Nick Shaxson ■ Stop press: large U.S. multinational decides to pay some tax
As expert after expert – and citizen after citizen – agrees: the international tax system is broken. Multinational corporations run rings around even the most sophisticated and well-resourced tax authorities, producing democracy-killing results such as the fact that General Electric paid a minus 11 percent US tax rate on average from 2008-12.
Remember that the race to the bottom on tax – more accurately described by the term Tax Wars instead of the more traditional term Tax Competition – doesn’t stop when effective tax rates fall to zero. The showers of taxpayer subsidies heaped on the wealthy owners of subsidies just keep getting larger.
So it was something of a relief to read this in the Financial Times:
“Ecommerce company eBay is repatriating billions of dollars in cash it has been holding offshore, choosing to pay a hefty tax bill in the US in order to access funds it says it might need for dealmaking.”
Ebay is expected to pay $3 billion in taxes on $9 billion in offshore earnings that it is repatriating to the U.S. to invest. That is about the same amount of money that General Electric wheedled out of U.S. taxpayers through its financial engineering.
Now we haven’t looked at this arrangement in detail, but from where we’re sitting this does make a refreshing contrast from those companies such as arch tax abuser Apple, which (as the FT notes) decided on Tuesday to borrow $12 billion rather than bring back to the U.S. some of the nearly $160 billion it has stashed offshore. Perhaps almost as egregiously, the proceeds will be used to stuff the pockets of mostly wealthy Apple shareholders via stock buybacks. The whole system of international capitalism, and not just its tax aspects, have become corrupted.
Now look at this Yahoo! story on Ebay’s move, entitled Why is eBay eager to pay a tax that Apple works to avoid?
“Are the board and management of eBay Inc. (EBAY) clueless or crazy for electing to trigger a $3 billion non-tax charge for a potential future tax bill should it decide to repatriate $9 billion of its overseas cash,rather than tap the pliant bond market for any immediate domestic spending needs?”
It says many analysts are mystified – which is a clear testament to the ever-growing banality of offshore. But it ends on a more heartening note:
“Perhaps the crazy thing is not so much eBay’s decision, but the fact that in the face of U.S. tax law, so many companies have made tax-minimization a key business objective that everyone is alarmed when a big corporation considers voluntarily paying what it owes.”
We would concur. Unless there is some deeper scheme behind this that we’re not aware of, we should applaud this company for doing it the way it should be done.