To Tax or Not to Tax Overseas Cash Hoards

Updated the time frame in which $ 187 billion of accumulated foreign earnings abroad, and to clarify where and when government officials proposed a minimum tax rate that can be paid to the state foreign countries to free the company from having to pay U.S. taxes. One little mentioned the subject of debate on how to meet the $ 16000000000000 sovereign debt crisis a boon to other countries and how companies are taxed on them. Because the tax code currently allows companies to defer taxes on foreign earnings, Bloomberg estimated to grow by $ 187 billion in 2011, many chose to stay abroad without certainty than paying the IRS, the a rate of 35 percent, to repatriate the money. Said Kimberly Clausing, an economics professor at Reed College, lost to the U.S. Treasury $ 90000000000 (PDF) in 2008 as a multinational corporation legally avoid paying taxes by leaving the money in overseas.Staffers Senate Subcommittee on Investigations recently discovered that Microsoft posted three catches in offshore subsidiaries, the accounting approach according to the researchers of the Senate allows the company to shave of $ 6500000000 of the tax bill for the last three years. Subcommittee also reported that HP has a child overseas loans to the parent company in the U.S., a way to transfer money home without having it taxed, the sub-commission. My colleague Jesse Drucker Bloomberg News reported 2007-2009, Google avoided paying $ 3.1 billion in foreign tax profits.The left-leaning advocacy group Citizens for Tax Justice estimated that if all income from earnings abroad companies' Collected, Treasury raised $ 583 billion over 10 years. That is not a huge amount, but it is not necessarily optimal facing Obama and Mitt Romney either.President propose a different plan for addressing repatriation. Romney said the donor during this summer that big business is "fine in many areas. ... They know how to find a way to get through the tax code, save money by placing various objects in an area where there is a low-tax havens in worldwide for their business "(Romney also has some own wealth offshore accounts and. Was told not to reduce his tax bill) Romney and Ryan want to lower the corporate rate to 25 percent and install the territorial tax system, where foreign income is not taxed at all when they return to the U.S. strategy ". actually encourage American companies to bring overseas profits back where they can use to hire new employees for or invest in a new plant at home, "said Romney spokeswoman Andrea Saul me.Obama plan would reduce the corporate rate to 28 percent and force the company to pay taxes on their foreign income to the IRS each year. There is one exception: If a company has to pay the minimum price of a particular tax to a foreign country, the company does not owe U.S. tax. But the president has not spelled out what is the minimum level. Rebecca Wilkins, a tax lawyer with the Citizens for Tax Justice, tells me that at the meeting of the group and others in the White House this year, administration officials floated the possibility of a 20 percent rate. Critics of the proposal say if level is set too low, the plan could prevent the money from the U.S. back to the company shores.When given tax holiday in 2004, they were allowed to repatriate profits of 5.25 percent -The Congressional Research Service found that companies use extra money to pay dividends, among others, but not to create jobs. Clausing of Reed College argued that the territorial system will encourage more companies to shift profits overseas because they can take them home tax-free, tax-free makes it more attractive than the current are.Romney and other support from the territorial state tax system that most foreign income taxes, puts the U.S. at a competitive disadvantage. But these countries also have strict policies and policing strategy intended to prevent the company from profit to assign children abroad, said Wilkins. However: the European Union, which has a territorial system, is considering leaving for the very reason Romney and Ryan said the United States should sign it-EU countries had a hard time getting the company repatriate profits.Obama could not push his company improved tax through Congress this year. Also can get Democrats to sign the company's tax plan Republican Representative Dave Camp of Michigan reform, which is exempt 95 percent of overseas revenue from company taxes. If the problem resurfaces in budget negotiations are expected to panic after 6 November, brace for battle.