cawacko
Well-known member
Obama wants to more aggressively go after offshoring profits. The Silicon Valley and the high tech space has a definitive leftward political lean to it. This area was huge fans of Bill Clinton as his administration worked with the tech industry in attempting to help open and expand overseas markets.
Now because a group (or individual) votes for, supports and donates money to someone doesn't always mean they will agree on all issues. Even with its leftward political lean the tech industry in the Silicon Valley has always had kind of a 'leave us alone' attitude towards Washington D.C. Now that the politicians want to get more involved in the tech space these tech companies are having to get more politically involved themselves.
Probably not surprisingly I'm with these tech guys and think Obama is missing the big picture here and the unintended consequences of his proposed tax actions will have a far bigger negative effect upon the tech industry.
Obama riles high-tech exec over outsourcing
Carl Guardino usually comes across as an amenable, mild-mannered Silicon Valley executive. But not on Monday. Not when he watched President Obama promising to end overseas tax breaks for U.S. companies that "create a job in Bangalore, India, (rather than) one in Buffalo, N.Y." Guardino, CEO of the Silicon Valley Leadership Group, angrily described Obama's language as "not only discouraging, but divisive." The president's implication that companies such as Cisco Systems and Hewlett-Packard merely "ship jobs overseas," and are being rewarded in the bargain, came as a shock to Guardino, who otherwise described the president as "brilliant and respected by so many in the tech sector who are counting on the administration as their ally."
Indeed, Obama's proposal to limit U.S. companies' ability to defer paying U.S. taxes on offshore earnings does put Bay Area companies doing a lot of business overseas directly in the crosshairs. "It would adversely impact our ability to invest and grow our business in the (United States) and to compete against our foreign competitors," said a spokesman for Cisco.
Google, whose CEO, Eric Schmidt, is supposed to be a close buddy of Obama's, said it is "too early to evaluate the potential effect on Google's operations, as there will likely be multiple proposals considered."
High stakes: Now, to put things in perspective, Cisco, Google and others have done very well by the current setup. Cisco, which had north of $30 billion in cash at last count, earned $5.6 billion overseas in 2008. By deferring taxes on those earnings, it enjoyed a 16 percent reduction in its U.S. tax rate, according to a Wall Street Journal analysis of SEC filings. Google got a 17.4 percent break thanks to tax deferrals on $7.7 billion of overseas earnings. HP, which reported a net profit of $1.8 billion in its last quarter, can defer taxes on $12.9 billion worth of foreign earnings, which it plans to reinvest overseas indefinitely, according to an SEC filing reported by the San Jose Mercury News.
So, doth Guardino et. al. protest too much? Not according to Atulya Sarin, a professor of finance at Santa Clara University. "It's a bad idea from the word go," said Sarin, who has consulted with the Internal Revenue Service and with Fortune 100 companies on international tax issues. "Increasing these taxes will reduce after-tax profits, which will reduce incentives. Right now, the administration should be helping Silicon Valley maintain its competitive edge, not making it less so. I hope saner minds will prevail."
Sang Kim, an international tax attorney at DLA Piper in East Palo Alto, decried Obama's Bangalore-Buffalo reference as "patently unfair and false." While he said the proposals were enticing, given the administration's drive to stimulate the domestic economy and raise more tax revenue, he warned of unintended consequences, including the possibility that more, not fewer, jobs could be shipped overseas. "Let's hope everyone thinks this through," he said.
That's the message Guardino and his 50-strong delegation of Silicon Valley executives - who just happen to be in Washington, D.C. - will be taking to their hometown representatives today. How much joy they get remains to be seen. In a statement, House Speaker Nancy Pelosi said she "welcome(s) the strong initiative outlined by President Obama that will restore fairness to the tax code by closing international tax loopholes." Pelosi said, "I look forward to working with the president and members of Congress to advance these proposals and close these loopholes." In the past, Sen. Barbara Boxer has pointed out there is "a great deal of misunderstanding surrounding these tax issues," said her senior adviser, Natalie Ravitz. Boxer also wants to be sure that any changes "do not result in unintended consequences," Ravitz said.
"This may not be Mount Everest, but it's going to be quite a climb," said Guardino, who is also due to meet with White House officials today. "They're smart people and doing their best. But clearly they see the world a little differently than Silicon Valley."
