The comments of @submergingmkt James Henry appear to assume that the #CookvTait Principle of extra-territorial taxation is correct

My last post featured the comments of Apple CEO Tim Cook about the ongoing debate over whether U.S. companies should be punished for their strict compliance with the absolutely archaic, dysfunctional, overly complex tax laws of the United States of America. It has reached the point where it appears there are two classes of corporations that Homeland politicians and groups like the Tax Justice Network dislike:

Group 1 – U.S. Politicians dislike those U.S. companies who do comply with U.S. laws; and

Group 2 – U.S. Politicians dislike those U.S. companies who do NOT comply with U.S. laws.

These sentiments were recently expressed by James Henry of The Tax Justice Network who makes the point that:

The interview with Mr. Henry is fascinating. Mr. Henry is opposed to “territorial taxation” for Corporations. This suggests that he might be opposed to “residence based taxation” for individuals.

I would appreciate you commenting on what you think of Mr. Henry’s interview. What are the key points that he makes? What (if anything) does he say that is relevant to the RBT vs. CBT debate? Do you get the impression that Mr. Henry believes that U.S. companies are the property of the U.S. government?

By the way …

Here is Tim Cook’s testimony before the Levin Committee in 2013:

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2 thoughts on “The comments of @submergingmkt James Henry appear to assume that the #CookvTait Principle of extra-territorial taxation is correct

  1. Patricia Moon

    Mr.Henry sounds like a typical “pay your share” kind of guy. Generalizing and over-simplifying. And not really answering the questions he was asked.

    Ms. KANJI: “….company would have to pay 40 percent of his profits in taxes if he repatriated its overseas income. Wouldn’t this kind of huge loss undermine the ability of Apple to reinvest in things that help workers, like job creation and benefits?” Seems like a reasonable question to me.

    Mr. JAMES: “No, in fact, the issue is that Apple has been booking a lot of their revenue and income offshore in tax havens. They’re the world leader in terms of using tax havens to avoid tax. And he’s missing the point. It’s not a question of the legality of what he’s doing.” Does this answer address anything about the idea of Apple losing 40% of repatriated earnings? All Mr. James does is use the two buzz terms “tax havens” and “avoid tax.” And sorry Mr. James, it most certainly IS a question of legality. Congress could get off its backside and change this at any point but obviously chooses not to. What role should Congress be taking in shaping policies that promote innovation, new technology etc? Instead of 40% tax on repatriated earnings, why not a credit for what paid overseas and some combination of lower tax rate plus credits for investment in new technology etc?

    “….the original value is created here in the first place. But the United States has always had a worldwide income tax, and U.S. companies have done quite well on the basis of this worldwide income tax. A territorial tax, which is what Cook seems to be asking for, would really be disastrous, especially for a lot of small companies.” So original value being created in the US equals “owned forever” by the US? If Apple paid what it owed at that time, it was already creating jobs, stimulating the economy and paying its fair share. That is all it should have to do. And WTH? Could we get some kind of explanation on what is so terrible about a territorrial tax for small companies? Are non-resident US companies not already paying tax in the countries they are located in? What’s terrible is the US demanding more from them. The extra-territorial tax is what is disastrous. They wouldn’t locate outside the US in the first place if territorial tax was so horrible.

    “In fact, you know, Apple is not unable to access these offshore assets. It’s able to borrow against them, very low interest rates. Invest here. And deduct the interest. So maybe we need to sit down Tim Cook and explain to him how he can actually take advantage of these offshore assets that he claims not to be able to invest here.” Weird. I rather imagine Mr. Cook and his advisers are able to assess whether it is more profitable to keep the money invested offshore etc as opposed to a 40% tax rate and where is the explanation of how investing in the US after paying that 40% is better?

    At the very least, with regard to RBT vs CBT, I hear no reference to the fact that Apple pays taxes to the countries it is operating in. This is the same drivel we get from Homelanders who seem to think we get something they don’t regarding FEIE and FTC. Money made outside the country and then taxed by the US takes capital out of the countries it was earned in. Doesn’t matter whether this is via individuals or companies, the US simply cannot justify this. If one paid while a resident of the US on US earnings, that should be enough. “Owing” for eternity just because of US origin? Would the US accept this the other way around? Resident immigrants/subsidiaries paying their country of origin before any tax liabilty to the US? Doubt that.

    The US is getting what it deserves for this superbly ridiculous attitude. Once expats became aware of what the US extraterritorial system is (rubbed in with good ole American exceptionalist penalties), renunciations rose to the highest level ever and are likely to continue. And corporations will keep their $$ out of that outrageous 40% system. Time for the US to grow up and accept it’s place. No one in their right mind would agree to such crippling robbery.

    Reply
  2. Pingback: The comments of James Henry appear to assume that the #CookvTait Principle of extra-territorial taxation is correct | alliance for the defeat of citizenship taxation

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