July 31, 2021

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Big Tech $ 100 billion overseas revenue targeted by the tax plan

(Bloomberg) – Tech giants, led by Apple Inc. and Microsoft Corp., posted more than $ 100 billion in profits outside the United States in recent years. That makes them the main target of President Joe Biden’s proposals to increase taxes on overseas profits.Tax proposals unveiled this month to clear the bill for massive infrastructure plans target common tactics used by US multinational corporations be e.g. The tech industry is particularly adept at shifting profits to tax-friendly areas because its most important assets – software code, patents, and other intellectual property – are relatively easy to move around compared to factories and other physical assets. Former President Donald Trump’s 2017 Tax According to Andrew Silverman, a tax policy analyst with Bloomberg Intelligence, the cuts and jobs bill was meant to curb the offshore tax maneuver, but Republicans have neutralized the rules with additional deductions and other benefits. Big tech will find it harder to dodge Biden’s plan because if it were turned into law it would fill most of the loopholes left by Trump’s 2017 legislation. The move threatens to leave the industry at odds with Washington, where lawmakers are already examining the spread of misinformation on online platforms and regulators are launching antitrust investigations against large technology companies. “Biden’s proposals could do what the Tax Cuts and Jobs Act promised but failed to deliver: higher taxes for large US tech companies,” said Silverman, who previously advised companies on these strategies. “For some companies, this will have a huge impact.” According to Silverman, a benchmark for assessing a possible risk is examining the approval applications of large US technology companies such as Apple, Microsoft, Amazon.com Inc., Facebook Inc. and Intel Corp. and Alphabet Inc. These six companies have reported overseas pre-tax revenues of more than $ 100 billion for the past few fiscal years. On Thursday, the first of these companies, Intel, reported first-quarter earnings that are expected to exceed $ 4 billion. The tax plan has shared the opinion of executives: Jeff Bezos, chairman of Amazon, says he supports higher corporate taxes, while Intel CEO Pat Gelsinger criticized Biden’s plan after a recent White House meeting to discuss the return of semiconductor manufacturing to the US to discuss “We are trying to make progress in a dramatic way and ten years from now,” said Gelsinger. “Now is not the time to tell me I’ll give you a dollar here and take two dollars there.” Three specific Biden proposals have the potential to add billions of dollars to annual tax bills for US tech companies. based on the analysis of authorization applications. All companies declined to comment on the proposed tax measures when contacted by Bloomberg. Global Minimum RateTrump’s U.S. tax bill of 2017 included a levy on global low-tax intangible income, or Gilti, which taxes profits made in many countries from intangible assets that targeted a common tactic of large tech companies: they transfer their intellectuals Ownership in Bermuda or other low-tax locations, and then the subsidiaries of the companies in high-tax locations like France are billed by the U.S. government to Bermuda unit for use of the IP. In this way, the company’s “high tax” units technically make no profit and therefore pay very little tax. “It’s easier to move your intangible asset than machines,” said Daniel Bunn, vice president of global projects in Washington. According to Silverman, the Tax Foundation Biden plans to increase the Gilti tax rate from 10.5% to 21% and limit the use of foreign tax credits. The Tax Foundation, a right-wing think tank, estimates the proposed changes to Gilti could increase corporate taxes by nearly $ 300 billion in a decade. Much of this cost would likely fall on the technology sector. For example, according to Biden’s proposal, Microsoft’s annual Gilti tax burden would potentially more than double to $ 2 billion, according to Silverman estimates. In fiscal 2020, Microsoft generated 86% of its overseas pre-tax income from doing business in Ireland and Puerto Rico, which the company’s annual report says has lower corporate tax rates than the United States. The 2017 Tax Act also provided for a tax deduction for foreign immaterial income or FDII. It is designed to encourage American companies to keep intangible assets such as intellectual property in the U.S. or to bring those assets home from overseas. Alphabet did just that in late 2019 when it began licensing IP in the US that had previously been licensed in Bermuda. Facebook made a similar change. Now, Biden is proposing to repeal FDII, which Bunn said would likely increase the tax burden on tech companies. According to its most recent annual report, Amazon recorded nearly $ 500 million in FDII prints in 2018, 2019, and 2020. “Some companies may reconsider intellectual property ownership in the US if this tax break is removed,” Bunn said. Minimum Book Tax Finally, there is a proposal in Biden’s plan to introduce a 15% “minimum book tax” for large companies reporting high profits but low taxable income. Large US technology companies often have low effective tax rates because of a number of available deductions for items such as research and development, foreign loans, and stock-based payments. “The biggest impact for tech companies is this minimum tax on book income,” said Bunn. “This would likely hit some companies much harder than the current tax system.” If Biden’s book tax had existed in 2020, Google’s bill would have been $ 847 million higher. Silverman estimates that Amazon owed another $ 1.2 billion and Apple another $ 3.8 billion. Tech companies are also being scrutinized from outside the US global talks led by the Organization for Economic Co-operation and Development, trying to target many countries. Concerns that technology giants – and other multinational corporations – are not properly taxed under the current system. The OECD’s efforts are aimed at replacing the digital services taxes that more and more countries are enacting in order to generate more revenue from companies like Google and Facebook. However, Amazon, which would likely evade the new rules because its margins are so small, becomes an obstacle to these negotiations. More articles like this can be found at bloomberg.com. Sign up now to stay up to date with the most trusted business news source © 2021 Bloomberg LP