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President Biden's Tax Proposal Targets Big Tech's $100B Overseas Profit: Bloomberg

President Biden's Tax Proposal Targets Big Tech's $100B Overseas Profit: Bloomberg
  • President Joe Biden’s tax boost proposals under his infrastructure bill have targeted technology giants like Apple Inc (NASDAQ: AAPL) and Microsoft Corp (NASDAQ: MSFT), Amazon.Com Inc (NASDAQ: AMZN), Facebook Inc (NASDAQ: FB), Intel Corp (NASDAQ: INTC) and Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL), who had reported over $100 billion in non-U.S. profits in their last fiscal years, Bloomberg reports.
  • The tech industry prefers to stash profits at low-tax offshore jurisdictions due to easier mobility of their main assets like software code, patents, and other intellectual property compared to factories and other physical assets.
  • The addition of extra deductions and other benefits to Donald Trump’s 2017 tax plan diluted its attempt to recover taxes from overseas profits.
  • However, Biden’s law will further intensify the country’s friction with the tech companies over misinformation and antitrust investigations.
  • Amazon Chair, Jeff Bezos, has endorsed higher corporate taxes. Intel’s Pat Gelsinger panned Biden’s plan.
  • Trump’s 2017 global intangible low-taxed income (Gilti) targeted non-U.S. profits from intangible assets. Biden plans to double the Gilti tax rate to 21% from 10.5% and restrict foreign tax credits. It could increase corporate tax bills by almost $300 billion over a decade, with most of the burden falling on the tech sector.
  • Microsoft’s annual Gilti tax bill could more than double to $2 billion. Microsoft generated 86% of its foreign pretax income from Ireland and Puerto Rico operations in 2020, which have lower corporate tax rates than the U.S.
  • The 2017 tax law also allowed a tax deduction for overseas intangible income (FDII) to encourage the companies to retain their intangible assets at home country. Google’s share of domestic income rose after it began licensing intellectual property in the U.S. in 2019. Facebook followed suit.
  • However, Biden FDII’s annulment proposal would raise the tax bills of tech companies. Amazon claimed $500 million in total FDII deductions in 2018, 2019, and 2020.
  • Biden also proposed a 15% minimum book tax on high-profit organizations that escape taxes via research and development, foreign credits, and stock-based compensation. Google, Amazon, and Apple’s tax bills would be higher by $847 million, $1.2 billion, and $3.8 billion, respectively, if Biden’s book tax existed in 2020.
  • The Organization for Economic Cooperation and Development (OECD) also represents several countries outside the U.S. over similar tax concerns.
  • The OECD sought to replace the digital services taxes to procure higher revenue from companies like Google and Facebook. However, Amazon is escaping on the pretext of its thin margins.

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Posted-In: Bloomberg Briefs Joe BidenGovernment News Tech Media

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