Import Manufacturers and Taxes

[ryansride2017]

Set the record straight on this: For years I have heard redneck die-hard domestic folk talk about how you always want to buy domestic vehicles because import manufacturers don't pay American taxes on vehicles sold here. Is this true? I have to believe Toyota pays American taxes on profits from its U.S. operations. I understand tariffs do exist in some countries with imported American cars but what about the tax issue? Please don't comment on this thread if you don't know for a fact who pays what in taxes. I just want to know the truth.

 

[bepperb]

Toyota is a publicly traded company on the NYSE, symbol TM, when they pay a dividend to a US stockholder that person then pays taxes. So yes, profits -> dividends, dividends = taxes.

On the flip side, a lot of profits could also go the parent company. Further, most of the taxes a company pays are payroll and Toyota doesn't have nearly as many white collar employees as Ford or GM.

But then, the suppliers for Toyota probably have a lot to do with it...

This might also help, this would be only for their US operations:

http://finance.yahoo.com/q/is?s=TM+Income+Statement&annual

 

[The_Jeff]

As a creative aside, think about how, say, a 1970s Corvette created US jobs, when it was first built, and now, when it's rebuilt.

Toyota made some enthusiast cars, eg the Supra, that may be loved well enough to do a many-weeks-worth-of-labor frame-off restore, but that fizzled out in the early 1990s. The small number of freaks redoing 1970's imports probably match the nerds making hot rod Vegas and Mustang IIs.

OTOH think about how many US gas station attendants have been laid off since the Prius came out.

Think the whole life cycle over... until you find figures you agree with.

While people moan about million dollar muscle cars being exported overseas to some sheik... the value added to bring that million dollars was on our shores.

And to partially answer your question, look up "chicken tax" and the 25% vs 2.5% tarriff rate on imported trucks vs cars. And how Toyota made truck boxes in the states to stick on "incomplete vehicles", and how Ford trashes passenger seats on new Transit vans. Of course there are much more than tarriffs to count towards taxes, the aforementioned payroll taxes are probably pretty big.

 

[GROUCHO MARX]

When I worked for a wholly owned subsidiary of a foreign corporation, there was a 5% tax on any money that was repatriated to that corporation. That included interest on loans that the parent company made to the sub.

And yes, the payroll taxes were big and they employed thousands here in the U.S.

It's a very complicated world in which we live.

 

[ryansride2017]

To the point and as simply as I can express it, does a foreign car company pay American taxes on the profits from a car that I may purchase from them?

 

[LS2JSTS]

As long as it is understood that the question you are suggesting is a mere sliver of the entire tax picture...then yes they do. That is if they made a profit at all in that region. If a loss was declared they may in fact benefit from tax offsets for years into the future.

The answer to the question you ask is far more complicated than a simple yes or no will allow. But a profitable foreign owned transplant does pay taxes on declared profits within a given fiscal year. Now what they declare as profits and what they reinvest, and where those revenue streams end up is another discussion.

 

[ryansride2017]

Originally Posted By: LS2JSTS
As long as it is understood that the question you are suggesting is a mere sliver of the entire tax picture...then yes they do. That is if they made a profit at all in that region. If a loss was declared they may in fact benefit from tax offsets for years into the future. The answer to the question you ask is far more complicated than a simple yes or no will allow. But a profitable foreign owned transplant does pay taxes on declared profits within a given fiscal year. Now what they declare as profits and what they reinvest, and where those revenue streams end up is another discussion.


But can't G.M. and Ford take advantage of the same tax loophole that you state in your 1st paragraph? Well then maybe this will clear my head up: What American taxes do Chevrolet and Ford pay that Toyota and Honda don't because they are foreign manufacturers? I'm just trying "cut threw the red tape" and find out exactly, and truthfully, what American taxes or tax incentives Toyota and Honda supposedly sidestep.

 

[chubbs1]

Originally Posted By: ryansride2017
To the point and as simply as I can express it, does a foreign car company pay American taxes on the profits from a car that I may purchase from them?


Simply put, Absolutely

 

[HTSS_TR]

Originally Posted By: chubbs1
Originally Posted By: ryansride2017
To the point and as simply as I can express it, does a foreign car company pay American taxes on the profits from a car that I may purchase from them?


Simply put, Absolutely

True, if they have a profit they will pay tax, if they have a lost for the year they will not pay tax and they get a tax credit just like GM or Ford.

 

[PandaBear]

This is America, tax loop holes are everywhere.

1st, pay roll taxes are to be paid wherever the employees are at, so that should tell you if you look at the US components content (since the most expensive costs are usually labor added onto the components' material and processes).

