Apple’s foreign cash hoard piles up: $54 billion and rapidly growing

“Apple (AAPL) is piling up boatloads of cash: just not here [in the U.S],” Stephen Rosenman writes for Seeking Alpha.

“Those boatloads are increasing becoming docked in Apple’s foreign subsidiaries and cannot be repatriated without incurring additional hefty U.S. taxes,” Rosenman writes. “A whopping $54 billion of Apple’s $82 billion cash and investments is in offshore accounts. It isn’t coming here: The giant 35% U.S. corporate tax has created an artificial divide between U.S. and foreign holdings, a divide which cannot be easily bridged.”

Rosenman writes, “Moreover, the off-shore component of cash is growing exponentially, courtesy of milder overseas tax treatment as well as burgeoning foreign markets. In contrast, Apple’s U.S. cash/investments are increasing much more slowly.”

Read more in the full article here.

Related articles:
Senator John McCain eyes Apple’s $54 billion overseas cash pile – November 3, 2011
Google joins Apple in push for U.S. repatriation tax holiday – October 3, 2011
Apple lobbies Obama for tax holiday, wants to bring overseas bounty home – August 24, 2011
U.S Senate Democrat Schumer allies with Apple, other multinationals on repatriation tax talks – June 21, 2011
U.S. companies push for tax break on foreign cash – June 20, 2011
Apple, Oracle, Duke Energy, others organize lobbying blitz for tax holiday – February 17, 2011

37 Comments

  1. Just wait. Starting in February or March, all the politicians who have been holding off on voting for things which would benefit the economy (that is, you and me) will start falling all over themselves to get them implemented so that the jobless rate sees a dramatic fall before the November elections. This is what will get the “tax wall” demolished for Apple and other big corporations; repatriating that money will give a big boost to the USA economy, and of course, certain people in Washington will take credit for it, once again just in time for the elections.

    It’s really too bad that people have such a short memory.

    1. I don’t think the US economy can move as fast aas you think it will.

      Further, it is basic human psychology to not notice changing circumstances until well after the change has occurred.

      No, I don’t think this will change the public’s opinion of their Congress critters.

  2. I sure hope our new President acts on this and allows repatriation of this money. It’s a shame that Pres Obama refuses to allow this because of the appearances of supporting big, evil, business. Let’s get that money back home so it can be spent here. It’s certainly NOT going to be spent here otherwise!

    1. Repatriation tax holidays are all well and good as long as they come with strings attached. The last time we allowed corporations to bring home cash for cheap (during GWB’s presidency), the vast majority of it went into executives’ pockets.

      I’m all for allowing corporations to bring their cash home for low taxes, as long they do something constructive with the money. Build a new factory, expand your office space, hire more workers, what have you. But history has shown time and again that if you give a corporation money for nothing, they executives just keep it.

      ——RM

    2. Why should a few big companies get a huge tax break when others have been paying taxes on their foreign earnings for years. We can debate the proper strategy for collecting tax revenues as much as you like, but I will not budge on my contention that the rules be applied consistently to all. I will not give special consideration to the wealthy companies just because they are flashing tens of billions across the pond.

  3. That people still talk about a repatriation holiday is proof that ideologues are completely untroubled by facts. Before the last holiday was passed in 2005 economists warned that it was a stupid idea; there was no reason to believe the money would be invested in the us (more likely it would just be distributed as dividends and/or used to expand foreign operations) and it would only encourage companies in the future to adopt a policy of hoarding money abroad and lobbying for another holiday a few years later. Studies done after the holiday was passed showed that, as expected, the money repatriated wasn’t used as backers promised but rather was distributed as economist warned and was used by some companies to actually cut us jobs by paying for expanding foreign production using repatriated cash. And, as warned, the other result was the expected increased hoarding of cash abroad with the expectation that lobbying would result in a new holiday.

    A permanent change in the tax would solve the issue but companies aren’t devoting lobbying cash to that because they’d rather get a fire sale holiday rate of 5% or free than a lowered permanent rate of 15% or whatever.

    Absent a permanent rate change, the best thing Congress could do is absolutely bar any holidays in the future.

    1. Yeah, probably the same economists that thought all the stimulus spending was a great idea. Sure, we also need to change the corporate tax by LOWERING the rate. Right now we have the 2nd highest corporate tax in the world. And there’s no reason why the lawmakers couldn’t stipulate that a certain percentage of the repatriated dollars had to be spent domestically. But first we have to replace Obama. First things first, I guess. No more liberal lawyers – we need more conservative business people who understand the true problem.

          1. Funny how the chart for US debt (http://en.wikipedia.org/wiki/United_States_public_debt) shows the debt doubling during the Reagan years, it increased during Clinton’s first term but when he left it was back down to levels when he started.

            The 90s saw the internet boom and bubble, and Bush inherited the mess after it popped.

            Likewise, the 2000s saw the second internet boom as well as the housing bubble, and Obama inherited the mess after it popped.

