Talk:Repatriation tax holiday

Other countries?

What other countries do have similar laws?--89.13.208.121 (talk) 13:04, 3 February 2015 (UTC)

Proposed rewrite

An editor changed the article to the following, which I believe merits some discussion. I am concerned about some of the proposed sources, particularly www.heritage.org (which, I understand, is an advocacy group, and therefore not usable as a neutral source), www.raymondjames.com, which appears to be a private company, and therefore not subject to peer review. Also, some aspects of the tone seem a bit on the promotional side. I think parts of this are salvageable. bd2412 T 00:37, 20 May 2017 (UTC)

A repatriation tax holiday represents a full or partial tax cut for repatriated earnings of subsidiaries of multinational companies to avoid paying double taxes on income earned at some time in the past abroad. In the USA repatriation tax holidays gained importance under the presidency of George W. Bush, then Barack Obama and currently Donald Trump who is a proponent of the reinvigoration of the economy through advantageous conditions for companies which would redirect their operation to USA. For most of the time, these repatriated earnings are subject to U.S. taxes whenever the tax owed abroad is lower than that in the USA. This is to say that US legislation tries to set the legal framework in which domestic entrepreneurs would not need to pay more taxes than those who would try to run their business abroad. In fact, when these taxes are underlying, firms operating abroad try not to fetch their earnings back to abstain from taxes, instead, they use the proceeds for investments abroad.

==History==

In 2004, with the American Jobs Creation Act of 2004 (AJCA)) section 965, the tax was reduced from 35% corporate tax rate on repatriated earnings to merely 5.25%. Yet, due to restrictions which reduced the scope of activities on which the money could be spent upon, the initiative was not very successful, with only 843 of 9700 large companies operating abroad making up their mind to bring back their incomes totaling at $362 billion from November 2004 until the expiration of the tax holiday end of 2005, with $312 million of the latter amount connected to the tax holiday. The most active sectors in terms of engagement in repatriation practices are from the pharmaceutical and medical manufacturing sector with 27% of the total amount of earnings repatriated and the sector of management of companies and enterprises with an equal amount. During the financial crisis, the debates over this tax cut became even more important as domestic economy needed a large fresh impulse of money to reinvigorate the economy through physical investment. March 2011 with the introduction of the Rising Tides Act (March 4th), The Jobs Creation and Innovation Investment Act of 2011 (March 11th) and the creation of WIN America Campaign (March 25th). Ways in which the money could be spent were restricted from domestic investment in research and development, capital investments, debt repayment, merging and purchases. Repurchase of shares and distribution to shareholders were forbidden by the Act. The Act left large room for tricky maneuvers which the firms later used for their own benefit. Hence, the weak regulatory requirements in abiding by the act most probably permitted the firms to spend the repatriated funds on disallowed objectives. Section 965 presumed the money to be used for job-creating, innovative investment ideas which did not always coincide with the objectives of companies. Another evidence that companies would take advantage of this opportunity that 50 companies have spent roughly $2.5 billion on lobbying out of which above $350 million for influencing the tax holiday debate. Homeland Investment Act for every additional dollar brought back from offshores 79 cents were dedicated for share repurchases.

===American companies and repatriation===

The largest multi-national companies as of today Apple Inc., Microsoft Corp., Alphabet Inc., Cisco Systems Inc., and Oracle Corp. called forth only 9% of their cash possessions following the 2004 act, yet the CEO of the former mentioned Tim Cook once narrated that he would take into consideration the repatriation of at least some portion of the companies company’s immense cash and liquid assets abroad, amounting to $215 billion, 35%. According to Moody’s the offshore holdings of five largest companies equal to approximately $500 billion, all in all total foreign assets of all but financial companies will be $1.3 trillion by 2017. According to Oxfam after the tax cut from 35% to 10% 50 largest US companies could economize about $320 billion.

In fact, repatriation is what these companies always keep in mind and econometric evidence suggests that MNCs expected to benefit from a second tax holiday, that is after 2008 and 2011 when the proposal was suspended, began accumulating 4.0 to 4.9 percent of assets in excess cash after 2008 to then if Act is passed to benefit as much as they could. All in all, estimates state that the 594 firms that supposed the tax holiday to take place saved $376 billion to $488 billion in excess cash waiting for a reduction in repatriation taxes. That is to say, U.S. MNCs which had a chance to benefit from this law altering began accumulating significant cash holdings once Congress initially proposed and began were lobbying intensively for the second repatriation tax holiday.

====Critism====

"Corporate profits on overseas operations will be reduced, but with demand weak and current profits under downward pressure, the repatriated earnings are likely to go into financial rather than physical investment," told Van Hoisington and Lacy Hunt of Hoisington Investment Management. That is the reason why many believe that instead of investing in real, a physical investment the companies if deciding to bring back their earning will try to invest in financial markets by paying to stockholders in the face of dividends and stock repurchases. Homeland Investment Act for every additional dollar brought back from offshores 79 cents were dedicated for share repurchases. Goldman Sachs gauged that S&P 500 companies will bring back $200 billion of the $1 trillion in cash they hold outside the United States and use $150 billion for share repurchase. These numbers might indicate that the stock market could witness booms, yet the reason why Donald Trump is working hard on bringing back cash of American enterprises to homeland is that he wants them to invest domestically in innovative projects, infrastructure, know-hows etc.

References