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Apple Has a Record $250 Billion In Cash, 90% of It Is Banked Overseas (phonearena.com)
An anonymous reader quotes a report from Phone Arena: On Tuesday, Apple is expected to report its fiscal second quarter earnings. In that report, the tech titan will reportedly announce that it is holding $250 billion in cash. If you think that this is a lot of money, you're absolutely right. According to Marketwatch.com, this is more than the foreign currency reserves held by the U.K. and Canada combined. Looking at it another way, at current valuations Apple could purchase all of the outstanding shares of Walmart and Procter & Gamble and still have money left over. It has taken Apple only 4 and half years to double its cash hoard. During the fiscal first quarter of 2017, Apple was adding $3.6 million to its cash position every hour. It finished the quarter ending in December with $246.09 billion in cash. 90% of the money is banked overseas, which means that Apple would be one of the companies to benefit the most from President Trump's plan to offer a one time tax break on repatriated funds.
wish i could pay no taxes
So, let's say that you have $250 in savings, but 93% of is in an account that penalizes you 35% to use it in the US, would you use it? Let's say the government changes the rule and now it is only 20%, does that really change the situation?
I mean if the US government thinks that a 10% penalty on early withdrawal from a 401K is sufficient to dissuade an average consumer, what do you think 20% looks like to a corporation whose every spend is scrutinized by Wall Street?
Even crazier, with the cost of debt being so cheap, it is actually smarter to leverage to pay for things in the US than to repatriate that money. If they bought a large US based company, they would not use this money, and instead would leverage themselves (either through loans of stock) to complete the sale.
I don't mind paying my taxes. I get a lot in return. I mind that corporations doing business in the USA, and other people, don't pay taxes.
It's not that the money is banked overseas. It's that the money isn't help by Apple directly, but by overseas wholly owned subsidiaries. I don't see why Apple Ireland (for example) couldn't invest its money in the United States just the same as any foreign company. What would be particularly interesting is if Apple Ireland decided to invest it's money in Apple stock. You could get almost all the advantages of a stock buy-back without having to repatriate the money. Am I missing anything, or would that work?
If the government allowed corporations to bring their money back from overseas tax free, provided they use that for investments in the US that create jobs, what would be wrong with that?
A sufficiently advanced simulation is indistinguishable from reality.
It only would run the federal government for 3 weeks or so.
If I were a major stake holder in Apple, I'd want my money. Yes, they'd have to pay taxes on it when they brought it in to pay it out as dividends but then I get some of it, whereas right now I'd get none of it. Apple just seems to hoard cash for no discernible purpose. I mean this has gone WAY beyond the amount you'd want to keep as a reserve. Yet for some reason investors are happy to let that continue, rather than demanding their rightful share of all the profits.
I just don't get it.
If the government allowed corporations to bring their money back from overseas tax free, provided they use that for investments in the US that create jobs, what would be wrong with that?
In a sense they have no productive use for the money since they base their expenses in the US and the profits in tax havens. If they needed more in the US they would just shift the ratio a bit so that expenses were still just a hair below US income. That companies outside the US get to, virtually tax or duty free, sell to US customers for no charge is a scam of epic proportions.
Because there would always be some loophole a corporate attorney would find which would allow the company to enrich the C room or do something stupid like a stock buy back rather than do something useful with the money.
If you made the rule airtight, companies wouldn't bother bringing the money back into this country because they'd claim you're interfering with their right to do with their money what they want.
Know what happened the last time the U.S. gave a tax amnesty to corporations? Nothing.
I know one of you has the PIN. Let's have it. There is enough for all of us.
John McAfee 'It was like that time I hired that Bangkok prostitute; to do my taxes, while I fucked my accountant'
... buy Dell then shut it down, just for laughs.
That Apple uses a Nevada corporation to avoid state corporatation taxes in US.
http://www.nytimes.com/2012/04/29/business/apples-tax-strategy-aims-at-low-tax-states-and-nations.html
If the USA would get rid of the 16th amendment, implement a "fair or flat" tax https://fairtax.org/index a LOT of that money would find itself coming BACK into the USA, along with a ton of money from overseas corporations, since we'd be a tax haven for a lot of people & businesses. But, that would mean taking away the power congress & the senate have...the power to tax & keep people down.
Yes, it is a lot of money, unless you're the US Government, in which case you can blow through it in less than 30 days...
Obviously Apple is only sitting on that money because they are scared about their cash flow. I bet if even more tax breaks were enacted for corporations, Apple and others would really start to create more jobs instead of sitting on mountains of cash!
... or perhaps lower its prices to drive more sales? What's the point of hoarding so much cash? I don't get it.
When all the money trickles down.
