[simba-hiiipower]

yeah, in one of their releases they specifically mention the transaction will be completed using offshore funds.

and while i'd generally like to see some movement on policy to encourage large us-based multinationals to bring-home more of their offshore earnings (for reinvestment domestically), the current environment does play-out nicely for foreign m&a - which is at-least (in my opinion) a better use of funds than dividends and buybacks.

[shubb]

Money from work and sales outside the US should be repatriated and invested domestically, just because the company is notionally based in the US?

Sounds a tad imperialistic?

I think getting companies pay tax in the US for sales in the US would be less internationally antisocial...

[WildUtah]

Remember that no other developed country besides the USA requires that local companies pay local tax again on foreign profits already taxed where they are earned. Most nations recognize that that would make investing locally costly and undesirable. It would also put local companies at a competitive disadvantage worldwide.

The politics of government greed in the USA has created a tax system where the USA government charges the highest business tax rates in the world and enforces punitive triple taxation of foreign profits. That's why USA companies are keeping their money abroad instead of investing in jobs at home. (The USA tax rate was second in the world until a recent Japanese reform, but Japan never triple taxed profits abroad, so the Japanese rate was always effectively lower.)

Corporate taxation is one of the few tax issues where Congressional Republicans are often more sensible than Democrats, from a purely technical tax policy perspective. Obama is willing to work with them, too, but nothing seems to get done. It's one small part of the ongoing failure of Washington.

[freehunter]

And god forbid you're a US citizen living and working overseas. You still have to fill out US tax forms for both state and federal tax. The federal government won't charge taxes on anything under ~$90,000, but the states sure will expect you to pay your share of their taxes, even though none of that money was earned or spent in the US.

[mahyarm]

Wouldn't you not be resident in any state in that case then? Or could pretend to just be in a non income tax state?

[freehunter]

I hear a lot of ex-pats who move to a non-income-tax state (like Texas) just before they move overseas. If your US residence is still in a state with income tax, even though you don't live there you still get taxed on your overseas income because as a US citizen you still have residence in your state even if you don't live there. It doesn't matter if you're physically there or not.

The only other alternative is to renounce your US citizenship if you never plan on coming back.

[makomk]

From what I recall, they wouldn't have to pay tax twice, they'd have to pay the difference between the US and Irish taxation rates. Other countries don't do this, but other countries also have huge tax evasion problems as a result.

[phillmv]

>I think getting companies pay tax in the US for sales in the US would be less internationally antisocial...

IIRC, that's precisely not what these tax repatriations are about; they're about sales abroad that are received by a foreign subsidiary. They avoid repatriating it back to the (US-based) parent company because they suspect if they hold onto it long enough the US government will issue yet-another tax holiday.

[consultant23522]

I would argue that there's a hand full of countries where being based is more than "notionally" beneficial. The U.S. is definitely among them. I'm not suggesting that the tax should exist but let's not pretend that being based in the U.S. is not dramatically different/better than being based in most other countries you could throw a dart and hit on a map. It's not as if these companies couldn't just move their headquarters off-shore to avoid the issue altogether.

[shubb]

>>It's not as if these companies couldn't just move their headquarters off-shore to avoid the issue altogether.

Which is always the risk when you call for something like the parent wants.

Huge companies, like Microsoft, have offices all over the world. Microsoft has about equal numbers of workers, and revenue, inside and outside the US. The same could be said for Apple. That makes the US a huge market, and it makes sense they are based there. But if being based in the US put them at a disadvantage in the rest of the world (e.g. they had to pay tax twice), it is likely they would move, at least notionally.

There is a big problem with companies that don't pay tax anywhere, or nominate very low tax countries. A coffee company in Europe famously buys coffee cheap with a subsidiary in a low tax country, then sells it to its other business units for so much that those units claim to run at a loss. No coffee ever passes through its small but extremely profitable office in the low tax country. That's annoying, as it puts the burden of subsidizing welfare salary top ups for its underpaid workers on me.

To suggest a solution - The answer here is to tax sales in the country the buyer is in, rather than taxing profit. Sure, it'll kill some low margin companies, but the overall economy will work better because it won't be so skewed by how easily a particular industry can dodge tax. I suspect financial services would do particularly badly.

In terms of this merger, if the tax was on transactions between companies (and I think it should be, though smaller), if Microsoft France funded the deal, it should pay tax in France.

[pasiaj]

M&As are generally value destroying activities. Why do you think dividends and buybacks are inferior?

[simba-hiiipower]

note that this is just my personal opinion (and is in contrast to what seems to be the consensus), but i tend to believe that firms are more efficient in investing excess capital, to drive long-term growth, than shareholders, who have largely become about maximizing short-term profitability (and often at the expense of long-term growth).

and while i'd agree that firms often overpay in the hope of realizing ‘synergies’ that rarely exist, an acquisition is at least an investment in something tangible (ip, product lines, people, ...), which at least has the potential to generate value.. and while it may fail to do so (or do so sufficiently as to offset the costs involved), i view it as a better use of funds than direct returns to shareholders in the hopes (from a macro view) that they are able to efficiently reinvest in value-generating activities.

edit: just want to add that i realize that if one views a firm’s primary function as to maximize returns to shareholders (as many do, a fair view), then m&a, with its high probability of not paying-off, would be considered less favourable than a direct transfer like a dividend. i however tend to view a firm’s function more along the lines of ensuring its long-term survival and growth (which, in-turn, and ideally, should generate significant returns to shareholders, and drive innovation).