A Third Of Cash Is Held By 5 US Tech Companies (siliconbeat.com)

An anonymous reader writes: Moody's Investors Service released an analysis Friday that shows Apple, Microsoft, Alphabet, Cisco Systems, and Oracle are sitting on $504 billion, which is roughly 30% of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015. Almost all of their earnings ($1.2 trillion) are stashed overseas in an effort to avoid paying taxes on moving profits back to the U.S. under the country's complex tax code. Apple has more than 90 percent of its money located outside of the U.S., according to its most recent filings. Moody's said in its report that "we expect that overseas cash balances will continue to grow unless tax laws are changed to encourage companies to repatriate money." Some of the other tech and Silicon Valley companies in the top 50 include Intel, Gilead Sciences, Facebook, Amazon, Qualcomm, eBay, Hewlett-Packard and Yahoo.

Comments

Remember where the responsibility is

[PrimeWaveZ]

The responsibility it to the shareholder, no the government.

Re:Remember where the responsibility is

[Carewolf]

The responsibility it to the shareholder, no the government.

Here I thought the responsibility of the tax code was to the voters.

Re:Remember where the responsibility is

[Sarten-X]

No, the responsibility is to the corporation's charter, which may or may not indicate any responsibility to shareholders.

Re:Remember where the responsibility is

[ScentCone]

Yes, and the responsibility of the government should be to its citizens, not corporations.

Because, of course, the people who form a business and incorporate it ... they're couldn't possibly be citizens. And the teachers, welders, farmers, retirees and everyone else who decide to invest some money in a publicly traded company, no chance those are citizens. Nope. The companies are all owned and run by non-human invisible evil ghost people, or AI machines in the basement.

Re:Remember where the responsibility is

[Opportunist]

So, essentially, government AND businesses should only be concerned with those that can invest money. Anyone else simply doesn't count.

Re:Remember where the responsibility is

[ScentCone]

What's with the false dichotomy? Are you really unable to imagine a government that isn't hostile to people who start businesses, and isn't hostile to the investments your mom makes for her retirement? Can you only imagine that it's either that, or a confiscatory socialist utopia that finally doles enough stuff out to the little people ... and nobody will worry about where that money is supposed to come from?

Re:Remember where the responsibility is

[Sarten-X]

My point is that the actual laws dictating an executive's responsibilities rarely care at all about the shareholders. Rather, they usually only require that the company follow its charter, and it's that charter that defines the goals, and that's usually done vaguely.

In Apple's case, I don't see any definition of what the shareholders' interests are. It has been upheld in court that such a term can be construed to mean many things beside the often-assumed short-term profit goal. If Tim Cook thinks (and convinces the Board) that it's in shareholders' best interests to pay taxes to bring cash into the United States, then he can do so.

In essence, my point is to question the point of the original comment. Corporations are beholden to the laws of their jurisdictions, and those laws (in the US) make them subject to their charters. Blaming shareholders and invoking the profit myth implies that somehow the executives are being forced to do something distasteful, whether it's outsourcing or polluting or keeping foreign cash. The reality is that the executives have a wide range of options, and usually they only have to make a passable justification like "our polled shareholders said they care about the environment, so we're spending billions of dollars to have recycling in all facilities".

The myth essentially shifts the blame from the corporate executives to "the system". It's the same as the hippies' stereotypical disgust with The Man, the modern rebels' jealousy of the 1%, the historic persecution of Jews, and the vilifying of banks. Rather than a specific mechanism to effect change, such as participating in a shareholder poll or vote, the myth provides a vague target for outrage that the masses can rally against, feeling good about their impotent rebellion. It satisfies a craving to be a noble warrior in a community of fellow underdogs, fighting against a powerful oppressor... but it doesn't require the drudgery of actually changing anything.

I love financial news...

[RyanFenton]

Ah, financial news - a place where you can open make statements like: "Unless the US changes its laws to give me lots of money, I can't help but foresee DIRE, DIRE things happening. Financial catastrophe would be putting it lightly." ... and not only is it counted as somehow news, but the richer or more openly lying the person saying it, the more respect it is given.

Well, WELL past the point of poe's law.

Ryan Fenton

Re:And trump wants to legalize tax evasion

[Anonymous Coward]

vs. the alternative, to continue letting them keep it out of the USA while occasionally moaning during a press conference about how unfair it all is. That's the Obama doctrine Hillary has vowed to uphold.

Do we need more corporate power?

[dbreeze]

I hope enough of us flesh and bone humans realize soon enough that corporations just aren't like us. Their interests and motivations are not ours. Either they will rule or we will rule. We had better get to work before it's too late.... http://www.movetoamend.org/

Lies

[don_combatant]

This story is misleading and irresponsible. There are many different measures of the US money supply including M0, M1, M2, M3, M4, adjusted monetary base, et al. The $1.7T number represents only the physically printed bills plus minted coins in circulation. M4 represents the total money supply including physical cash, bank balances, certificates of deposit, etc. Current US M3 money supply is approaching $20T, and the Treasury Department doesn't even divulge the M4 numbers anymore as per Federal Reserve Directive because they claim it's too difficult to calculate the total amount of US currency in circulation. READ: they don't want the proles knowing how much money is being pumped into the system post 2008 crash. The Fed alone has nearly $4T on their balance sheet and they don't even have legal authority to print money -- that's the Treasury Departments arena.

