“Taxpayers are making millions of dollars in interest payments on U.S. Treasuries to an unlikely source — tech giants Apple, Microsoft, Google and Cisco,” Patrick M. Sheridan reports for CNNMoney.”Those tech companies have more than $100 billion in U.S. bonds, according to a report released Thursday by The Bureau of Investigative Journalism, a not-for-profit, privately funded reporting outfit in London. Due to U.S. tax laws, much of that cash is held in overseas subsidiaries — and it is likely that some of that cash is being used to purchase U.S. bonds.”
“If these firms are buying U.S. debt with that money, then U.S. taxpayers are on the hook for hundreds of millions in debt payments to the same U.S. companies they already buy billions of dollars from in iPads, software and routers,” Sheridan reports. “‘It means American taxpayers are effectively rewarding U.S.-based technology firms for avoiding taxes,’ said Nick Mathiason, the author of The Bureau of Investigative Journalism report.”
“But the situation isn’t a surprise — or even a problem — according to international tax experts,” Sheridan reports. “‘U.S. corporations can defer taxes by keeping earnings abroad and they can continue to defer the tax by buying U.S. Treasuries,’ said Michael Knoll, a professor at the University of Pennsylvania Law School… Knoll said that there are some benefits from having big companies owning U.S. debt. After all, the yield on a bond goes down when investors are buying bonds. So the bond purchases may help keep interest rates low.”
“Some argue that the 35% tax rate on foreign profits should be lowered to encourage U.S. companies to bring that money back home. But others think Congress should impose rules that penalize companies for shifting earnings out of the United States,” Sheridan reports. “What Apple, Microsoft, Google and Cisco are doing is perfectly legal. And the companies stressed that it’s up to Congress to enact new rules if they aren’t happy about the practice of parking cash overseas.”
Read more in the full article here.
MacDailyNews Take: In November 2012, Tim Worstall wrote an interesting article for The Register. In case you missed it:
Google, Apple, eBay shouldn’t pay taxes – people should pay taxes.
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Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth. – Apple CEO Tim Cook, May 21, 2013
Tax codes the world over are micro-managed to the point where the only people benefiting from them are accountancy firms. Completely co-incidentally when a governments wants advice on how to change an aspect of tax policy they will frequently call in consultants….from accountancy firms.
When it gets to the point that nobody, not even those working in the tax office, understand the code then you’ve got one huge problem on your hands. Corporation tax may well need an overhaul, but so do other sections of the code. I’m not calling for flat-taxes or any other of those right-wing talking points, just an end to a system that requires exemptions and special cases left, right and centre.
I wonder if Mr Sheridan would prefer that the Treasury sell US debt to China rather than Apple.
It’s worth clicking through and reading the comments on CNNMoney which have been posted on this article.
Exactly! Let’s see, Apple and others own the US debt or China!? I would prefer Apple quite honestly. Oh, and just for the record the tax payers are paying me as well.
As for this comment, “But others think Congress should impose rules that penalize companies for shifting earnings out of the United States”. That’s a bullshit comment, Apple doesn’t “shift” money to over sea’s and never has. Apple and others make that money outside of the US and leaves it there. The US government can not force Apple or any other company that makes money outside the US to bring it back into the US. They do not have authority to impose their will or laws outside the US.
Again, the solution would be easy if these so-called leaders in government would represent the people and what’s best for the USofA instead of their own greedy agenda’s.
Yeah right – what politician will go against his lobby groups to amend the tax law? Special interests rule the status quo in government and no-one is going to be able to change it unless they are willing to sacrifice their political career in doing so.
Funny. When it comes to taxes, corporations don’t want to be people. When it comes to political speech and the First Amendment, the want all the rights and protections afforded actual people.
Assholes.
OTOH, I can’t get too excited about corporations loaning money to the Government. The Government borrows from the Chinese Government, Arab royalty and anyone else with money to lend, including Wall Street Banksters. US taxpayers are on the hook to pay interest to those parties as well.
In case you haven’t figured it out, corporations don’t pay taxes. . . their customers pay their taxes through higher prices for their goods and services. ALL taxes are costs that are included in the price of what ever the company or corporation sells. Remove the tax and the price of that product or service will go down, a benefit to everyone. . . leaving more money in the pockets of the consumers with which the consumer can pay taxes WITHOUT using the corporation as the tax collector and having it incur the added expenses of collecting those taxes AND CHARGING the customer to do it! Direct collection of taxes is more efficient, but also more transparent about who really pays the freight of running the government. . . and the politicians really don’t want the voters knowing that!
America , of the lobbies….by the lobbies…for the lobbies.
This is part of the “Take back your government!” movement. Owning the nation’s debt is a more powerful thing than paying lobbyists and more legal than owning politicians!
Every dollar of tax paid by a business is a dollar that was collected from those who purchased goods or services from the business. A business pays no taxes, it merely collects the taxes from its customers and passes the money through to the government.
so they say…
but then again do you seriously imagine if the 35% corporate tax rate were reduced and eliminated to 0% that our corporate fellow persons would lower their prices by 35% ?
or might they cite their obligations to their shareholders and keep prices right where they are, thank you very much…. ’cause i know they would never think of raising them….
Yes. . . the power of the open market and competition would see to that!
sadly I feel any tinkering w/ the fiscal system (def: setup of government revenue and expenditures) anywhere in the world is going to have unintended consequences because the economic system is so interconnected.
Having said that it might actually be a good thing for shareholders in particular and US citizens in general that US tax laws keep money off shore because it forces companies to save (i.e. keep cash on their balance sheet) for what I feel is an inevitable economic crisis that will be caused by unfunded social programs
put another way, by having tax laws in place that incentivise AAPL to buy US treasuries, it prolongs the day of reckoning due unfunded social programs
We are paying interest, BECAUSE WE KEEP BORROWING AND TAKING ON DEBT. Duh! We are paying Apple and others because they are loaning us money. If it were anyone else the article would be written about how civic minded they are. BUY US TREASURIES!
Better we ow the money to American corporations and American citizens than we owe it to China.
To hell with that.
People shouldn’t pay taxes – corporations should pay taxes.
People already pay 100% of all the taxes. . . either directly or through the price they pay for everything they buy from businesses, the rent they pay, or the money that changes hands. The question is really just how and by whom are those taxes collected and passed to the government coffers.
I just can’t get over the way this article is worded. It’s as if Apple punched the U.S. citizens in the nose and took their money.
The U.S. Government is out there spending beyond their capacity to pay. Every damn year all we hear from the spenders is Raise that debt ceiling! We need to spend more!
They sit there salivating over corporate profits so they can buy more bombs and drones and kill more people we never heard of and force a health care plan down the throats of Americans that no one wants.
Well says Apple and the rest, you’re asking for loans, we’ll loan you money! It’s a win win situation. Stagnant oversea funds earn interest, Apple does a good thing for the American citizens again by loaning the government money “to pay its bills” as Nancy Pelosi would say, and we pay the interest we would have paid to someone, no matter who bought the bonds.
It’s almost poetic.
I have to.
“U.S. taxpayers are on the hook”
does the writer want the companies to buy European, South american or Asian bonds instead?
Apple and the other companies are NOT moving their profit overseas. They are making it overseas. And keeping it there. It is not against the law, nor should it be. They already pat taxes to the countries in which they make their profits. If you were working in France, you’d be required to pay tax in France. Should the US government also be able to tax your income. That would be double taxation. I think not.
Nick, you are a tool. Guess you’d rather see all that interest payment go to the Chinese. That’s who buys most of this paper- wake up and smell the coffee, much better that keeping your head under the sheets smelling your toots, NICK!