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Big Tech $100 Billion Foreign-Profit Hoard Targeted by Tax Plan

(Bloomberg) — Technology giants led by Apple Inc. and Microsoft Corp. disclosed more than $100 billion in profit outside the U.S. in their last fiscal years, making them prime targets of President Joe Biden’s proposals to boost taxes on earnings stashed overseas.The tax proposals, unveiled this month to help foot the bill for massive infrastructure plans, target common tactics used by U.S. multinationals such as stashing income-generating assets in low-tax offshore jurisdictions. The tech industry is particularly adept at shifting profits to tax-friendly locales because its main assets — software code, patents and other intellectual property — are relatively easy to move around compared to factories and other physical assets.Former President Donald Trump’s 2017 Tax Cuts and Jobs Act was supposed to crack down on offshore tax maneuvering, but Republicans neutered the rules by adding extra deductions and other benefits, according to Andrew Silverman, a tax policy analyst at Bloomberg Intelligence.Big Tech will find it harder to dodge Biden’s plan because, if turned into law, it would close most of the loopholes left by Trump’s 2017 legislation. The move threatens to leave the industry further at odds with Washington, where lawmakers are already scrutinizing the spread of misinformation on online platforms and regulators are embarking on antitrust investigations into large tech companies.“Biden’s proposals may accomplish what the Tax Cuts and Jobs Act promised but failed to deliver: higher taxes on large U.S. technology companies,” said Silverman, who has previously advised corporations on these strategies. “For some companies there will be a huge impact.”One yardstick to estimate possible exposure, according to Silverman, is examining the regulatory filings of large U.S. tech companies such as Apple, Microsoft, Amazon.com Inc., Facebook Inc., Intel Corp. and Alphabet Inc. Those six corporations disclosed more than $100 billion in overseas pretax income in their most-recent financial years. On Thursday, the first of these companies, Intel, reports first-quarter earnings that are expected to top $4 billion.The tax plan has divided opinion among executives: Amazon Chairman Jeff Bezos says he supports higher corporate taxes, while Intel boss Pat Gelsinger criticized Biden’s plan after a recent meeting at the White House to discuss bringing semiconductor manufacturing back to the U.S. “We’re trying to step forward in a dramatic way, a decade-shaping way,” Gelsinger said. “Now is not the time to tell me I’m going to give you a buck over here and take two bucks over there.”Three specific Biden proposals have the potential to add billions of dollars to the annual tax bills of U.S. tech companies, based on the analysis of regulatory filings. All of the companies declined to comment on the proposed tax measures when contacted by Bloomberg.Global Minimum RateTrump’s 2017 U.S. tax law included a levy on global intangible low-taxed income, or Gilti, which taxes profits made in many foreign countries generated from intangible assets such as IP and software code.This targeted a common tactic among large tech companies: They transfer their IP to Bermuda or other low-tax locations, and then the companies’ subsidiaries in high-tax locations, such as France, are charged by the Bermuda entity for using the IP. This way, the “high-tax” units of the company technically make no profit and so pay very little tax.“It’s simpler to move your intangible asset than machinery,” according to Daniel Bunn, vice president of global projects at the Washington-based Tax Foundation.Biden wants to raise the Gilti tax rate to 21% from 10.5% and limit the use of foreign tax credits, according to Silverman. The Tax Foundation, a right-leaning think tank, estimates the proposed changes to Gilti could increase corporate tax bills by almost $300 billion over a decade. Much of that cost would likely fall on the tech sector.For example, Microsoft’s annual Gilti tax bill would potentially more than double to $2 billion under Biden’s proposal, Silverman estimates. In its 2020 fiscal year, Microsoft got 86% of its foreign pretax income from operations in Ireland and Puerto Rico, which have lower corporate tax rates than the U.S., according to the company’s annual report.Deduction RepealThe 2017 tax law also offered a tax deduction for foreign derived intangible income, or FDII. It was designed to encourage American companies to keep intangible assets, such as IP, in the U.S. or bring these assets home from overseas. Alphabet did just that at the end of 2019 when it started licensing IP in the U.S. that had been previously licensed in Bermuda. Facebook made a similar change.Now, Biden is proposing to repeal FDII, which would likely increase the tax bills of tech companies, according to Bunn. Amazon took total FDII deductions of almost $500 million combined in 2018, 2019 and 2020, according to its latest annual report. “You might see some companies rethink holding in intellectual property in the U.S. if this tax break goes away,” said Bunn.Minimum Book TaxFinally, there’s a proposal in Biden’s plan to introduce a 15% “minimum book tax” on large corporations that report high profits, but have little taxable income. Big U.S. tech companies often have low effective tax rates due to a slew of available deductions for items including research and development, foreign credits and stock-based compensation.“The biggest impact for tech companies is this minimum tax on book income,” said Bunn. “This would likely hit some companies much harder than the current tax system.”If Biden’s book tax existed in 2020, Google’s bill would’ve been $847 million higher. Amazon would’ve owed an additional $1.2 billion and Apple another $3.8 billion, according to Silverman’s estimates.Tech companies are also facing scrutiny from outside the U.S. Global talks, led by the Organization for Economic Cooperation and Development, are trying to address many countries’ concerns that tech giants — and other multinationals — aren’t being properly taxed under the current system. The OECD effort seeks to replace the digital services taxes a growing number of countries are enacting to capture more revenue from companies like Google and Facebook. However, Amazon, which would likely escape the new rules as its margins are so thin, is becoming a roadblock in those negotiations.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.

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Facebook-Meta Earns the ‘Worst Company of 2021’ Title in This Survey

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Facebook has had its share of controversies this year. The company was under more scrutiny after whistleblower Frances Haugen leaked a series of internal documents.