This story would only be accurate if those companies were holding the $500 billion in actual physical $100 bills in a vault. They are not. This $500 billion is merely entries in a database on a bank server and thus should be compared to the total M4 money supply, not M0. While $500B is a tremendous amount of money, the story would be much less shocking if the correct comparison was made.

So not "a third of cash" at all, then

[wonkey_monkey]

A Third Of Cash Is Held By 5 US Tech Companies

roughly 30% of the $1.7 trillion in cash and cash equivalents held by U.S. non-financial companies in 2015

So actually it should be:

A third of all cash held by US non-financial companies in 2015 is held by 5 US tech companies

Re:And trump wants to legalize tax evasion

[Junta]

The money is not in the USA, it wasn't made in the USA

That's not true. For some of the money, yes, but we are talking about these companies managing to get 90% of their cash over there.

First, a lot of these companies change their headquarters overseas in name only, so they aren't technically US companies anymore. Then the US business concerns become some subsidiary of what is nominally a foreign company.

Then they'll take however much profit that would be declared in the US, and offset it with some accounting tricks like saying they needed to license their own brand name from their foreign parent company, which coincidentally totaled just about as much as would have been US profit.

The tax rate is not competitive

[tom229]

The U.S. Corporate tax rate is something ridiculous like 35%. They can claim profits are in a country as close as Canada and it would only cost them 15%. You can't be this wildly out of balance in a global market and expect to function well. This is a fundamental aspect of free market capitalism. Actually, if the U.S. lowered the rate to even something like 17% I'm sure they'd generate more revenue, instead of less. A company the size of Google likely spends a great deal of money on clever accounting to avoid taxes. They wouldn't need to do it if there was little or no benefit.

Re:And they're doing nothing with it

[Anonymous Coward]

Which is the point.

1) Overseas cash is profit from sales overseas, not domestic. Apple, Microsoft, Google, and such aren't sending US profits overseas, they are just not repatriating money made overseas. Which to some extent you don't want to do since it increases FOREX costs exchanging money back and forth.
2) US taxes are far out of line with international ones. Unless there are tax treaties made with Ireland, Panama, and the Virgin Islands, all companies will continue to use low or no-tax countries to effectively "store" the wealth. Every country literately has to agree to have the same tax rate, which is at least 15%
3) US double-taxes. This is harder to explain, and many Liberals will characterize it one way while Conservatives will characterize it the opposite way.

So in short, When you make one dollar in Europe, the company is registered, usually to an Ireland subsidiary as the legal entity, but the customer service is likely based in Germany, because of the labor laws are favorable in Germany (and least-favorable in France.) Only businesses that deal with domestic customers are actually located in their respective countries and pay taxes in their countries, but from a legal perspective the Irish company is the taxable entity. Remember that EU countries are like US states. Each state can have their own domestic tax rate, but if you live in Florida, you don't pay California's tax rate even if Apple is based in California, you pay Florida's tax rate. But of course if you ship an item, there might not be any taxes involved due to the VAT complexity in the EU.

So ultimately sales inside North America are part of the US market, while sales in Europe are usually registered to the Irish entity.

Microsoft was more sneaky about it, having all their software sales registered to an entity in a lower tax state. I'm not sure if Apple or Google did that with iTunes/App Store and Google Play, but it's a reasonable thing to consider.

Apple's hand was kinda forced by one investor to start handing out Dividends because the stock-manipulators at Wall Street were literately robbing the investors blind in the value of the stock price by driving up the price until earnings and then shorting the stock to make it drop. Anytime Apple did far better than expected, everyone won, but if they fell even a penny short of estimates there was a major drop. The value of the company on paper is worth far more than the stock price. That has much to do with the overseas cash. If Apple wasn't doing anything with it, it was literately losing value at negative interest rates while inflation is closer to 2%.

"moving back"?

[superwiz]

That money was never taken out of the country, so why is it "moving it back"? If Apple sells an iPhone in Japan and it manufactured the phone in China, why should it deposit the profits on that money in a US bank?

Re:"moving back"?

[phizi0n]

Even if it is manufactured and sold outside the country, lots of work inside the US helped to produce it (designing it, programing it, testing it) so shouldn't some portion of the profits still come back?

The bigger issue is that their offshore money is not only from offshore business but it does get "exported" as well. They set up a bunch of shell corporations and then one of their shell companies pays another for whatever reason they make up in order to move money from one country to another. For instance, Google US could take all their profits and pay it to Google Ireland for [insert any reason] and then Google US's taxable income would be $0 so they'd pay no taxes in the US. This is how literally every multinational corporation avoids paying taxes or at least significantly reducing them.

Re:"moving back"?

[superwiz]

You really think Apple is selling a ton of iPhones in Ireland?