Then the US sales profit, that'll depends on how much the profit is allocated to the US operation vs foreign if you import the whole car or just some part of the car as components. This is where many manufactures' play games to mark up the cost imported so the profit is higher in the US or foreign countries, depends on the tax rate. My understanding is Japan has a higher tax rate for income than US, so it is more likely that they'll keep the profit portion in the US higher than the Japanese HQ.

Then you have to look at which layer of the company is controlling its subsidiaries. Company as big as auto manufactures with international presence will for sure have many subsidiaries so they don't fold and collapse for liability reasons, even if it means they pay more taxes as a trade off (until one of our former president said it is unfair and knock it off and give that limited liability a free ride). Even if it means the HQ is publicly traded in the US, if the subsidiaries is in the Japan and the major profit is made over there, the income tax will be paid there rather than the US, unless they cash out and move the $ up to the HQ and pay one extra layer of tax (or not) as dividend.

Finally, there's tax treaty, incentives, tariff, local tax waiver deals to consider and when it is all ended, only the lawyers and accountants know how much each company is paying in tax per car.

 

[The_Jeff]

Remember the old taurus plant in Atlanta could throw together a taurus, from subassemblys, in 24 man-hours. The subassemblies, wherever they were made, benefitted those economies of course.

So the Atlanta economy saw the benefits of about half a paycheck per car output. Plus the health care, as the Ford employees probably had a better deal than their spouses. And the spouses and their employers got to keep their shares of their conceivable health insurance allowance they would have spent had Ford not been so generous.

When you spend a dollar in your economy it travels until its all gobbled up by taxes. So you can assume a paycheck eventually gets "used up", probably mostly locally. If there are a few more white collar guys in the Detroit Three, that's more money on these shores unless they take a Carribean vacation or buy a yacht overseas. (But yacht luxury taxes, flags of convenience etc are an interesting subject unto themselves.)

 

[rshaw125]

The best for the US is buy a car that is made here with the majority of the parts made in the US. That employees the most US tax payers. So they can pay Federal,State and payroll taxes. Then spend what's left locally.

 

[CivicFan]

Originally Posted By: eljefino
Remember the old taurus plant in Atlanta could throw together a taurus, from subassemblys, in 24 man-hours. The subassemblies, wherever they were made, benefitted those economies of course.

So the Atlanta economy saw the benefits of about half a paycheck per car output. Plus the health care, as the Ford employees probably had a better deal than their spouses. And the spouses and their employers got to keep their shares of their conceivable health insurance allowance they would have spent had Ford not been so generous.

When you spend a dollar in your economy it travels until its all gobbled up by taxes. So you can assume a paycheck eventually gets "used up", probably mostly locally. If there are a few more white collar guys in the Detroit Three, that's more money on these shores unless they take a Carribean vacation or buy a yacht overseas. (But yacht luxury taxes, flags of convenience etc are an interesting subject unto themselves.)


the economists call it a 'multiplier effect'. As far as I remember, it's a factor of 6. That's why stimulus plans are a useful tool in recessions - every dollar that is borrowed and spent in an economic area generates $6 of economic activity. Basically, you take money out of thin air and end up with an extra $5 minus the interest on the borrowed amount.

That's why fiscal and monetary policies used by governments are a fascinating study and that's why the latest discussion about 'spending cuts' and 'deficit reduction' are inadequate (or stupid if one wants to be blunt).

 

[Win]

I don't know the direct answer to the OP's question, but US corporate income tax rates are high.

My gut is that a foreign national company locating a subsidiary here is probably figuring they have a way out of paying them, OR, the horrendous state/local give aways, subsidies, incentives, tax forgiveness, etc., are enough to make them locate here in spite of the federal income tax.

It's naive to just look at income taxes and think you are seeing the entire picture.

 

[LS2JSTS]

Originally Posted By: Win


It's naive to just look at income taxes and think you are seeing the entire picture.


Agreed.

Especially when only corporate income tax is included in the discussion. Without also looking at the payroll taxes that the company generates through domestic employment numbers, one can only scratch the surface.

Even Corporate taxes are very hard to nail down because so many expenses can be written off against the overall revenues for a given year. Where those expenses, such as R&D and the engineering behind the car take place, matter as well. A corporations cash revenue streams and where they get spent are important to the local economy and as mentioned the payroll numbers have an exponential benefit to a local economy.

 

[PandaBear]

Originally Posted By: eljefino
Remember the old taurus plant in Atlanta could throw together a taurus, from subassemblys, in 24 man-hours. The subassemblies, wherever they were made, benefitted those economies of course.


