Why do so many firms have so much of their cash balance overseas? Is this a problem? Why or why not? If it is a problem, for whom is it one?
U.S. multi nationals often leave foreign profits overseas to avoid U.S. taxes. Should those profits and cash flows be identified by firms? Since these are “permanently reinvested” overseas, would you change your opinion of the firm’s value? Why or why not?
Do managers of firms have a fiduciary responsibility to shareholders to minimize the tax burden? Why or why not? Do you agree with Senator Levin that the tax avoidance efforts of Microsoft and other firms are “shenanigans”? If so, who is to blame, the firm or those who write tax law?
Why does Usain Bolt not want to run in England? How do tax rates affect the allocation decisions of financial capital? Of human capital?
Do tax rates affect individuals’ behavior? Corporate behavior? Can you make a case at all that these companies who are leaving the U.S., such as Eaton, should stay in the U.S. and pay more in taxes?
If Apple repatriates the foreign earnings, who are the “winners” and who are the “losers”? If you were the CEO or CFO of Apple, to whom would you have the fiduciary responsibility? Would you repatriate the profit and pay the tax, or leave it overseas?
FIN 48 requires firms to accrue a liability for tax positions (such as deductions, timing of tax payments, etc.) that stand a “50/50 chance” of not being upheld on an audit. Why do firms “revile” the rule? Why did the FAF get involved in the review? How would you challenge the FAF’s conclusion that the information is useful for investors?
Here is Apple’s response to the below article about Apple’s taxation. Maybe this will help you think about your answers to the below questions.
Did Apple do anything “wrong” by “sidestepping” taxes? Regardless, should anything be changed with respect to taxation, and if so, why? And what exactly?
If cash taxes paid are already disclosed by firms, what additional benefit for investors and other interested parties would there be in requiring firms to disclose to whom they paid the tax?
