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Apple, Google and Microsoft Are Hoarding $464 Billion In Cash (cnn.com)
Apple, Google and Microsoft are sitting on a mountain of cash -- and most of it is stashed far away from the taxman. Those three tech behemoths held a total of $464 billion in cash at the end of last year, according to a Moody's report published this week. From a report: Apple alone had a stunning quarter-trillion dollars of cash thanks to years of gigantic profits and few major acquisitions. That's enough money to buy Netflix three times. It's also more cash than what's sitting on the balance sheet of every major industry except tech and health care. All told, non-financial U.S. companies studied by Moody's hoarded $1.84 trillion of cash at the end of last year. That's up 11% from 2015 and nearly two and a half times the 2008 level. Roughly $1.3 trillion -- 70% of the total -- is being held overseas, where the money isn't subject to U.S. taxes. Apple, Google owner Alphabet, Microsoft, Cisco, and Oracle hold 88% of their cash overseas. Moody's said the tower of money stashed abroad reflects the "negative tax consequences of permanently repatriating money to the U.S."
Sure, These companies are based in the US, but they are global companies.
They should not have to pay US taxes on the profits they received via a cellphone sold in Europe.
hoarding it, stashing it, keeping it away from the taxman...
good! more power to them!
what it would be like if these companies paid their fair share of taxes on this money. Schools, roads, healthcare. They want the benefits of being in this country without having to support it.
Time for "helicopter money". Inflation is under par and fat cats are hoarding cash. Sufficient inflation will make sitting on cash unpleasant because its actual value shrinks quicker. It may even get T closer to the 3% GDP growth he wants as the cash is spent.
Table-ized A.I.
We have the biggest, most complicated tax code in the history of the universe. We are also the only country that taxes its citizens for income earned while living and working in another country... even after they pay that country's taxes.
N/T
I don't really get finance. That's... not good for the economy right?
It's money that's "Not being put to work". Just rotting in a bank account. Extrapolate this, and it's essentially a giant black hole in the economy where money goes in but it doesn't come out. Today we've got a money cycle of farmers buying oil to run their combines and oil-well workers buying food to eat. Today there's a trillion dollars moving back and forth (and being pissed away on recreation) but tomorrow Apple hoards half of that and now the cycle is moving just $500B. So... It's essentially deflation? If they ever dump it back into the markets, that'd be a big wave of inflation, ya? Suddenly there's just more cash in the system. Is half a trillion even enough? How much money is needed to have a noticeable impact on the value of the US dollar?
So it's outside of the USA. Couldn't they go invest it in... China or something? Buy all of Foxconn. Do they have problem bringing it elsewhere? Would they have to pay China income tax if they went there? If it's all Irish money... Buy Guinness. ...I guess that just shifts the fat bank account from the owners of apple to the ex-owners of Guinness... Yeah, to actually make that money work, they'd have to actually launch a new business or expand their business or buy a business that needs expansion.
Inflation is the sort of thing that's supposed to encourage people (or business, in this case) to go DO SOMETHING with their money rather than hoarding it. We should DEFINITELY NOT give them some sort of tax-free day to slip it in. Fuck you, pay me.
This really just demonstrates the stupidity of our current economic system, where money, which is a made-up human construct meant to facilitate the trade in real goods and services, has become more important than said real goods and services. We have a 'market' that pays our best and brightest far more to come up with these pointless number shuffling schemes than to become a doctor, scientist or teacher. We then wonder why, despite all the GDP we have supposedly magiced up in the last decade, many of our doctors, scientists and teachers can no longer afford basic shelter and services for them and their families.
At a government level, we have treasuries slashing public sector spending to provide corporate tax breaks because politicians seem to believe that they can save for the care worker jobs that will be required by the ageing boomers in the future, by putting the young out of work today. Again, all driven by this belief that money is more important than the underlying economy it is meant to facilitate.
And to add to the complete disconnected stupidity, we have central banks busy abusing the monetary system by printing trillions of dollars in an attempt to stop all this warped cash hoarding by the rich from deflating the real economy.
It is really sad, and it is all going to come to a head at some point. Unfortunately I don't think anyone has a clear idea of how to fix it, and there is a great risk that we lurch too far to either the left or right, as has been the pattern throughout history.
The US has been very generous at allowing shell companies and off-shore earnings to be store in other countries. Once a corporation gets a handout, they expect it into perpetuity and they want all the market access and its protections of the legal system while avoiding contributing to it.
This basically shows that this is the consequence of letting companies sit on cash to avoid taxes. Another commenter said the US tax system is too complicated. It is, but the benefits from it go to corporations who use it to avoid taxes, not to increase them.
