salary.
It also changes who is affected by changes in the tax rate for all the employees whose compensation was negotiated before the rate changed. Making the payee of US payroll taxes the employer rather than the employee would similarly be a de facto raise for almost all US workers at the time of implementation because the employer would effectively begin paying your income taxes.
So what I mean is, make the corporation pay it, not the employee. Assuming you actually want a tax on labor at all, given that it discourages hiring in your jurisdiction.
> Personal income tax (with the exception of half of social security and medicare) is paid by the employee.
Sure, but income tax is different than payroll tax, and some payroll taxes (the federal ones that support Social Security and Medicare, particularly) are split between the employee and the employer.
> Making the payee of US payroll taxes the employer rather than the employee would similarly be a de facto raise for almost all US workers at the time of implementation because the employer would effectively begin paying your income taxes.
I think you mean "payer" rather than "payee". The payee of federal income and payroll taxes is the federal government, not either the employee or the employer.
> So what I mean is, make the corporation pay it, not the employee. Assuming you actually want a tax on labor at all, given that it discourages hiring in your jurisdiction.
To the extent the US has a tax on labor qua labor (payroll tax vs. income tax), that's already halfway true (income tax isn't strictly a tax on labor, since its not limited solely to labor income.
All of that is true, but it seems like a pedantic tangent. Are you saying that converting personal and corporate income tax into employer-paid payroll tax would not be more difficult for corporations to avoid paying than existing corporate income tax?
Bringing it back simply allows Tax authorities to "see" it again.
Perhaps the fact that it's even possible for companies to shelter the vast bulk of their earnings from tax is the problem in the first place?