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For U.S. Companies, Money ‘Offshore’ Means Manhattan By DAVID KOCIENIEWSKI Published: May 21, 2013 FACEBOOK TWITTER GOOGLE+ SAVE E-MAIL SHARE PRINT REPRINTS Like some of the nation’s prominent chief executives, Apple’s Timothy D. Cook has a simple proposal to help spur the economy and encourage corporate tax compliance: give American companies a tax break to bring to the United States untaxed profits parked overseas. Enlarge This Image Kimihiro Hoshino/Agence France-Presse — Getty Images John T. Chambers, chief executive of Cisco, has lobbied for a temporary corporate tax break. Related Even Before Apple Tax Breaks, Ireland’s Policy Had Its Critics (May 22, 2013) High & Low Finance: One Response to Apple Tax Strategy May Be to Copy It (May 22, 2013) In Disarming Testimony, Apple Chief Eases Tax Tensions (May 22, 2013) DealBook: Finding the Economic Roots of Apple’s Taxable Product (May 21, 2013) Add to Portfolio Apple Inc Go to your Portfolio » But much of that money is already home. Multinationals based in the United States now hold more than $1.6 trillion in cash classified as “permanently invested overseas.” These funds will face the 35 percent federal corporate tax only if it is returned to the country. In the convoluted world of corporate tax accounting however, simple concepts like “overseas” and “returned to the country” are not as simple as they appear. Apple’s $102 billion in offshore profits is actually managed by one of its wholly owned subsidiaries in Reno, Nev., according to the Senate report on the company’s tax avoidance. The money is tracked by Apple company bookkeepers in Austin, Tex. What’s more, the funds are held in bank accounts in New York. Because the $102 billion is technically assigned to two Irish subsidiaries, however, the United States tax code considers the money to be under foreign control, and Apple is legally entitled to avoid paying taxes on it. Tax experts say that such an arrangement is not uncommon among American multinationals. During the last several years, major companies like Microsoft, Hewlett-Packard, Google and Abbott Labs have lowered their tax bills by arranging for their billions in profits to flow to subsidiaries that are technically offshore — even though some of the money is placed in United States Treasury bonds and other government securities. Because the money is nominally held by the offshore companies, the tax code deems the money nontaxable, even if the funds are physically held in the United States. The savings to American companies is huge: the Congressional Joint Committee on Taxation estimated that if foreign profits of United States corporations were fully taxed it would generate an additional $42 billion this year for the government — about half the amount of the automatic spending cuts enacted as part of the so-called sequester. The companies say that they need to shield their money overseas, however, because the official corporate rate of 35 percent is the highest in the world and puts them at a competitive disadvantage. And while the offshore money may be in American banks and controlled from home, executives say it would be irresponsible to return the money to their shareholders or invest it in the United States because of the high tax rate. Just last month, Apple announced it would pay for its dividends to shareholders by taking on $17 billion in debt rather than tap into the untaxed foreign profits. Mr. Cook said it would have been a disservice to shareholders to use the “offshore” earnings and pay the 35 percent federal income tax. But Senator Carl Levin, the Michigan Democrat who heads the committee, brushed aside those claims. “You can bring the money home,” he said. “You’d just have to pay your taxes on it.” Apple is one of about 20 major corporations that have been pushing for a fresh tax break, known as a “repatriation holiday,” which would allow them to bring the money to the United States at a drastically reduced rate. John T. Chambers, chief executive of Cisco, has led a sustained lobbying effort for such a policy, promising that it would act as a stimulus to encourage investment and increase jobs in the United States. A similar policy was enacted in 2004, which prompted American companies to return more than $300 billion in foreign earnings at the reduced rate of 5.25 percent. But it led to no discernible increase in American investment or hiring. On the contrary, some of the companies that brought back the most money laid off thousands of workers, and a study by the National Bureau of Economic Research later concluded that 92 cents on every dollar was used for dividends, stock buybacks or executive bonuses. A study by the Congressional Joint Committee on Taxation estimated that a similar program would result in $79 billion in forgone tax revenue over a decade. Opponents of the repatriation tax break say that Apple’s accounting maneuvers show how easily major companies can shield their profits from the government, even putting companies without aggressive tax departments at a competitive disadvantage. “The offshore companies are a fiction and the statement that the money is offshore is a fiction,” said Edward D. Kleinbard, former staff director for the Congressional Joint Committee on Taxation. “What they are asking for is a reward for having gamed the system.”