I work in Private Equity and have experience with this type of stuff. Honestly in my opinion, there's nothing to see here other than a great case for why the US corporate tax rate should be lower. There are two separate concepts worth discussing. One is money that was MADE offshore and remained offshore, which I don't think anyone should take issue with. That money is used to fund international operations and international acquisitions (and is invested--I recall reading that Apple runs the world's largest hedge fund via its balance sheet cash). No big-wig executive or shareholder benefits from this cash being offshore - in order for them to see any of it, it has to be repatriated, at which point it is subject to US tax. The other concept is money that was made in the US, but is treated as if it was made offshore. The way this works is generally via IP transfer. If a US company transfers its IP to a subsidiary in another country (Ireland is popular, for example), then that US company has to pay royalties to the international subsidiary as it does business. So US Co. makes $100 in search revenue, but has to pay $90 to Ireland Co. for the right to license the IP (oversimplified but that's the gist). $10 gets taxed in the US, and $90 gets taxed in Ireland, the profits remain in those respective countries. Note that when the IP is transferred to the other country, that transaction is taxable - the Irish subsidiary has to "purchase" the IP from the US, which is a taxable event that the US government receives tax income from. However, after the IP is transferred and once operations commence, this becomes frustrating for the US government (and citizens) because money that was made in the US becomes taxed in Ireland. However, even in this case, in order for US executives or shareholders to ever get this cash, the money must be repatriated, at which point it is subject to US tax. So the money ends up just staying offshore, until the company can either negotiate with the US government for more favorable tax treatment, or until it gets used for an offshore purpose. Long story short, if the US corporate tax rate was lower, we would not have this problem. Companies would not transfer IP offshore to achieve more favorable tax structures, they would just keep the money in the US. My personal opinion is that the corporate tax rate that maximizes revenue for the US is much lower than the current 35%.
If the writer of the article honestly thinks that any of these companies are just sitting on piles of cash, they're insane. Not even Warren Buffet is doing so. That cash is IN the economy. It's being invested, it's a bond here or a loan there, but it's never just sitting idle.
"Saving" is good, "hoarding" is bad. The choice of words implies the author's desire to confiscate all or part of the monies...
To all those coveting other people's dabloons: they are not yours!.
In Soviet Washington the swamp drains you.
Replace it with a fair/flat tax and watch most of that money, come back to the USA, where it can be put to work. I don't understand why, "the poor" don't understand why they oppose it since they will see the biggest benefit. It also takes the power of government (congress, senate) to tax out of their hands.
If you earn money in a country then you should be required to pay a special tax to remove it from that country. New laws need to be adopted such that shifting money tax free through IP licensing and other such loop holes are closed.
Simple. That requires a business presence. I do have issue with countries declaring a business presence and imposing their regulations were non exists. For example an advertising agency taking money for ads in the German language does does not give the country of Germany domain over such a company.
Countries are free to sensor the internet from their citizens and to fine (regulate) client companies in their own country and according to their own laws to the best of their ability. By example US punitive restrictions on trade with certain countries.
They are out of ideas. They can't think of a single thing to do with the money that's better than sitting on it.
I guess if they wasted it on product development there would be less left to pay out as dividends once the tax laws change to their liking. Shareholders would scream.
Corporations sit on this much cash because execs get paid in stock and the dividends have lower taxes. "Qualified dividends" and long-term capital gains benefit from a lower rate. Qualified dividends are those paid by domestic or qualifying foreign companies that have been held for at least 61 days out of the 121-day period beginning 60 days prior to the ex-dividend date.
Saving money is not "hoarding". Keeping it from the "taxman" is not only financially proper but morally ethical. Y'all fawning over the possible tax bill are just weaponizing your envy for the fruits of someone else's labour.
This is entirely true. The cash is leveraged several times over as collateral for loans with the assumption that only so many loans would fail simultaneously, leaving a very low risk. Not really fair with what a person can do, but still creates economic movement. At least it isnt just parked in a saving account.
Seriously. That's insane. Three companies sitting on five percent of M2!
Rule 35 of the internet: "If it can be hacked, it will be". - Charles Stross
...That's enough money to buy Netflix three times.
Well yes, Netflix subscriptions have become a little on the pricey side these days.
What this world is coming to - is for you and me to decide.
Note that while this is bad, generally speaking the economy works around value that pretty much gets sequestered out of circulation. So the result of injecting this money into the economy long term would pretty much be no change and a touch of inflation. Short term some people close to major influx of cash will be very happy and elevated, but it's like a pyramid scheme, barely moving the needle as it moves outward.