The problem is, its competitors could throw together a camry or accord in 15 man hours or so.

Usually subassemblies are build near the main assembly to reduce cost, inventory, and overhead, unless the transportation cost is significantly lower than the production labor cost, this rule applies.

R&D on the other hand, tends to be more skill specific and that's where companies build their research center near existing tech hubs, universities, or former research center for similar industries (i.e. how most high tech hub in California are near former military air base). Sometimes you see government give incentives to move a tech center to a particular location, but that's usually low end tech center for testing, process, rather than engine design or top secret projects.

Originally Posted By: CivicFan
the economists call it a 'multiplier effect'. As far as I remember, it's a factor of 6. That's why stimulus plans are a useful tool in recessions - every dollar that is borrowed and spent in an economic area generates $6 of economic activity.


That depends on who you give it to. Common consensus is that the lower income the recipients, the higher the multiplier because they won't just stash it away but they need to spend it due to financial hardship.

 

[LS2JSTS]

There is pretty much parity when it comes to efficiency and man hours per vehicle in todays market...

"Downsizing and productivity gains made through lean manufacturing and increased automation
by the Detroit 3 were spurred primarily by increased foreign competition in the North American
market. The annual Harbour Report on manufacturing productivity reported that the gap
between the six major North American automakers continues to narrow. The Detroit 3 have
made tremendous gains in improving productivity in terms of hours per vehicle assembly time.
Chrysler jumped from last place in 2003 to second place in 2007 (latest available). GM passed
Toyota at 22.19 hours per vehicle, vs. Toyota’s 22.35 hour per vehicle."

http://trade.gov/static/Motor Vehicles Industry Assessment 2010 rev5.pdf

 

[Tempest]

Originally Posted By: CivicFan

the economists call it a 'multiplier effect'. As far as I remember, it's a factor of 6. That's why stimulus plans are a useful tool in recessions - every dollar that is borrowed and spent in an economic area generates $6 of economic activity. Basically, you take money out of thin air and end up with an extra $5 minus the interest on the borrowed amount.

That's why fiscal and monetary policies used by governments are a fascinating study and that's why the latest discussion about 'spending cuts' and 'deficit reduction' are inadequate (or stupid if one wants to be blunt).

I suggest you look at the unemployment rate over the last 2 years as a check to see how well that works.

Hint: It doesn't. I also suggest you look at Zimbabwe to see how well money taken out of "thin air" works. Hint: It doesn't. You will find NO example in history where people have spent and printed their way out of debt and to long term prosperity.
So spending cuts and deficit reduction are in fact THE issue for long term stability. Are you intentionally ignoring Europe?? Notice the fires and near daily riots?

I heard some people say that unemployment benefits are the best way to create jobs, and that there is a ~1.6 "multiplier". If this is the case, then everyone should get fired and GDP should jump by 60% every year. It's amazing what people will believe.

 

[Gary Allan]

Yeah ..you're righ6t, it's the same horse manure as tax cuts. Just give people an exemption from bills ..throw it on the nation's credit card ..have them blow it on various non-durable trinkets ..let the financiers and moneychangers take their cut ..send 35-50% offshore ..

lather ..rinse ..repeat ...

 

[Torino]

Originally Posted By: Tempest
Originally Posted By: CivicFan

the economists call it a 'multiplier effect'. As far as I remember, it's a factor of 6. That's why stimulus plans are a useful tool in recessions - every dollar that is borrowed and spent in an economic area generates $6 of economic activity. Basically, you take money out of thin air and end up with an extra $5 minus the interest on the borrowed amount.

That's why fiscal and monetary policies used by governments are a fascinating study and that's why the latest discussion about 'spending cuts' and 'deficit reduction' are inadequate (or stupid if one wants to be blunt).

I suggest you look at the unemployment rate over the last 2 years as a check to see how well that works.

Hint: It doesn't. I also suggest you look at Zimbabwe to see how well money taken out of "thin air" works. Hint: It doesn't. You will find NO example in history where people have spent and printed their way out of debt and to long term prosperity.
So spending cuts and deficit reduction are in fact THE issue for long term stability. Are you intentionally ignoring Europe?? Notice the fires and near daily riots?

I heard some people say that unemployment benefits are the best way to create jobs, and that there is a ~1.6 "multiplier". If this is the case, then everyone should get fired and GDP should jump by 60% every year. It's amazing what people will believe.
Tempest, I think you've 'GOT IT'. John--Las Vegas.