Stranded Profits
The revenue enhancement reform give-and-take includes the persuasion that yesteryear moving to a territorial system, United States of America companies volition select lots of coin stranded offshore dorsum to the US, unleashing a moving ridge of investment here. While I intend a territorial organisation makes sense, every bit does reducing or eliminating the corporate tax, every bit a pure affair of economics, I don't intend this repatriation declaration makes sense.
Here's why. (The next is a story, non a fact most Apple accounting.) Apple sells an Iphone inwards Spain. Apple Espana pays a huge licensing fee on software, owned yesteryear Apple Ireland, so it's non a profits inwards Spain. Apple Republic of Ireland thence collects huge amounts of cash from all over the world, taxed at the depression Irish Gaelic corporate revenue enhancement rate. Apple Republic of Ireland deposits this cash inwards an Irish Gaelic bank. (I presume they do fancier things amongst the money, simply I'm telling a storey here). The cash is "stranded" overseas, right?
No. The Irish Gaelic banking concern tin terminate lend the coin anywhere. It tin terminate purchase United States of America mortgage backed securities, it tin terminate lend the coin wholesale to United States of America banks who lend it out to United States of America businesses. It tin terminate fifty-fifty lend the coin to Apple US. If Apple or whatsoever other United States of America society wants to invest, they tin terminate borrow from the Irish Gaelic bank. Conversely, if profits are repatriated to United States of America banks, those banks tin terminate lend the coin overseas.
If Apple's Irish Gaelic banking concern invests alone in, say Castilian condos, so the Castilian banking concern that would accept made the condo loan instead loans to the US. Conversely, fifty-fifty if the profits are "repatriated" to a United States of America bank, if investment opportunities are ameliorate abroad, that's where the investment volition happen.
You can't avoid 2 key truths: 1) Money is fungible. 2) Savings - Investment = Net Exports.
Yes, at that spot are about minute society effects. If coin comes dorsum to United States of America banks, United States of America banks become to earn the fees. Internal upper-case missive of the alphabet tin terminate hold upward cheaper so external; it's inefficient to post your ain coin to yourself through a bank. But these are minute order, as well as that's non the declaration existence made.
It's even so a practiced idea, simply for other reasons. Reduction or elimination of corporate taxes volition brand United States of America investment to a greater extent than profitable, as well as that volition attract coin from abroad. But don't count on a moving ridge of repatriated profits to hateful much to a greater extent than than a big fiscal change. Even if it happens. There are many other reasons to continue pots of coin overseas these days. Bad arguments for practiced policies are not, inwards the end, a practiced idea.
Here's why. (The next is a story, non a fact most Apple accounting.) Apple sells an Iphone inwards Spain. Apple Espana pays a huge licensing fee on software, owned yesteryear Apple Ireland, so it's non a profits inwards Spain. Apple Republic of Ireland thence collects huge amounts of cash from all over the world, taxed at the depression Irish Gaelic corporate revenue enhancement rate. Apple Republic of Ireland deposits this cash inwards an Irish Gaelic bank. (I presume they do fancier things amongst the money, simply I'm telling a storey here). The cash is "stranded" overseas, right?
No. The Irish Gaelic banking concern tin terminate lend the coin anywhere. It tin terminate purchase United States of America mortgage backed securities, it tin terminate lend the coin wholesale to United States of America banks who lend it out to United States of America businesses. It tin terminate fifty-fifty lend the coin to Apple US. If Apple or whatsoever other United States of America society wants to invest, they tin terminate borrow from the Irish Gaelic bank. Conversely, if profits are repatriated to United States of America banks, those banks tin terminate lend the coin overseas.
If Apple's Irish Gaelic banking concern invests alone in, say Castilian condos, so the Castilian banking concern that would accept made the condo loan instead loans to the US. Conversely, fifty-fifty if the profits are "repatriated" to a United States of America bank, if investment opportunities are ameliorate abroad, that's where the investment volition happen.
You can't avoid 2 key truths: 1) Money is fungible. 2) Savings - Investment = Net Exports.
Yes, at that spot are about minute society effects. If coin comes dorsum to United States of America banks, United States of America banks become to earn the fees. Internal upper-case missive of the alphabet tin terminate hold upward cheaper so external; it's inefficient to post your ain coin to yourself through a bank. But these are minute order, as well as that's non the declaration existence made.
It's even so a practiced idea, simply for other reasons. Reduction or elimination of corporate taxes volition brand United States of America investment to a greater extent than profitable, as well as that volition attract coin from abroad. But don't count on a moving ridge of repatriated profits to hateful much to a greater extent than than a big fiscal change. Even if it happens. There are many other reasons to continue pots of coin overseas these days. Bad arguments for practiced policies are not, inwards the end, a practiced idea.
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