XML is like violence. If it doesn't solve the problem, use more.
Exactly, wish I had mod points for your AC comment. Pete is drinking the Koolaid. The money sits idle and is leveraged as collateral. This is modern capital management/MBA thinking 101.
I propose a retro active tax on any company that initializes or in any degree controls a company with offshore earnings. When we repatriate that money it will be taxed again unless proof of investment in new or existing, unrelated companies is quickly made. That will put a dead end to off shoring American companies and money. See ! problem solved with no big fuss at all. The people must become aware that the power belongs to the people and not to government or corporations. Think of me as a rebel with a darned good cause.
Living in a foreign country does not exempt any citizen from paying taxes on stocks, business profits, or revenue generated within their home nation. Say you're a Canadian citizen who owns a McDonalds franchise in Canada. If you move to the United States, you still have to pay the Canadian government for the profits from your franchise in Canada. You just don't have to pay them for the franchise you own in the United States. The United States is the only country that taxes its citizens for income earned from living and working in another country.
Even that being said, I lived and worked as a US citizen abroad for a year. US Citizens still don't have to pay taxes on the first $85,000 they earn abroad, which is a pretty generous amount.
That's only 6 Gerald R. Ford-class aircraft carriers.
I see my shadow changing, stretching up and over me...
Apple, Google owner Alphabet, Microsoft, Cisco, and Oracle hold 88%
Weird, I would have expected to see Amazon in that list. Where does its money go?
The money sits idle and is leveraged as collateral.
If it's being used as collateral, it's not idle. It's collateral. It's freeing up other money to be lent.
WRONG. They use the money as collateral for a loan at a cheap rate (since there is zero risk), and the payments are made tax deductible.
I'm lost. Which "they" are you talking about? I was talking about on Apple, Google, and Microsoft. I'm not aware any of these are in the business of making and servicing loans, at least, not to any major extent.
(That's not exactly true, though. The tech giants probably have some of their money in bonds. Those are essentially a loan to someone else: a company, city, state, or country.)
What banks do with their deposits is another topic and it quite complicated. I have my perception of banks, sorta like out of It's A Wonderful Life. I know banking is a lot more complicated than that now so I don't pretend to understand what exactly they do with deposits.
All I'm seeing here are arguments as to why the USA/Australia/Britain/Europe/Korea and Japan should push hard to harmonise taxation laws and pass a blanket 35% global tax on all businesses worldwide applied in all countries. This would stop tax avoidance as all nations would be expecting the same tax rate on all companies. Hard to implement sure, but not too hard to sell to the populations of most of these countries. The major powers could even use their military/diplomatic muscle to threaten/coerce it into happening.
The invisible hand of the market are equity firms that want to buy large parts of a company, force the company to pay dividends or buy back their shares while cutting investment and jobs and increasing debt, then dumping the artificially inflated stocks. As long as the CEO is able to resist this, the corporation can run in a sustainable way. Otherwise, it is only a matter of time before the seed cord is consumed by Wall Street.
So practically speaking, the officers end up beholden to the shareholders that own the company, and forced to make decisions for the shareholders. It's just that many shareholders of today are not interested in a long term return, they are merely interested in volatility, which allows them to make money by moving money.
You make simplistic assumptions about...
I note that you offer no alternative analysis.
You also, as almost everyone does, ignore the critical issue of externalities, especially negative ones.
I'm not ignoring those issues at all; they're completely separate from questions about taxing corporate income. Unless you see income as a negative externality, I'm at a loss to see how you think taxing it helps. If you want to tax corporations for their carbon emissions, for example, that's an entirely different situation.
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
In the case of Apple, that vast majority of the "cash" is actually short term corporate and government bonds... not bank deposits. Aka investments!
Heeeeey, that sounds a lot better.
So... Apple has a banking gig on the side? Loaning out money. Which is essentially what buying a bond is... sorta.
Because finding an investment for that cash that returns 30%/year is insanely difficult compared to buying back shares of Apple with a 30-40% ROE.
So why don't they do that? Unless they're getting 30%/year on.... bonds.
I think the problem is they can't think of anything to do with the money.
There are a few ideas that might work out and make a ton of money and get the race out of the CO2 box. StratoSolar is the small change one, power satellites are the one that could take that much investment. There is a 2016 video here: https://www.youtube.com/watch?.... It's exactly not the current scheme, but close. Takes about nine and a half years before you see any return, but, if it works, the return is in the tens of trillions.
End MGM. Get prospective parents of boys to Google: Men do complain
They're running Pyramid schemes in disguise of Business
Casteism