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/05/BUF817D164.DTL
Now because a group (or individual) votes for, supports and donates money to someone doesn't always mean they will agree on all issues. Even with its leftward political lean the tech industry in the Silicon Valley has always had kind of a 'leave us alone' attitude towards Washington D.C. Now that the politicians want to get more involved in the tech space these tech companies are having to get more politically involved themselves.
Probably not surprisingly I'm with these tech guys and think Obama is missing the big picture here and the unintended consequences of his proposed tax actions will have a far bigger negative effect upon the tech industry.
Obama riles high-tech exec over outsourcing
Carl Guardino usually comes across as an amenable, mild-mannered Silicon Valley executive. But not on Monday. Not when he watched President Obama promising to end overseas tax breaks for U.S. companies that "create a job in Bangalore, India, (rather than) one in Buffalo, N.Y." Guardino, CEO of the Silicon Valley Leadership Group, angrily described Obama's language as "not only discouraging, but divisive." The president's implication that companies such as Cisco Systems and Hewlett-Packard merely "ship jobs overseas," and are being rewarded in the bargain, came as a shock to Guardino, who otherwise described the president as "brilliant and respected by so many in the tech sector who are counting on the administration as their ally."
Indeed, Obama's proposal to limit U.S. companies' ability to defer paying U.S. taxes on offshore earnings does put Bay Area companies doing a lot of business overseas directly in the crosshairs. "It would adversely impact our ability to invest and grow our business in the (United States) and to compete against our foreign competitors," said a spokesman for Cisco.
Google, whose CEO, Eric Schmidt, is supposed to be a close buddy of Obama's, said it is "too early to evaluate the potential effect on Google's operations, as there will likely be multiple proposals considered."
High stakes: Now, to put things in perspective, Cisco, Google and others have done very well by the current setup. Cisco, which had north of $30 billion in cash at last count, earned $5.6 billion overseas in 2008. By deferring taxes on those earnings, it enjoyed a 16 percent reduction in its U.S. tax rate, according to a Wall Street Journal analysis of SEC filings. Google got a 17.4 percent break thanks to tax deferrals on $7.7 billion of overseas earnings. HP, which reported a net profit of $1.8 billion in its last quarter, can defer taxes on $12.9 billion worth of foreign earnings, which it plans to reinvest overseas indefinitely, according to an SEC filing reported by the San Jose Mercury News.
So, doth Guardino et. al. protest too much? Not according to Atulya Sarin, a professor of finance at Santa Clara University. "It's a bad idea from the word go," said Sarin, who has consulted with the Internal Revenue Service and with Fortune 100 companies on international tax issues. "Increasing these taxes will reduce after-tax profits, which will reduce incentives. Right now, the administration should be helping Silicon Valley maintain its competitive edge, not making it less so. I hope saner minds will prevail."
Sang Kim, an international tax attorney at DLA Piper in East Palo Alto, decried Obama's Bangalore-Buffalo reference as "patently unfair and false." While he said the proposals were enticing, given the administration's drive to stimulate the domestic economy and raise more tax revenue, he warned of unintended consequences, including the possibility that more, not fewer, jobs could be shipped overseas. "Let's hope everyone thinks this through," he said.
That's the message Guardino and his 50-strong delegation of Silicon Valley executives - who just happen to be in Washington, D.C. - will be taking to their hometown representatives today. How much joy they get remains to be seen. In a statement, House Speaker Nancy Pelosi said she "welcome(s) the strong initiative outlined by President Obama that will restore fairness to the tax code by closing international tax loopholes." Pelosi said, "I look forward to working with the president and members of Congress to advance these proposals and close these loopholes." In the past, Sen. Barbara Boxer has pointed out there is "a great deal of misunderstanding surrounding these tax issues," said her senior adviser, Natalie Ravitz. Boxer also wants to be sure that any changes "do not result in unintended consequences," Ravitz said.
"This may not be Mount Everest, but it's going to be quite a climb," said Guardino, who is also due to meet with White House officials today. "They're smart people and doing their best. But clearly they see the world a little differently than Silicon Valley."
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/05/05/BUF817D164.DTL
