A repatriation tax holiday is a

tax holiday A tax holiday is a temporary reduction or elimination of a tax. It is synonymous with tax abatement, tax subsidy or tax reduction. Governments usually create tax holidays as incentives for business investment. Tax relief can be provided in the ...

specifically directed towards individuals and businesses in one country who repatriate to that country

income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. For ...

earned in other countries. The theory supporting such an action is that

multinational companies A multinational company (MNC), also referred to as a multinational enterprise (MNE), a transnational enterprise (TNE), a transnational corporation (TNC), an international corporation or a stateless corporation with subtle but contrasting senses, i ...

headquartered in one country, but which earn income in a second country will be unlikely to bring income from the second country back to their home country if high

taxes A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity) by a governmental organization in order to fund government spending and various public expenditures (regional, local, or n ...

will be assessed on this income when it is brought back. By allowing those companies to bring income back to the home country at a reduced tax rate, money will be injected into the economy of the home country that otherwise would remain in the second country. In 2004, the

United States Congress The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washin ...

enacted such a tax holiday for U.S. multinational companies in the

American Jobs Creation Act of 2004 The American Jobs Creation Act of 2004 () was a federal tax act that repealed the export tax incentive (ETI), which had been declared illegal by the World Trade Organization several times and sparked retaliatory tariffs by the European Union. It ...

(AJCA)) section 965, allowing them to repatriate foreign profits to the United States at a 5.25% tax rate, rather than the existing 35% corporate tax rate.Martin A. Sullivan, ''Corporate Tax Reform: Taxing Profits in the 21st Century'', p. 83, . Under this law, corporations brought $362 billion into the American economy, primarily for the purposes of paying

dividend A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a portion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-in ...

s to investors,

repurchasing shares Share repurchase, also known as share buyback or stock buyback, is the re-acquisition by a company of its own shares. It represents an alternate and more flexible way (relative to dividends) of returning money to shareholders. When used in coord ...

, and purchasing other corporations. The largest multi-national companies,

Apple Inc. Apple Inc. is an American multinational technology company headquartered in Cupertino, California, United States. Apple is the largest technology company by revenue (totaling in 2021) and, as of June 2022, is the world's biggest company b ...

, Microsoft Corp.,

Alphabet Inc. Alphabet Inc. is an American multinational technology conglomerate holding company headquartered in Mountain View, California. It was created through a restructuring of Google on October 2, 2015, and became the parent company of Google and se ...

, Cisco Systems Inc., and Oracle Corp., recalled only 9% of their cash possessions following the 2004 act. In 2011, Senate Democrats, arguing against another repatriation tax holiday, issued a report asserting that the previous effort had actually cost the

United States Treasury The Department of the Treasury (USDT) is the national treasury and finance department of the federal government of the United States, where it serves as an executive department. The department oversees the Bureau of Engraving and Printing and ...

$3.3 billion, and that companies receiving the tax breaks had thereafter cut over 20,000 jobs.Kristina Peterson,
Report: Repatriation Tax Holiday a 'Failed' Policy
, '' Wall Street Journal'' (October 10, 2011). A second repatriation tax holiday was defeated in the

United States Senate The United States Senate is the upper chamber of the United States Congress, with the House of Representatives being the lower chamber. Together they compose the national bicameral legislature of the United States. The composition and power ...

in 2009.

References

Tax policy {{tax-stub

See also

References