TAX HOLIDAY FOR REPATRIATION OF COMPANIES OVERSEAS PROFITS

Though I am for a "Tax Holiday" to repatriate foreign corporate profits with a tax, of say, 5%,  I would demand that the companies doing so be legally bound not to buy back stock for 5 yrs.  What would be the penalty if they do buy back stock?  Perhaps a tax of 50% of the dollar amount of the buyback.  Stock buybacks are wasted money and are done because companies don't know what to do with the money.  Companies are awash in money and really don't need the repatriation.  I doubt much of the money will go towards new plant and equipment or a bonus to the employees.  They could buy back debt and/or issue a special dividend, some of which may find it way into productive enterprises.  If something like this isn't done, then we would no doubt see something liked happened to the "Tax Holiday: of 2004:

In the 2004 case, 9,700 companies were eligible to take part in a tax holiday that would bring the overseas cash back at a rate of 5.25 percent, well below the 35 percent rate for profits earned abroad.

Of that group, 843 companies participated. They brought home $312 billion in qualified earnings, or about one-third of the total cash held overseas, according to the CRS. That translated into total deductions of $265 billion.

For certain industries and companies, the program worked out nicely.

Five companies — Pfizer, Merck, Hewlett-Packard, Johnson & Johnsonand IBM — accounted for 28 percent, or more than a quarter, of total repatriations. The top 15 tax holiday beneficiaries accounted for 52 percent of the total benefit.

Moreover, the pharmaceutical and medicine industry alone accounted for 32 percent of the total, and combined with the computer and electronic equipment sector to make up fully one-half of the repatriated cash.

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From 2005 to 2006, Pfizer, which repatriated $37 billion, slashed 10,000 jobs. Merck, which brought back $15.9 billion, cut 7,000 jobs, and HP pared its employment rolls by 14,500 after repatriating $14.5 billion.

Most of the money went to repairing balance sheets and rewarding shareholders, according to the CRS. According to one study cited, as much as 91 cents on the dollar went to share repurchases, even though that, along with compensation increases, was expressly prohibited by Congress.  (Empasis added).

Prohibited uses for the cash weren't easy to track because the money ended up being commingled with other corporate funds.

The study said one of the biggest faults was that the permitted uses were "overly generous" and not "explicitly linked to specific uses."

https://www.cnbc.com/2017/08/31/trumps-tax-repatriation-plan-flopped-the-last-time-it-was-tried.html