Double Irish

Another bizzy day demands a repeat, this from just last year.  Little has changed since then, and if anything corporate taxes are only closer to the front burner.  Maybe.

In a victory for corporate taxes everywhere, Apple has been ordered to pay as much as €13 billion ($14.7 billion) in back taxes to Ireland. Or, perhaps, in a loss for workers everywhere, a reluctant Ireland is forced to go back on its agreement with Apple to base its European operations there in exchange for much needed tax breaks. Or, perhaps, corporate tax harmonization has been dealt a terrible setback as the European Union (EU) has claimed their turf in what should be hammered out through an international agreement.

What we do know for sure is the massive penalty, the largest ever imposed, is a big blow to Apple, amounting to …. around 7% of their massive $200 billion cash reserves. Unless, of course,  the Republic of Ireland can justify a smaller bill, which they are very much keen to do. So nevermind.

Like corporate taxes themselves, today’s big story is completely negotiable and dependent on your perspective. There will be more to this, but nothing even remotely obvious will happen in the immediate future.

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Ireland’s Big Payday

In a victory for corporate taxes everywhere, Apple has been ordered to pay as much as €13 billion ($14.7 billion) in back taxes to Ireland. Or, perhaps, in a loss for workers everywhere, a reluctant Ireland is forced to go back on its agreement with Apple to base its European operations there in exchange for much needed tax breaks. Or, perhaps, corporate tax harmonization has been dealt a terrible setback as the European Union (EU) has claimed their turf in what should be hammered out through an international agreement.

What we do know for sure is the massive penalty, the largest ever imposed, is a big blow to Apple, amounting to …. around 7% of their massive $200 billion cash reserves. Unless, of course,  the Republic of Ireland can justify a smaller bill, which they are very much keen to do. So nevermind.

Like corporate taxes themselves, today’s big story is completely negotiable and dependent on your perspective. There will be more to this, but nothing even remotely obvious will happen in the immediate future.

Continue reading

Corporate Taxes

What is a fair corporate tax? It’s a hot political topic, but one loaded with a tremendous amount of mis-information. On the left, it’s common to cite “loopholes” which allow corporations to “offshore” profits and dodge taxes as a result of corporate lobbying. On the right, the extremely high corporate tax rate of 38%, nearly double the worldwide average, is cited as a major problem.

Both statements are greatly limited at best. US corporate tax law does not contain “loopholes” but a series of structural deficiencies derived primarily from being hopelessly antiquated. Any discussion of the tax rate misses the main issues entirely, as the definition of “profit” – more accurately, definition of “income” and “expense” – is the core issue.

Any reasonable discussion of corporate taxes has to start with the fundamentals. What is a corporation? What is profit? Who benefits? What needs to be done?

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Taxing Solutions

The election is over.  The Sunday morning gab shows suddenly found a purpose, interviewing serious Senators and other concerned about the work that the new (and first old!) Congress will face – particularly the “Fiscal Cliff”.  A tremendous amount of movement on the Republican side shows that tax increases, particularly coming as reform in the deductions allowable, is definitely on the table.

Grover Norquist now knows what it’s like to be in a position where you can’t deliver the votes.  Must be a shocker.

The question remains, however, as to how much of the roughly $1.1 Trillion deficit will be tackled in year 2013, and how much will be spun out into the future.  No one expects the gap to close overnight, but instead are looking for serious progress towards balance.  More to the point, they want to assure markets that it won’t grow from here.  How much can they raise get us down the path right away?  Here is a short guide to some of the ways to look at it.

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