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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."
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%.
I think that if they repatriate this money they'll do exactly the same thing financial institutes have done with their cash. Sit on it. They won't "encourage local economic growth". If anything they'll reduce local economic growth by buying up and removing competition. Growth of anyone but themselves is not in their interests.
Personally, I believe that the issue is the USA's tax rates are too high on these companies so they are being encouraged to do business overseas instead of in their home country to shelter themselves from the tax rates in the USA.
Do you honestly believe if the USA's tax rates would be lower that they would pay US taxes? They do what they do because they can, plain and simple.
This is my sig, there are many like it but this one is mine
The worst thing about Ayn Rand is that dumb people latch onto her crazy ideas and think that they are actually rationally sound. Her prose was terrible, but I really like her as a writer, because anytime someone starts talking about Atlas Shrugged I know I can just ignore the person. It's sort of like a big sign that says, 'I am not worth talking to' hanging over their head.
HA! I just wasted some of your bandwidth with a frivolous sig!