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Principles of Finance: Unit 3, “Offshoring” for Tax Benefits 4 Views


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Description:

How does a company "offshore" for tax benefits? What does that even mean? And is it, uh...kosher?

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Transcript

00:00

Principles of finance a la shmoop offshoring for tax benefits hot topic

00:08

[Man and woman arguing] what does that mean well in 2016 what was left of Europe post brexit submitted

00:14

to Apple a tax bill for 15 billion dollars

00:18

well that event shined a light on global tax policy in a way that had never quite [Global Tax Policy speaking into microphone]

00:22

hit the limelight basically Europe claimed that Apple owed them for a

00:26

decade in change of past tax bills.. Apple had created a ton of jobs all over [Apple logo all across Europe]

00:32

Europe and had believed that it was to receive a tax waiver in return for doing

00:37

so well Europe is economically weak and you know fading fast so it is

00:41

desperately trying to cut deals with anyone who will employ its desperate

00:46

socialist masses but there's another side of the story here as well when

00:49

American domiciled corporations do business in other countries they [Plane travels to Europe from USA]

00:54

typically set up a subsidiary corporation there which exists pretty

00:58

independently that corporation has its own set of accounting books and

01:02

maintains its own definitions of profits and it is taxed independently as well so

01:07

hewlett-packard France face a 35% tax for the privilege of operating in France

01:12

it would love to wire home to its Palo Alto California offices to cash profits [Stack of money lands outside HP headquarters]

01:18

it has retained overtime from doing business in France but if it does so the

01:23

American government will tax those profits again so hewlett-packard would

01:27

turn a dollar into about 35 cents really quickly by paying tax twice once to

01:32

France and then once to the good ol US of A well why would Hewelett Packard do

01:37

that yeah wouldn't so it leaves money in France hires French workers and builds a

01:42

tech business offshore outside of America..Fair, not fair, smart politics

01:47

dumb politics smart economics you tell us...[Man looking confused]

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