Paul L. Caron

Thursday, January 2, 2020

NY Times: Why The Impact Of The Trump Taxes Remains Partly Hidden — The GILTI Silence

New York Times, Why the Impact of the Trump Taxes Remains Partly Hidden:

New taxes should be a big expense for many companies. But they have found a way around disclosing it in annual reports.

Armed with legions of lobbyists, companies have been pushing hard — and successfully — to weaken new federal taxes that take aim at overseas tax havens.

Many of them have managed to avoid publicly disclosing how much they owe under the new taxes. Without such figures, it becomes virtually impossible for outsiders to work out how much companies are saving from the watered down tax rules.

In theory, this opacity should not exist. United States securities regulations have long required public companies to disclose even relatively minor tax expenses. Over the past year, this requirement has led to a small number of companies revealing the effect of the new taxes on overseas income.

Yet many others — including some longtime users of tax havens — appear to have found ways around disclosing how the overseas taxes will affect them. ...

Understanding the GILTI silence
The lack of disclosure may be masking the financial impact of how the Trump administration is writing rules governing how the 2017 tax package is enacted. Under pressure from corporate lobbyists, the Treasury Department has allowed multinational companies to partly or completely avoid taxes on certain overseas income.

Tax experts told The New York Times that the impact of those weakened rules, while hard to measure precisely, is likely to exceed $100 billion.

The companies’ silence about what they actually are paying under the GILTI makes it hard to quantify the true costs of the Treasury’s rules.

It’s possible that some companies did not reveal how much the GILTI tax was costing them because, after accounting for tax credits and other factors, the amount fell below the 5 percent threshold. Microsoft said that was the case with its GILTI tax in its 2019 fiscal year.

But other companies appear to have bundled GILTI together with other tax expenses and benefits in a way that makes the cost invisible. Facebook, for example, quantifies “the effect of non-U. S. operations” on its overall tax liability. And Apple provides a number for its taxes on “earnings of foreign subsidiaries.”

The cost of the GILTI tax is most likely lumped into those categories, tax experts said. Over the years, they say, corporate auditors — who have to review and sign off on companies’ financial disclosures — have adopted a loose reading of the tax-disclosure rule, enabling companies to combine items that are not directly related.

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So GILTI isn’t working, but it is? An interesting analysis.

Posted by: Mike Livingston | Jan 4, 2020 2:32:58 AM