BIG TECH & TAXESThe Spotty International Tax Record of Big U.S. Technology Companies
Many big technology firms continue to book large offshore profits in low tax jurisdictions, particularly Ireland and Singapore.
There was a saying a few years back that the United States is the one country where you could “make your first million (or billion) before buying your first suit.”
Perhaps that saying should be changed to United States is “the one country where a company can get a stock market capitalization in the hundreds of billions, or even trillions, before paying much—if any—tax to the U.S. government.”
I am referring of course to Nvidia, which doesn’t appear to have paid any tax to the United States Treasury on net between 2016 and 2022.
Nvidia obviously did pay a decent amount of U.S. tax in 2023 as its profit rose and it reorganized its tax structure. Per its most recent 10-k disclosure, its intellectual property now sits in the U.S. for tax purposes and it thus pays the Foreign-Derived Intangible Income (FDII) tax on its foreign sales. It consequently now pays U.S. tax (at a relatively low rate of 13.125 percent) on its large international sales, and its 2024 tax liability should also be significant. Yet the absence of U.S. income tax payments before 2023 is also a reminder that some big U.S. companies don’t pay much (or any) tax in the United States.
To be sure, the post-Tax Cuts and Jobs Act (TCJA) landscape for the taxation of tech companies is more complicated than the landscape for big pharma. Some companies—Google/Alphabet and Facebook/Meta at end of 2019, Qualcomm and Nvidia more recently—have repatriated their previously offshored intellectual property and thus now do pay some U.S. tax on their offshore sales and profits.
However, several big companies (Apple, most prominently, but also Microsoft—as outlined in the reporting of Thomas Hubert of The Currency) and strategically important companies that control the choke points for advanced manufacturing (such as Applied Materials and Lam Research) book most of their profit abroad. The chip equipment manufacturers also appear to have offshored some production to strengthen the legal basis for booking the bulk of their profit abroad (and to get tax incentives from other governments).
There are thus two issues. Let’s call one the “Ireland” problem and the other the “Singapore” problem.