No, but that's between Ireland and China or Ireland and Japan. Why should US be the place where that money gets spent?

Corporations use taxpayer funded services

[MrKaos]

Revoke their charter if they are not prepared to contribute to the societies that grant them a license to exist. After all they are users of infrastructure and they expect the community to absorb all manner of negative externalities. It's only right that they contribute their share of tax if the rest of us do.

Re:And trump wants to legalize tax evasion

[Sarten-X]

Yeah, yeah, yeah, you think you know simething?

Please enlighten me with what you know. This should prove most entertaining.

Gold is not an investment, never was, it is money

To my knowledge, there is no country that actually uses gold as legal money. You personally might value it as a currency, but that is not a majority opinion.

its function is to keep purchasing power and be an inflation hedge

It fails to keep its purchasing power due to fluctuations in its exchange rate with real currencies. Even accounting for the recent recession, real estate has actually done a better job of keeping its "purchasing power". I'll also note that the very definition of an "inflation hedge" is an investment.

Governments produce inflation, unless you are under a mistaken belief that central banks are not really controlled by governments and don't really act for the short term benefit of the current organization. Governments produce inflation and sometimes hyper inflation that take down economies.

You're going to have to explain this conspiracy theory of yours a little more. Governments (through central banks) can encourage inflation by raising their interest rates, or they can allow deflation by cutting interest rates, but they're not the driving force behind inflation, and would have no reason to initiate heavy inflation or hyperinflation.

Inflation happens when consumers have to pay more for the same goods and services. A little inflation has a positive effect on the economy, because it encourages people to spend money, adding more inertia to the economic machine, thereby providing confidence that producers will continue to have income in the near future, allowing them (as consumers) to purchase luxury goods and raise their quality of life. Conversely, if consumer prices are dropping under deflation, consumers are less likely to spend money, because they'll get a better deal later. That, in turn, reduces the viability of industry, lowers confidence, and further discourages spending.

These basic market principles are independent of any government. The government's only involvement is that by issuing loans from a central bank and controlling the interest rates of those loans, the government has a very highly-desired product whose price it can control. That lets the central bank effectively put its thumb on the scales, promoting inflation or deflation as it sees fit, but it can't actually control the whims of the rest of the market.

As to taking down governments, that's a worth while life goal, call it a hobby for the sake of freedom.

Using corporate money to fund a personal hobby, especially one that will harm the company, is a good way to get fired, even for an executive.

Information and "The Public"

[golodh]

I disagree with the idea that "people in power" keep information from "The Public" that would enable them to discern their own best interest/

Unfortunately "The Public" has been conditioned to ignore such information.

As in: "everybody knows that the most affluent companies are successfully using tax loopholes to avoid paying large amounts of tax", but "The public" has been trained to respond with gems like: "It's 'legal' so it's Ok.", "You'll always lose out aagainst 'The Market'" and "Better the money stays with industry than 'Da Gubbamint', and "We don't want Big Government" and "It's da pooh - lie - tishuns what dunnit".

And other gems of coherent well-informed thinking.

The only thing "people in power" need to hide is repeated ("The Public has a short memory") authenticated videos ("The Public doesn't read") of themselves conspiring in the clearest, bluntest terms imaginable (or The Public won't catch on), to intentionally ("to The Public mere self-serving greed is Ok), illegally and maliciously deprive "The Public" of their rights.

Now that's a pretty low bar to pass, don't you think?

We'[ve had half a century of investigative journalism to tell us about ethical standards in commerce, the way industry can purchase influence, the way in which (i.m.h.o. especially Conservatives) have paved the way for the fullest expression of industry interests in politics and uncounted economic, legal, sociological, and political studies to underpin this and its effects.

What The Public need (in order to catch on) is politics in the form of a reality show. Like errm ... a Trump interview?

Re: Tax laws will never be changed

[Rob Y.]

There was such a middle ground - it was the America of the 50's and 60's. Ever since high-priced think tanks started giving Reagan (and other lesser actors in the Republican party) homey-sounding reasons to cut taxes on passive income to the bone, the trend has been straight to the 'new aristocracy' scenario. So unless you want to deny the trend line, you might want to try proposing a solution that reverses it. And 'cut taxes to grow the economy' doesn't count. That's been a bald-faced lie wrapped around a tiny kernel of truth from the beginning. We've long since exhausted that kernel of truth and have been living squarely in the lie for decades now.

Re:That's not true at all.

[Rob Y.]

You make it sound like the solution is to go along with the fiction that these are Irish companies. Perhaps the US should lower its rates some - and if double-taxation is really an issue, sure (though i think they can deduct foreign tax paid). But the ultimate solution is to disallow legal fictions like 'our Irish subsidiary owns all our intellectual property and the profits generated from it'. If that IP was developed in the US, and is ultimately owned by a company that is run out of the US (i.e. CEO and other top officials are US citizens), it's a US company, and the profits are US profits. End of story. Once you get your realities straight, then you can fight for an effective and fair tax structure - and you might find support in unlikely places.