Ultimately corporations are owned by groups of people. Instead of taxing the group, why not just tax the individual people that own the corporations. Oh wait they do that. Therefore the money is taxed twice already.
A sufficiently advanced simulation is indistinguishable from reality.
250 billion USD is somehow the GDP of countries such as Chile or Finland.
What sort of jobs do you think Apple would create with this "tax free" money?
Time is what keeps everything from happening all at once.
If you want to solve a lot of "problems", don't tax income (which is a horrible idea anyway), simply tax sales based on where the is purchased or used (not necessarily the same place). If you want, you can tax sales based on product class. For example, bread may be taxed at 0%, eggs may be taxed at 3%, while computers are taxed at 10%, with ERP systems being taxed at 20% (or whatever, I'm just picking these numbers out of the air). With this method, your "profit" becomes irrelevant. Besides all that - if Apple were to bring in its $250B into the U.S. "tax free", what do you think would happen to that money? It would go SOMEWHERE. Either to shareholders, or to expand facilities, or R&D, to buy another business, etc. You just collect your tax there. But the U.S. takes the position that it should be able to tax the same money an infinite number of times and the result is that Apple decides to leave its money where it is. Whose fault is that?
must be nice to have $3/hr 60+ hours a week labor to build your stuff in red china.
Because then the US economy would be good, wages would rise and you couldn't blame evil corporations... Now do you see why ?
Seriously. They talk about being eco-friendly, so they really should start covering the back-end of their production chain with conflict-free minerals, eco-friendly mining and aluminum production and the likes. Cash like that buys you giant branches of entire industries and they could use that money to start fixing things inmediately. Call the new subsidary "Apple Raw Materials" or something and spread out eco-standards across the globe through sheer market and marketing force - that would actually be cool and justify the obscene amount of net gain they get per device.
We suffer more in our imagination than in reality. - Seneca
Of course, the key "relevant" country is the home country, in this case, the US. It should be simple for the IRS to simply say that the accounting sleight of hand will not be recognized, as is often done for other tax sheltering strategies.
Easier said than done. In principle you are quite correct. The problem is that any accountant worth his salary can make it very difficult to prove that the transfer "price" isn't a good approximation of correct. Seriously, I'm a certified accountant and I'm telling you point blank that the IRS would have a very difficult time proving that a company like Apple is engaging in fraudulent transfer pricing unless they were incredibly clumsy about how they did it. The IRS simply doesn't have the resources to do an audit deep enough to uncover the truth of the matter in most cases when we are talking about large multinationals.
And transfer pricing is just the tip of the iceberg when it comes to hiding profits and other tax dodging schemes. Large corporations hire huge teams of accountants and lawyers whose entire job it is to find clever legal loopholes in the tax laws and exploit them. The profit for doing so is in the billions of dollars so expecting them to stop is unrealistic.
Mod parent +9000 informative.
#DeleteFacebook
Maybe Apple should change the color of its laptops from silver to gold, especially the ones it sells overseas.
So, they didn't (past) pay some taxes. That's a government cash flow issue in the past.
Because this money is long-term banked, it's essentially removed from the economy--same as if you put it in a big pile and burned it.
The Federal Treasury maintains a 2% inflation rate by issuing new money. Mechanically, they buy Federal Treasury bonds back from big banks at an inflated rate; this gives those banks a major profit in newly-minted money. The Fractional Reserve System allows the banks to then lend 19 times as much money--if the Federal Treasury adds $1B, the banks can now loan $19B.
This money then enters the economy from two ends. First, consumers take loans to buy things ahead of inflation--cars, mortgages, the like. Second, businesses take loans to leverage their position in the market, which pays money outward; a sizable fraction of this leveraged money trickles down in the short term, whereas in the long term the bankable fraction of profits works its way up to a narrow band of business service providers.
These immediate payouts hit consumer hands and start their way upwards. This is a fractioning process: most revenue goes to wages, either directly or by purchasing services from the next business in the supply chain; some goes into business savings, investments in securities (money that just trades on paper but doesn't actually go to buy things, thus doesn't drive the economy by paying wages), and executive pay that similarly gets banked and invested.
The fraction that goes to wages circulates, and the fraction that goes to savings and investments ages: nobody with that much cash taps their savings to $0, so only the fluctuation in savings counts as active money. The portion that just sits is removed from the economy--we're back to Apple's $250B.
Okay, so we've established that the Federal Treasury effectively offsets the money sinking into static accounts by printing new money, and replaces it while pushing 2% inflation.
From here, we can say "what's wrong with that": if AAPL brought this money back and spent it (on what?), it'd essentially cause inflation in the same way as printing a ton of money. Just floating this money into US bank accounts would cause an enormous flurry of credit availability and... were you here for 2008? Banks try to issue all the credit they can.
