A recent article by The Register points at a tax break in the 2015 US budget for tech firms. According to the article, the new budget proposes a tax break for multinational US companies that keep profits from their activities in overseas accounts. The Register claims that these accounts combine for a total value of $2 trillion.
The current tax code requires multi-national companies to pay tax on all profits worldwide at a rate of 35%. The new budget suggests cutting this tax rate to 19% and as a one time deal to 14%. A similar one time deal was struck under the Bush administration, which led to some unexpected consequences as pointed out in this analysis. Instead of increased investments and more jobs, most of the money was returned as dividends to investors.
This tax cut will not affect any new technology firms, but large multinational corporations with large success in the global market. The goal of the Obama administration is to use the additional income for infrastructure measures in the US. The proposal does not meet the expectation of the industry which wants a single digit tax rate, which would equate to less than $200 billion if all of the money flowed back to the US. In addition, the companies would have only to pay taxes on the difference between the US and the foreign country tax rates, if any taxes were paid. – Norbert Hildebrand
