4 ms·

Why Google has so much cash on its balance sheet

12 points by klochner 16y ago

Ben_Dean 16y ago
its
- deleted 16y ago
  [deleted]
bhiggins 16y ago
See also: http://www.ft.com/cms/s/0/57f8d7e0-daf4-11df-a5bb-00144feabdc0.html http://www.ft.com/cms/s/0/57f8d7e0-daf4-11df-a5bb-00144feabd...
- pasbesoin 16y ago
  As the article mentions briefly at the end, we already went through this once. Now, five years later, multi-nationals are back at the trough again. Last time, it was sold as a "one time" deal. Of course, nothing was done to address the underlying systemic conditions. I also wonder, a bit, what effect all that lowly taxed cash had on the broader economy. It sure didn't seem to go into any worthwhile domestic investments. (I'm being a bit flippant in this last comment, I concede.)
protomyth 16y ago
I really wish we could just simplify the corporate tax code down to: x% of revenue - total salary payed to US(1) citizens. I figure the citizens are paying taxes on their salaries and it would encourage local hiring. Flat rate tax on revenue solves all this shell wackiness. Actually makes shells kinda nasty since you wouldn't be able to deduct salary. If the government still wants to encourage / discourage behavior then do grants / fines instead. Stop using the tax system for political purposes. 1) substitute your country of taxation here
- lsc 16y ago
  I'm all for simplification, but I think your plan would have some unintended consequences. It's essentially a subsidy of vertical integration. This would make it hard for any b2b company. you can hire an accountant in house, as an employee (deductible, under your plan) or you can pay an external firm (say, a firm next door. small business accounting is usually done locally.) to do your taxes (not deductible under your plan, even though the accountant salaries are deductible to the accounting firm, the accounting firm fees you paid would not be deductible for you.) This would make it doubly hard for those of us who spend most of their revenue on non-salary expenses and who are primarily b2b businesses. The thing is, I pay more for power/rackspace/bandwidth than I pay for salary, and that disparity will only increase as I scale up. For me, it'd be a double whammy, as not only would I get taxed on what I pay for power, (so I'd have to raise my rates) but my customers would have to pay those higher rates out of post-tax money. This would probably be incentive enough to move my corporation abroad or shut down... I mean, a bunch of my customers are already outside the country, and while it wouldn't help my US customers pay me out of pre-tax dollars, it would mean that I could lower my rates by 35%. Really, I think only taxing profits is great for growing companies. Right now, I live in California, an area with ridiculous taxes. but you know what? I don't really care, because I only have to pay taxes on profit, so worrying about my taxes being high is one of those "good problems to have" that I really only have to worry about once I start making a lot of money.
  - lionheart 16y ago
    If we just changed % of profit in his plan, wouldn't that solve it?
    - lsc 16y ago
      it would solve it for me, certainly. Really, that's how I view the tax system now. (I mean, there are loopholes and all that, but I don't really have enough money to put too much effort into that sort of thing at this point.) but, the guy was suggesting that %revenue is more simple and harder to fake than %profit (and he's right about that.)
    - 16y ago
klochner 16y ago
tl;dr: Multinational corporations hold cash in foreign subsidiaries to avoid paying taxes on profits, and would get taxed on those profits if they bring them back into the U.S. (repatriate the profits). This study shows the following: - Firms that face higher repatriation tax burdens hold higher levels of cash, hold this cash abroad, and hold this cash in affiliates that trigger high tax costs when repatriating earnings. - Estimates indicate that a one standard deviation increase in the tax burden from repatriating foreign income is associated with a 7.9% increase in the ratio of cash to net assets.

12 points by klochner 16y ago

Ben_Dean 16y ago

its

deleted 16y ago
[deleted]

bhiggins 16y ago

See also: http://www.ft.com/cms/s/0/57f8d7e0-daf4-11df-a5bb-00144feabdc0.html http://www.ft.com/cms/s/0/57f8d7e0-daf4-11df-a5bb-00144feabd...

pasbesoin 16y ago
As the article mentions briefly at the end, we already went through this once. Now, five years later, multi-nationals are back at the trough again. Last time, it was sold as a "one time" deal. Of course, nothing was done to address the underlying systemic conditions. I also wonder, a bit, what effect all that lowly taxed cash had on the broader economy. It sure didn't seem to go into any worthwhile domestic investments. (I'm being a bit flippant in this last comment, I concede.)

protomyth 16y ago

I really wish we could just simplify the corporate tax code down to: x% of revenue - total salary payed to US(1) citizens. I figure the citizens are paying taxes on their salaries and it would encourage local hiring. Flat rate tax on revenue solves all this shell wackiness. Actually makes shells kinda nasty since you wouldn't be able to deduct salary. If the government still wants to encourage / discourage behavior then do grants / fines instead. Stop using the tax system for political purposes. 1) substitute your country of taxation here

lsc 16y ago
I'm all for simplification, but I think your plan would have some unintended consequences. It's essentially a subsidy of vertical integration. This would make it hard for any b2b company. you can hire an accountant in house, as an employee (deductible, under your plan) or you can pay an external firm (say, a firm next door. small business accounting is usually done locally.) to do your taxes (not deductible under your plan, even though the accountant salaries are deductible to the accounting firm, the accounting firm fees you paid would not be deductible for you.) This would make it doubly hard for those of us who spend most of their revenue on non-salary expenses and who are primarily b2b businesses. The thing is, I pay more for power/rackspace/bandwidth than I pay for salary, and that disparity will only increase as I scale up. For me, it'd be a double whammy, as not only would I get taxed on what I pay for power, (so I'd have to raise my rates) but my customers would have to pay those higher rates out of post-tax money. This would probably be incentive enough to move my corporation abroad or shut down... I mean, a bunch of my customers are already outside the country, and while it wouldn't help my US customers pay me out of pre-tax dollars, it would mean that I could lower my rates by 35%. Really, I think only taxing profits is great for growing companies. Right now, I live in California, an area with ridiculous taxes. but you know what? I don't really care, because I only have to pay taxes on profit, so worrying about my taxes being high is one of those "good problems to have" that I really only have to worry about once I start making a lot of money.
- lionheart 16y ago
  If we just changed % of profit in his plan, wouldn't that solve it?
  - lsc 16y ago
    it would solve it for me, certainly. Really, that's how I view the tax system now. (I mean, there are loopholes and all that, but I don't really have enough money to put too much effort into that sort of thing at this point.) but, the guy was suggesting that %revenue is more simple and harder to fake than %profit (and he's right about that.)
  - 16y ago

klochner 16y ago

tl;dr: Multinational corporations hold cash in foreign subsidiaries to avoid paying taxes on profits, and would get taxed on those profits if they bring them back into the U.S. (repatriate the profits). This study shows the following: - Firms that face higher repatriation tax burdens hold higher levels of cash, hold this cash abroad, and hold this cash in affiliates that trigger high tax costs when repatriating earnings. - Estimates indicate that a one standard deviation increase in the tax burden from repatriating foreign income is associated with a 7.9% increase in the ratio of cash to net assets.