New Case: Financial Policy at Apple, 2013
Again, A U.S.-based multinational corporation is merging with a foreign counterpart, with the intent to pay taxes at the other country’s lower rate. By joining forces with Ireland-based Allergan, pharmaceutical-maker Pfizer may reduce its effective tax rate from 26 percent to 17 percent. And once again, U.S. politicians are denouncing the deal as a demonstration of corporate America’s allegiance to profits above its responsibility to help pay for the government that enforces patent rights, among other beneficial services. Last year, Congress’s Joint Committee on Taxation projected that all such tax-driven mergers, known as “inversions,” would erode federal revenue to the tune of $33.6 billion over the next decade.
The case helps students to understand how the characteristics of a business are reflected in its financial statements. This case consists of an exercise in which students are given balance sheet data in percentage form and other selected financial data for companies in 14 industries. The specific task assigned to the student is to use the balance sheet data along with their basic knowledge of the operating conditions and characteristics of these 14 industries to match each industry to the correct data.
3/10/15 New Testimony: Complexity in the Tax Code
Committee on Finance, U.S. Senate, Washington DC. Video of Testimony available here.
By soliciting ideas from large groups, the U.S. can come up with the right policies to reform the nation’s tax code — similar to the way complex computer systems are managed around the world.
4/14/15 New Op-Ed, Fortune Magazine: How crowdsourcing could help simplify America’s tax code
In this interview with the Tax Foundation, Professor Desai analyzes the nature, drivers, and economic effects of profit shifting, with a specific emphasis on the real economic distortions that profit shifting may cause. Moreover, professor Desai highlights aspects related to firm uniqueness with respect to profit shifting and offers a set of possible solutions to address profit shifting.
5/12/15 New Interview, Tax Foundation: Making Sense of Profit Shifting
By the end of 2013, Apple had $137 billion dollars in cash and marketable securities. This case explores how companies can generate such large amounts of cash and how and if they should distribute it to shareholders, especially in the face of shareholder pressure. In the process, students are asked to undertake fundamental financial analyses, including ratio analysis, a financial forecast, and a cash distribution analysis.
3/7/2016 New Op-Ed, Wall Street Journal: The Trump-Obama Corporate Tax Reform Fail
Removing the incentive for American companies to move their headquarters abroad is a widely recognized goal. To do so, the U.S. will need to join the rest of the G-7 countries and tax business income only once, in the country where it was earned.
The Dublin-based Botox-maker Allergan announced early Wednesday it would abandon its mega-merger with U.S. pharmaceutical giant Pfizer after new government regulations made the tax advantage of the cross-Atlantic deal more difficult to achieve.