For completion's sake: to get 2% inflation, the Federal Treasury has to offset labor force growth (10% more working hours, 10% more dollars) and technical progress (make 10% more stuff with the same labor, goods cost 10% less, you need to drive wages up ~11% to keep prices the same). Then, it needs to pop an extra 2% on top of that. With the money being taken out of the economy, the Federal Treasury has to replace that money as well to get back to the original cash basis.
As for loans, well. Inflation and all. You take a loan for a 30-year mortgage, you pay interest that's probably more than inflation. That's going to cost you. On the other hand, that's the cost of the house. The purchase price goes directly into the hands of the seller, who can spend it now; you stop paying $1,000 in rent and instead pay $1,000 in mortgage. Thing is, in 10, 15, and 30 years, 2% inflation means that $1,000 should be $1,218, $1,385, and $1,811; and you're still paying only $1,000/month as agreed in your mortgage contract.
In other words: loaning money into existence immediately drops a pile of cash into spending somehow, adding that to circulation; and the continuing inflation steadily lowers the amount of cash removed in exchange by reducing the fraction of per-labor-hour money it represents. Your mortgage payments shrink over time.
Further, the economy is essentially labor trade. The buying power of money essentially moves based on the productivity of labor, and technical progress which decreases scarcity and increases population just spreads the money thinner (prices come down, deflation happens). Inflation works by putting in
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It was $2.85 in urban areas 2009, including social insurances; $1.14 in rural areas; $1.74 total compensation average in all firms. The Chinese workers engage in 2,222 working hours of labor per year (it's about 2,000 in the U.S.), at a current rate of 2,300 Yuan minimum hourly wage, equating to $1.80 of direct wage.
In 2009, the share of wages was $1.13/hr, and social insurances was $0.61. This suggests today's minimum wage compensation in china would be $2.77 of total cost, roughly 2.43 times the 2009 rural average.
If we assume (bad assumption) that rural vs urban compares the same way, then urban manufacture employee cost would be $6.925/hr, of which $4.50/hr is direct wage. The average would be $4.23, of which $2.75 is direct wage. In reality, the average Chinese manufacturer pulls roughly $3.61/hr of direct wage; the average Chinese manufacture compensation in total would be $5.56 today.
The average total compensation of an American factory worker is $78, but I've been using numbers like $21/hr + 18% + 6.4% (OASDI+HI) to project the cost of moving manufacture from China to America. I have vastly underestimated the total loss of American jobs that such a move would produce, methinks. For example: the break-even point for manufacture of Men and Boys's Cotton Trousers and Shorts in America is roughly $18/hr + 18% + 6.4%, or $22.39 total employee hourly cost; above that, you're losing jobs. At $21/hr + 18% + 6.4% ($26.12 total hourly cost), moving all MBCTS manufacture from China to the United States results in a net-loss of a little over 90,000 American jobs; at $18/hr ($22.39 total hourly cost), it's a net-loss of 0 jobs; and at $8.25/hr ($10.26 total hourly cost) you gain about 54,000 net new American jobs. Imagine what it looks like if the Americans cost $78/hr in total.
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Sun had 2 specific problems that Apple doesn't have.
1) When the internet bubble burst in the last 90s, Sun's great sales suddenly became a massive liability. Internet bubble companies suddenly stopped paying for the Sun equipment as they went bust. I don't know how much Sun actually got in terms of real revenue vs. billable charges that would have eventually been paid has those companies survived. But this led to a glut of barely used Sun equipment that depressed their prices on new machines and was maybe more than the market could absorb. It's unfair, but Sun basically ended up being punished for being successful.
2) Their failure to quickly respond to the market's demand for lower priced blade type servers vs. their legacy, expensive servers meant that companies who didn't do so well in the bubble like HP and IBM suddenly were selling cheap servers by the truckload in the new market demanding lower cost. Sun lost this segment and even though they eventually sold servers in it, the business that went away didn't ever come back.
Congress is financed by Global National corps so of course the tax systems is geared to them. However I never had a big issue with this when Steve Jobs was alive because it gave Apple so much money to do the brilliant and innovated R&D that brought us great great products. Not so sure any more.
Let's put that statement in perspective. For 3 weeks Apple corporation could pay for:
+-- Wages and living expenses for 1.4 million active duty military personnel
+-- Wages for 1.3 million civilian employees of the defense department
+-- Wages for 575 thousand postal service employees
+-- Maintain all the interstate and national highways in the US
+-- Pay out the Social Security benefits owed to 62 million retirees
I do not block ads. I do block third party scripts.
They're trying to do that. Lisa Jackson was reviewed on Daring Fireball and they really are trying to get out of a lot of those things that are super harmful.
http://daringfireball.net/link...
You can read the transcript or listen to the podcast. Either way, she was great.