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I don't see why I would pay 35% of my holdings to avoid having to pay 3%. Also your plan is impossible because it's not Apple or Facebook or Google the US list

I don't see why I would pay 35% of my holdings to avoid having to pay 3%. Also your plan is impossible because it's not Apple or Facebook or Google the US listed entities that own this money, it's independent country specific subsidiaries. The US Gov't has no territorial claim on their asset reserves. The fact that the big companies report the money as their own is a GAAP sleight of hand that everyone knows already understands both sides of in the marketplace.

Retric 10y ago
3% * 10 years = 30%, wait 20 years and well you get the idea. The point is by keeping large foreign holdings you simply gain an ever larger tax burden until you need to bring money back to pay it off. After all foerein holdings are not a problem the problem is the unlimited tax dodge until tax holiday. Also, the ability for companies to have subsidiary's as separate entity's is all down to law and can change at any time. US courts regularly https://en.m.wikipedia.org/wiki/Piercing_the_corporate_veil https://en.m.wikipedia.org/wiki/Piercing_the_corporate_veil
- thaumasiotes 10y ago
  3% * 10 years is 26%, not 30%. And later payments are better than earlier payments even when they're numerically equal.
  - zht 10y ago
    why is 3% for 10 years 26%?
    - Nullabillity 10y ago
      You're thinking 3% of the original amount, rather than 3% of the remaining amount. If you pay 3% then 97% remains. 0.97^10≃0.74, meaning that you've lost 26%.
  - Retric 10y ago
    That's assuming zero interest. 3% ROI + 3% tax over 20 years... Also, the idea is an AMT tax if you pay 3 million in US taxes and keep 100 million untaxed offshore that's no additional taxes. Next year if you add another 100 million (200m total) your US taxes also increase by another 3 million. So you might as well bring back enough that you would have paid 3 million in extra taxes so 200m - 3/.35 = 191.4m off shore and 8.6m brought back. After a few years your foreign untaxed accounts stop growing as you bring back as much as your making. Same basic math would also apply with 5% or 1% AMT tax rate, the difference is how large the foreign reserves get. PS: Ok, now the downside. It's really hard to parse though untaxed profits of subsidiary's. But, companies like Google are going to stick with legal methods of dodging taxes.
    - thaumasiotes 10y ago
      3% tax every year for 20 years is 46%. It doesn't matter what interest rate you get on your holdings; that tax reduces your worth 20 years down the line by 46%. > the idea is an AMT tax if you pay 3 million in US taxes and keep 100 million untaxed offshore that's no additional taxes. Next year if you add another 100 million (200m total) your US taxes also increase by another 3 million. So you might as well bring back enough that you would have paid 3 million in extra taxes so 200m - 3/.35 = 191.4m off shore and 8.6m brought back. I'm not following you. Suppose every year my goal is to minimize the taxes I pay that year. What benefit do I see from repatriating those $8.6M? Scenario A: I have $200M offshore and pay a 3% offshore-holdings penalty of $6M. Taxes are $6M. Scenario B: I have $191.4M offshore on which I pay a 3% offshore-holdings penalty of $5,742,000. I repatriate $8.6M on which I pay a 35% repatriation penalty of $3,010,000. My total taxes in this scenario are $8,752,000, which I notice is more than $6,000,000. What did I gain?
      - Retric 10y ago
        It's an AMT, so for Scenario B: the AMT is 5,742,000 which is a minimum and not added to anything. AKA You pay that or other taxes if your other tax bill is higher. You repatriate 8.6M which leads to tax of: 3,010,000. 3,010,000 < 5,742,000 you pay 5,742,000. Which is less than 6 million. (This assumes you have zero tax bill for US operations.) Also, paying this does not decrease your future tax bill next year in any way. So if your interest rate is zero you pull money back this year. The idea is to penalize behaviors designed to reduce taxes.
- charlesdm 10y ago
  Only if this money yields 0% in the meantime. Even with a 3% tax, it's probably still better to reinvest through your offshore entity than to repatriate.
  - beefield 10y ago
    Most western interest rates are very close to zero or even below. I guess that in Zimbabwe you would get reasonable nominal interest rates but there are some other issues that make it uninteresting for most investors.
    - firebones 10y ago
      Yes, peg that kind of AMT to inflation.
  - beefield 10y ago
    Most western interest rates are very close to zero or even below. I guess that in Zimbabwe you would get reasonable nominal interest rates but there are some other issues that make it uninteresting for most investors.

