Is America Company Friendly?

Boss, Legal
3 Comments

Fuck yeah. That’s why the overwhelming majority of the greatest companies are or have been started in America. The British may have started the industrial revolution but we’re the ones that have perfected it and executed the most effective wealth generation in the history.

Now the question is:

As the American companies grow and expand worldwide, should they bring corporate profits back to United States and redistribute them to their US shareholders? Which will then pay at least 15% additional taxes on the dividends they receive.

At what cost to the corporation itself should the profits be taxed again?

This is the question that Apple has been summoned to Washington DC to answer.

While I do not wish to make this a political topic, it should stand as a fact that majority of the tax code that global corporations are “abusing” has been written by the very same representatives and senators that are now crying foul. And as with all things American, most of it has been driven by corruption and lobbyists. While it is what it is, the fact remains that this is the law of the land.

The second fact here is that companies like Apple (and Cisco and many others pushing for profit repatriation / tax holiday) manufacture their gear abroad, sell their gear abroad and pay taxes abroad: they aren’t evading IRS, the profits they make abroad are not taxable by our laws. This isn’t the scumbag tax shelter game (Mitt Romney) where company incorporates in the Caymans and charges licensing fees to all it’s foreign operations to make it seem like it makes no profit in those countries to minimize local tax liabilities. The taxes are already paid where the profits were generated (goods made in China and sold in Italy are taxed in Italy) and the money is free and clear sitting in an Italian bank.

ExchangeDefender

My company, ExchangeDefender, is a global business. We do business around the world and we sell our services around the world.

We are headquartered in State of Florida, United States. Every single penny we make is charged through United States and every bit of profit that we make is taxed here in United States. All our shareholders are Americans and we all pay taxes on the distribution/dividends.

As our operations in Europe and Australia have grown exponentially over the years, it has started to make more sense to start locating people in Australia and United Kingdom and incorporate local subsidiaries there in order to establish local bank accounts, local corporate entities and local network control.

We have had infrastructure abroad for nearly a decade – but we are quickly moving towards having local staff manage the infrastructure, sell and support the services, provide onboarding assistance and so on.

To those of you not big on SAT words: The people that would otherwise be employed in United States managing remote infrastructure and services will now be employed, living and working abroad. And the profits generated by those subsidiaries will stay abroad instead of being deposited into our USA bank accounts.

We already pay taxes abroad – all kinds of taxes – but all our profits come to United States and IRS hits those profits at 35%. I have no beef with the rate or the IRS.

However, ExchangeDefender is a world citizen. If we are taking Australian Dollars from Australian citizens who subscribe to our servers located on Australian soil, managed, supported and sold by Australian citizens and taxed by ATO.. why should those profits come back to United States to be taxed at 35% and then further taxed by it’s shareholders? Just so I can use the proceeds to buy an Italian car?

Our government needs to make an effort to create a way to bring profits generated abroad by foreigners back to United States at a reasonable cost. Since United States government has had nothing to do with the generation of the said profits in the first place, what is a reasonable rate to charge on those profits to have them deposited in US bank accounts and distributed to the shareholders?

Currently it is 35% and it is unhealthy for United States to require that – not because I am cheap – but because it makes more sense to take the profits abroad and invest them abroad where they can generate higher profits. It makes more sense to put the money to work than to cut it in nearly a half and spend here. It guarantees business growth abroad instead of United States. It doesn’t work in vacuum either – every dollar spent generates multiple dollars in economic impact so one job lost here equals to more than one job created abroad.

Over time, this creates countries that will be more successful than United States.

As an American.. and one that is as such by choice.. I feel that our representatives in the government have the responsibility to it’s people to make America more competitive, not less. As a business owner, I have fiduciary responsibility to my shareholders to maximize corporate profits and to my clients to deliver services they want to pay for. The two are not mutually exclusive! We just need the government to close the loopholes and make it less expensive to import profits from other countries into United States.

To put it simply, this is like your bank charging you nearly 50% of your deposit whenever you put money into your account. Would you put it in the bank or keep it in your pocket? In case of Apple, Cisco, Google (and every global business out there) the money is staying in the back pocket instead of being spent in the US economy.

Do the right thing gents. The economic prosperity of United States is literally in your hands.

3 Responses to Is America Company Friendly?

  1. SC says:

    But that is not what Apple is doing. They are shifting profits to more favorable locales, regardless of the origin of the profits. They are playing a huge shell game.

  2. Vlad Mazek says:

    @SC,

    I agree, that is in part what they have done through their subsidiary in Ireland, but for the most part that impacts US economy is if the $100 billion that sits abroad could be deposited back into US bank accounts without a 35% profit charge by the IRS.

    I am not defending Apple for moving their profits from some EU territories to Ireland – that is the fault of the EU government. This is not something for our government to judge.

    In United States, Apple does not export it’s profits – It pays them here to the IRS just like my company. The question is, should the profits from an iPad that is sold in Italy and already taxed through Ireland and so on – be deposited back in United States at 35% tax rate or significantly less… or should that $ be kept overseas and invested in R&D overseas and spent on services overseas and generally used to grow the economy abroad instead of here.

    That is the question.
    That is what they are trying to decide how to handle.

    -Vlad

  3. RandyS says:

    @Mr. Coin Pouch, good point and great addition to the discourse. I love your blog!

    @vlad, wouldn’t it be great if our elected officials cared what we “common folk” were concerned about? Maybe Mr. Coin Pouch actually has the right idea, as long as his pouch is filled with gold coins which are sure to get the politician’s attention when rattled profusely..

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