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Apple, Cisco, Google, Seek Tax Relief to Repatriate Cash

US companies have more than $1 trillion in cash outside the country, funds they could use to create jobs at home — but they lack the incentive to do so because of the taxman, according to a new organization set up to prod Congress on the issue.

WinAmerica formally opened up shop today with the goal of lobbying the Congress to grant American companies operating outside the country a temporary tax holiday to repatriate funds kept in foreign accounts where the tax rates are much lower than the average 35 percent corporate rate in the United States.

More than two-thirds of the organization's 18 supporters are technology companies involved either in software development or electronics hardware design and sales. They include {complink 9006|Adobe Systems Inc.}, {complink 379|Apple Inc.}, {complink 831|Broadcom Corp.}, {complink 1269|CA Technologies}, {complink 1131|Cisco Systems Inc.}, {complink 1781|EMC Corp.}, {complink 2294|Google}, {complink 3426|Microsoft Corp.}, {complink 4092|Oracle Corp.}, and {complink 4505|Qualcomm Inc.}. In fact, it wouldn't be stretching the truth to say the supporters of this initiative are mainly American technology companies with huge cash hoards outside the country. Naturally, the US Chamber of Commerce is also onboard.

Here are some elements of their argument as stated on the WinAmerica Website (you can read the entire report here):

  • We strongly support the need for corporate tax reform, but we should move now to allow businesses the power to bring this money home and invest it into our still fragile economy. We have an opportunity right now to strengthen our economy, reduce our deficit, put people back to work, and invest up to $1 trillion in America.
  • Our broken tax system actually penalizes American companies for doing well overseas in the global marketplace when they want to bring those earnings back to America to invest here.
  • Providing American businesses with incentives to bring home their global earnings is a common sense solution that could help inject up to $1 trillion into our economy.
  • There are few other options available that will help ensure that our recovery endures and that it spreads to Main Street. The likelihood of another stimulus, additional tax cuts, or action by the Federal Reserve is low, and unemployment is still too high.
  • This money will help strengthen our economic recovery, create jobs, and help reduce the deficit — at no cost to taxpayers.

We have been here before. In 2004, Congress granted a tax holiday similar to the one companies are now seeking, and many took the opportunity to remit funds kept overseas. While WinAmerica argues that this action resulted in the creation of jobs in the United States, it's not such a convincing argument, considering numerous other factors are typically considered by companies before hiring. The 2004 tax holiday might have helped, but I don't agree it made a dent on the US employment rate at the time.

That doesn't mean Congress shouldn't do the same again this time, but anyone who thinks this would lop several percentage points off the current almost 9 percent unemployment rate is deluded. Will Apple, for instance, pull back manufacturing contracts from its Taiwanese partners because it can now bring back the billions it has in cash overseas? Are any of these companies refusing to hire now in the US because they lack the funds to do so? I doubt this.

I don't have a position on this issue because I lack the necessary insight into how such an action would directly spur companies to hire. So, I'll leave the core issues to labor lawyers and Congressional representatives. I've said this before, and I'll repeat it here: Some of the companies supporting the WinAmerica initiative who don't currently pay dividends should do so if Congress sanctions their request. Microsoft did in 2004, paying out a hefty $30 billion to investors.

12 comments on “Apple, Cisco, Google, Seek Tax Relief to Repatriate Cash

  1. Jay_Bond
    March 24, 2011

    I think this is a great idea. I agree that by allowing a “tax holiday” the unemployment numbers aren't going to drastically drop. The break might allow these companies that take advantage of the offer to hire more people into their work force, but not such staggering amounts to save the unemployed.

    What it will allow these companies to do is invest in their U.S. based operations. Many of these companies can invest in newer technology to help their workers; they can buy better electronics for tracking their supply chain. They can also expand some operations that have growth potential.

    Though this is not a solution to the countries problem, I don't see how allowing this break could hurt anything.

     

  2. Taimoor Zubar
    March 24, 2011

    Besides the savings on taxes, one of the major reasons why companies take their business outside America is to take advantage of the lower labor costs. The rates for skilled labor in countries like China and India cannot really be compared to the ones in US. I still feel the US has to work on this side as well. It won't just be enough to give the companies a tax relief.