Retric 10y ago

3% * 10 years = 30%, wait 20 years and well you get the idea. The point is by keeping large foreign holdings you simply gain an ever larger tax burden until you need to bring money back to pay it off. After all foerein holdings are not a problem the problem is the unlimited tax dodge until tax holiday. Also, the ability for companies to have subsidiary's as separate entity's is all down to law and can change at any time. US courts regularly https://en.m.wikipedia.org/wiki/Piercing_the_corporate_veil https://en.m.wikipedia.org/wiki/Piercing_the_corporate_veil

thaumasiotes 10y ago
3% * 10 years is 26%, not 30%. And later payments are better than earlier payments even when they're numerically equal.
- zht 10y ago
  why is 3% for 10 years 26%?
  - Nullabillity 10y ago
    You're thinking 3% of the original amount, rather than 3% of the remaining amount. If you pay 3% then 97% remains. 0.97^10≃0.74, meaning that you've lost 26%.
- Retric 10y ago
  That's assuming zero interest. 3% ROI + 3% tax over 20 years... Also, the idea is an AMT tax if you pay 3 million in US taxes and keep 100 million untaxed offshore that's no additional taxes. Next year if you add another 100 million (200m total) your US taxes also increase by another 3 million. So you might as well bring back enough that you would have paid 3 million in extra taxes so 200m - 3/.35 = 191.4m off shore and 8.6m brought back. After a few years your foreign untaxed accounts stop growing as you bring back as much as your making. Same basic math would also apply with 5% or 1% AMT tax rate, the difference is how large the foreign reserves get. PS: Ok, now the downside. It's really hard to parse though untaxed profits of subsidiary's. But, companies like Google are going to stick with legal methods of dodging taxes.
  - thaumasiotes 10y ago
    3% tax every year for 20 years is 46%. It doesn't matter what interest rate you get on your holdings; that tax reduces your worth 20 years down the line by 46%. > the idea is an AMT tax if you pay 3 million in US taxes and keep 100 million untaxed offshore that's no additional taxes. Next year if you add another 100 million (200m total) your US taxes also increase by another 3 million. So you might as well bring back enough that you would have paid 3 million in extra taxes so 200m - 3/.35 = 191.4m off shore and 8.6m brought back. I'm not following you. Suppose every year my goal is to minimize the taxes I pay that year. What benefit do I see from repatriating those $8.6M? Scenario A: I have $200M offshore and pay a 3% offshore-holdings penalty of $6M. Taxes are $6M. Scenario B: I have $191.4M offshore on which I pay a 3% offshore-holdings penalty of $5,742,000. I repatriate $8.6M on which I pay a 35% repatriation penalty of $3,010,000. My total taxes in this scenario are $8,752,000, which I notice is more than $6,000,000. What did I gain?
    - Retric 10y ago
      It's an AMT, so for Scenario B: the AMT is 5,742,000 which is a minimum and not added to anything. AKA You pay that or other taxes if your other tax bill is higher. You repatriate 8.6M which leads to tax of: 3,010,000. 3,010,000 < 5,742,000 you pay 5,742,000. Which is less than 6 million. (This assumes you have zero tax bill for US operations.) Also, paying this does not decrease your future tax bill next year in any way. So if your interest rate is zero you pull money back this year. The idea is to penalize behaviors designed to reduce taxes.
charlesdm 10y ago
Only if this money yields 0% in the meantime. Even with a 3% tax, it's probably still better to reinvest through your offshore entity than to repatriate.
- beefield 10y ago
  Most western interest rates are very close to zero or even below. I guess that in Zimbabwe you would get reasonable nominal interest rates but there are some other issues that make it uninteresting for most investors.
  - firebones 10y ago
    Yes, peg that kind of AMT to inflation.
- beefield 10y ago
  Most western interest rates are very close to zero or even below. I guess that in Zimbabwe you would get reasonable nominal interest rates but there are some other issues that make it uninteresting for most investors.