overman1 on 22 August 2014
| thx1139 said: This isnt just sales made in other countries. A little explanation when profit is made in another country the tax on that profit is deducted from what the tax is in the US. So if profit is $100 and company pays $10 in tax to another country and the tax would have been $20 in the US then the company pays $10 more in tax when the money is repatriated. OK so now what a lot of companies do. I dont know if MS does this, but I believe Apple does. A company makes a product in very low wage country like China. Then has a holding company in say the Cayman Islands or Ireland that has very low tax rate. The company sells the product made in China to the holding Company in the Cayman Islands for large profit. Then the company in the Cayman Islands sells the product to the main company in the US to sell to the US consumer. They sell the product at nearly the retail price. So now little profit on the actual sale to the consumer. The profit goes to the holding company in the Cayman Islands which has little tax. Example: Product made in China for $10 for the holding company. The holding company sells to US company for $95. US company sells to consumer for $100. So the holding company makes $85 in profit. US company makes $5 in profit. Tax in holding company country is basically nothing. Tax in US is on $5 profit. Money sits offshore. Companies lobby to get repatriation holiday to get money back in US. Think last time the tax % was 10% rather then top rate of 35%. |
and they keep all that money off shore. Companies like this (just like GM) then get very careless with their base in the home country and when they get into trouble, guess who comes to bail their ass out? the big bad goverment.
All the while, they still have their money offshore, they CEO dont get fired, the shareholders still get thier usual profit cut and people lose their jobs. Not saying all U.S business do this but now this is very common now in America.