  3. DataCrunch
    March 24, 2011

    On the surface it seems to make sense, less corporate taxes equals corporate re-reinvestment.  I assume there would be a mechanism in place to measure the “re-investment” due to the tax breaks, in order to make sure that companies just don’t hoard their cash and actually do create jobs.

  4. Anand
    March 24, 2011

    This is a great idea. This is win-win for both the government and tech companies. Technology companies should promise the US government, that  they will reinvest this extra cash which they saved because of tax holiday in creating jobs.  If the tech companies fail to keep up their promise then government can penalise those companies.

  5. itguyphil
    March 24, 2011

    I'll believe it when I see it. Well then again, the bog movers have the ability to “move” $$ around at will to circumvent spending more than they'd like to. We'll see what happens.

  6. JuneKlein
    March 25, 2011

    http://5th.electronic-boardroom.com/handou-tax-benefit-exchange/

    Please contact me at about TMVi Tax Benefit Exchange. June Klein has streamlined the exchange and clearing of depreciation deductions so cash rich profitable US tech firms can purchase at a discount less than 35% the unused depreciation deductions of small businesses who will then buy equipment, hire employees and jumpstart the economy.

  7. Parser
    March 25, 2011

    Entire problem with about 9% of employment is not going to be solved by one measure, but many ones like this put together will make investments in this country a reality and as a domino effect in long term will chip down the unemployment significantly. It would be good to start with $1 trillion, as it is clearly visible and simply manageable by changing tax law.

    I would be looking for more of such initiatives and maybe someone will look at tax loopholes favoring investing everywhere else but in the US. 

  8. itguyphil
    March 25, 2011

    Here's an article – GE proving my point regarding 'working the system' when it comes to taxes, finances:

    http://www.nytimes.com/2011/03/25/business/economy/25tax.html?_r=1&nl=todaysheadlines&emc=tha2

  9. Ira Klein, Tax Law Expert
    March 25, 2011

    Ira & June Klein of Technology & Marketing Ventures Inc have sent a solution to US Senator Gillebrand (NY) to propose legislation to permit the sale of new depreciation deductions without increasing the deficit. We are calling upon technology companies who are at the 35% tax rate, to support the proposed legislation and get it passed.  

    If the $1 trillion of cash coming back from foreign profits were to be used to fund small businesses per the TMVi Tax Benefit Exchange, repatriation of $1 trillion of foreign profits by US corporations would improve the US economy and create US jobs. Small businesses create 70% of all new private sector jobs while large corporations produce less than 30% of new private sector jobs. The 2004 experience permitting a tax holiday in the repatriation of foreign profits produced marginal benefits to the US economy.

    The TMVi Tax Benefit Exchange would permit the tax free repatriation of foreign profits if those profits are used to buy unused new depreciation deductions from small businesses. This purchase would benefit small businesses by providing cash from unused new depreciation deductions and effectively lowering their new equipment costs. Small and large businesses would benefit from TMVi Tax Benefit Exchange's streamlined simple process of matching/settling the sale of depreciation benefits with buyer's purchases.

    Further, such a purchase would provide a net profit to the large US corporation = difference between the 35% tax rate and the tax benefit purchase price cleared on the TMVi Tax Benefit Exchange. Thus technology companies who generally pay taxes at the top rate would benefit. http://5th.electronic-boardroom.com/handou-tax-benefits-exchange

     

  10. elctrnx_lyf
    March 26, 2011

    I just wonder if the American congress accepts the tax holiday does it really do any help. How it is guranteed that the companies who are benefitted by this will actualy create employment? Is money is the only reason why americla companies are not trying to expand in america to provide more employment. This more sounds like take the money from government ot pay to the employees.

  11. Kunmi
    March 27, 2011

    I think these investors are making a smart move. But it appears that they were driven away by the high percentage of taxes that they have to pay if operating in the united States . Moving the manufacturing outside the USA has a great impact on the economy. Requesting for a tax break worths trying, and return of a trillion dollars into US economy will be an additional strength towards recovery. At least, quite a number of people will be employed lowering the number of the unemployed in the country.

  12. SP
    March 31, 2011

    Soemone is really watching the amount of money these companies make outside US but then the first reason for them being in business is tomake money. I guess th eissue is more on political grounds. lets see what happens.

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