Israel warns Syria over Golan Heights clashes

From: AFP May 22, 2013 10:47AM Increase Text Size Decrease Text Size Print THE head of Israel's armed forces warned Syrian President Bashar al-Assad of "consequences" if fire continues from Syrian territory against Israeli troops in the occupied Golan Heights. “If he disturbs the Golan Heights, he will have to bear the consequences,” Lieutenant General Benny Gantz said in an address at Haifa University, broadcast on Israeli television. “We cannot and shall not allow the Golan Heights to become a comfort zone for Assad,” he said. He spoke hours after Israeli troops and Syrian forces exchanged fire across the sensitive ceasefire line on the Golan Heights, but the Jewish state denied Syrian claims one of its vehicles had been destroyed. The Syrian army “fired on an Israeli patrol, which we confirmed six hours ago, but did not destroy a vehicle or kill anyone,” Israeli military spokesman Avichai Adraee wrote on Twitter. “In response, Israel Defence Forces returned precise fire at the source of the gunfire. They reported a direct hit,” an army statement added. Syria claimed to have destroyed an Israeli military vehicle it said had crossed the ceasefire line during the incident. “The vehicle passed the ceasefire line and was moving towards the village of Bir-Ajam situated in the liberated Syrian zone” of the Golan, it said, adding that the operation was aimed at “lifting the morale” of rebel forces in the region. General Gantz said that the vehicle never entered Syrian-controlled territory and suggested that Syria was fabricating a story with an obsolete Israeli vehicle left behind in Lebanon during Israel's 2006 war there against Syrian ally Hezbollah. “It's a totally absurd story about an old 2002 model jeep,” he said. The army also reported that small-arms fire from Syria hit the Israeli-occupied Golan overnight, causing no casualties or damage. The army filed a complaint with the UN monitoring force. The strategic plateau has been tense since the beginning of the conflict in Syria more than two years ago. However, there have been only minor flare-ups in the area to date, with Syrian shells crashing in the occupied Golan and Israel firing in retaliation. In recent weeks, there were four incidents of fire coming from the Syrian side of the ceasefire line. Last week projectiles from Syria hit Mount Hermon, causing the popular site on the Golan to close down to visitors. Defence Minister Moshe Yaalon said that Israel did not want to get sucked into Syria's war, but that fire on Israeli targets would not be tolerated. “Our policy is clear: we will not intervene in the Syrian civil war, but concerning the situation in the Golan Heights, we will not permit gunfire against our territory,” he said in a statement. Maariv daily quoted an Israeli commander in the north of the country as warning that “if one of these shells causes an (Israeli) casualty, the response will be different.” Israel launched air raids inside Syria this month targeting what sources said were arms destined for its arch foe Hezbollah, whose members have joined the fight against rebels alongside the Syrian military. The strikes ramped up regional tension, with Syria threatening to hit back. In a separate incident yesterday, the Israeli army said an injured Syrian was taken to a hospital in northern Israel overnight after crossing the ceasefire line. A number of wounded Syrians have been treated in Israeli hospitals over the past few months, before being repatriated. Israel, which is technically at war with Syria, seized 1,200 square kilometres of the Golan from its Arab neighbour in the 1967 Six-Day War. It annexed the territory in 1981 in a move never recognised by the international community. The area is thickly-sown with landmines and the Israeli army said that one of its sappers was killed yesterday during clearance operations in an Israeli minefield in the southern Golan. Public radio said that the man stepped on an anti-tank mine which should not have exploded under the weight of a person. AFP