Facebook parent Meta has been named the Worst Company of the Year (2021) by Yahoo Finance respondents. According to the publication, an “open-ended” survey was published on Yahoo Finance on December 4 and 5, where 1,541 respondents participated. Facebook received 8 percent of the write-in vote, but respondents were seemingly mad about the Robinhood trading app as well. Electric truck startup Nikola, which was named last year’s worst company by the same publication also faced respondents ire.

Yahoo Finance notes, “Facebook has had its share of controversies this year.” Starting in January, Meta-owned WhatsApp got caught up in a huge controversy after the messaging app announced a new privacy policy (Terms of Service). WhatsApp said it would collect user information and share it with third-party apps for a better user experience. However, the app gave users no choice but later made modifications to the policy under pressure. Similarly, the company was under more scrutiny after whistleblower and former Facebook employee Frances Haugen leaked a series of internal documents showing the company’s problematic practices. It was revealed that Meta-owned Instagram had a negative impact on teenage girls, but the company did almost nothing to rectify the problem.

Yahoo Finance even highlights, “At the same time, some critics, including conservatives, say Facebook over-policed the platform’s speech and stifled their voices.” Critics also blame Facebook and other social media platforms for not curbing hate speech that led to Capitol Building riots.

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However, around 30 percent of Yahoo Finance readers said that Facebook or Meta could redeem itself. One respondent suggested that the company could issue a formal apology for negligence and donate a sizable amount of its profits to a foundation to help reverse its harm.

On the other hand, respondents chose Microsoft as the Company of the Year (2021). The Satya Nadella-led company touched the trillion-mark this year and introduced notable upgrades. The most notable is the Windows 11 OS update that succeeds Windows 10.

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Facebook pays 1.7 Cr fine to Russia after failing to delete content Moscow deems illegal

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In the latest legal tussle with Russia over controversial social media regulation laws, Facebook paid 17 million roubles (Rs 1.7 Crore) for failing to remove content deemed illegal by Moscow. With a threat of potential larger fines looming, Facebook parent company Meta, owned by Mark Zuckerberg, is scheduled to face court next week over repeated violations of Russian legislation on content, Interfax News Agency reported. As per the latest updates, the social media giant could be fined a percentage of its annual revenue.

In October, Moscow sent state bailiffs to enforce the collection of 17 million roubles. Meanwhile, as per Interfax report citing a federal bailiffs’ database, on Sunday, there were more enforcement proceedings against the company. Apart from the popular social media app, Telegram has also paid 15 million roubles in fines for failing to comply with the Russian social media legislations that came into force in 2016.

Facebook pays $53k to Russia for refusing controversial social media laws

It is pertinent to mention that Facebook has locked horns with Moscow earlier in November, resulting in it paying 4 million roubles ($53,000) over its refusal to adhere to Russian data localisation laws, the Moscow Times reported. The Moscow court on November 25 had said that Facebook paid the fine levied in February, following which all proceedings against the US-based social media giant. The payment comes against the litigation filed against the company in 2018, alongside Twitter. The tech companies were also forced to pay an additional 3000 rubles ($40) for failing to comply with user data sharing rules as per the law. The Russian authorities have also previously blocked LinkedIn, owned by Microsoft, for failing to abide by the laws.

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Russian social media laws

As per Moscow Times, under the Russian social media regulation laws, all foreign technology companies are required to store data related to Russian customers and users on servers located in Russia. Additionally, the Russian tech companies will also have to share encryption data with the federal authorities as well as record user calls, messages and civil society group conversation records. The apparatus is said to be a severe breach of privacy rights and unfettered back-door access to personal data that could be used to harass Kremlin critics.

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Facebook Messenger Is Launching a Split Payments Feature for Users to Quickly Share Expenses

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Facebook Messenger Is Launching a Split Payments Feature for Users to Quickly Share Expenses

Meta has announced the arrival of a new Split Payments feature in Facebook Messenger. This feature, as the name suggests, will let you calculate and split expenses with others right from Facebook Messenger. This feature essentially looks to bring an easier method to share the cost of bills and expenses — for example, splitting a dinner bill with friends. Using this new Split Payment feature, Facebook Messenger users will be able to split bills evenly or modify the contribution for each individual, including their own.

The company took to its blog post to announce the new Split Payment feature in Facebook Messenger. 9to5Mac reports that this new bill splitting feature is still in beta and will be exclusive to US users at first. The rollout will begin early next week. As mentioned, it will help users share the cost of bills, expenses, and payments. This feature is especially useful for those who share an apartment and need to split the monthly rent and other expenses with their mates. It could also come handy at a group dinner with many people.

With Split Payments, users can add the number of people the expense needs to be divided with and, by default, the amount entered will be divided in equal parts. A user can also modify each person’s contribution including their own. To use Split Payments, click the Get Started button in a group chat or the Payments Hub in Messenger. Users can modify the contribution in the Split Payments option and send a notification to all the users who need to make payments. After entering a personalised message and confirming your Facebook Pay details, the request will be sent and viewable in the group chat thread.

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Once someone has made the payment, you can mark their transaction as ‘completed’. The Split Payment feature will automatically take into account your share as well and calculate the amount owed accordingly.


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Tasneem Akolawala is a Senior Reporter for Gadgets 360. Her reporting expertise encompasses smartphones, wearables, apps, social media, and the overall tech industry. She reports out of Mumbai, and also writes about the ups and downs in the Indian telecom sector. Tasneem can be reached on Twitter at @MuteRiot, and leads, tips, and releases can be sent to tasneema@ndtv.com.

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