            Protip: it doesn’t matter which party is in power, they’re always cleaning up the mess left by the previous one.

      1. Yeah, probably the same economists that thought all the stimulus spending was a great idea.

        No, the same economists that said that the stimulus was too small to work. And they were right.

        You really only hear the facts you want to hear, don’t you.

        ——RM

      2. @Figurative: Please explain how our tax rates are too high, yet we are running a deficit and conservatives refuse to cut the incredibly high defense spending. Then explain why cutting corporate tax rates will actually solve this problem, because there is no way that the U.S. economy can grow fast enough for long enough to compensate for the massive tax cuts that you and your ilk feel is mandatory. Then explain how the Republican platform is suddenly so different from the Reaganomic “trickle down” or the Bush “tax cut and spend” that it will actually work this time. Then try again.

    2. Meanwhile, the IRS is misusing a tax evasion provision to go after American ex-pats or dual citizens for relatively paltry amounts of money.

      I know one person, born in the US but moved to Canada with her parents when she was 5, has never gone back even for vacation, worked her entire career as a doctor here, paid all her taxes here (remember they’re higher than the US), don’t think she’s even voted in US elections… and they’re going after her for tens of thousands of dollars because she never thought the US part of her dual citizenship would be a liability.

      Meanwhile, we’re talking about a tax holiday for billions in overseas corporate accounts. Yes, it’s post-tax money in the countries they’re held in, but that’s exactly what the IRS is trying to do to ex-pats–collect tax on personal income that’s already been taxed. Even Canadian ex-pats can retain citizenship and not be double-taxed, as long as they’re a declared non-resident.

      Disgusting.

      1. Does she carry a US or Canadian passport? If she carries a US passport, then she must expect the benefits of being a US-citizen, thus the taxes.

        IF, as you say, she’s paid more taxes in Canada than required by US taxes, then she owes nothing. The US, gives FULL CREDIT for foreign taxes paid. Clearly, if she owes something as you indicate, it doesn’t matter that the marginal rate is higher, the actual rate must be lower, after you take away deductions.

        And, yes, I agree that it sounds pretty lousy.

        1. Unlike some other people I know who the IRS is going after, this particular person does not have a current US passport. AFAIK you don’t need a passport to remain a dual Canadian/US citizen, she still has a US birth certificate and she hadn’t revoked US citizenship.

          Clearly there’s some odd loophole that’s allowing the IRS to claim that she owes them tax money. It’s possible she simply never filed tax returns with the IRS, so they think she’s evading taxes.

  4. I love Apple but the tax law is the tax law… You and I have to pay… So your plan is if a company makes enough money give them a break so we can at least get “some” of it…..if they want to keep it overseas and not really be able to spend it the way the like or need …. Fine … But I would never let any company “extort” our tax revenues by holding offshore with the promise of “make an exception in our cases and we will bring out money home to help our country..,. We are all expected to do our part… Why aren’t they.

      1. Bullspit.

        Apple has offshored it’s intellectual property and takes a tax deduction every year for “royalties” for the US company using this intellectual property. It’s a pure tax dodge that every major US company is playing.

        They still are showing high tax expenses because they are recognizing the tax at US rates and deferring the tax to be paid upon cash repatriation.

        Almost all of the intellectual property is / was made in the USA, but the income is no longer generated in the USA and an expense is recorded.

        IF anyone believes that allowing these companies a big fat tax holiday to bring back the money they never paid US taxes on (and by the way they get a credit against US taxes for the foreign taxes they did pay) will be reinvested in the USA, then they are ready to by prime farm land in northern Japan.

        1. Strange, I have never heard of Apple using that IP offshore tax dodge. Can you point me to some info on that? I have heard that Google got an IRS ruling allowing them to offshore their proprietary search algorithm IP.

  5. Steve J. and many others have been trying to bring the money back into this country for years now. If they (our so called government) really want to fix the economy and bring investment and manufacturing back into this country this has to be the first step. They can’t grow the economy on the backs of American workers while continuing to give foreign countries competitive advantages by taxing American business trying to bring their money home. Protectionism doesn’t work so they have to make it a level the playing field so American companies can compete when foreign business are not handicapped in the same manner. They have money to invest in their infrastructure and we don’t. It doesn’t take a rocket scientist to figure this out.
    Yeah, I hear the screams from those that want to tax the rich and big business and give it all away but when all the jobs are gone, who you going to blame then?

    1. The U.S. has to collect enough tax revenue somehow. If you want to remove the taxes from business, then fine. But other tax rates will have to rise to cover that loss in revenue. If workers are taxed more, then they will demand higher wages in order to offset the reduction in income. And the circle continues.

      Actually, now that I think about it, this is probably a good thing because the percentage of U.S. citizens that pay their taxes is probably much higher than that of corporations, particularly the big ones with the hordes of lawyers. So sure, change the tax code, but only for new revenues, not for already realized profits, and the new law would not apply until all foreign profits were repatriated. That way there will be no windfall for large companies hoarding cash overseas.

  6. Now if Apple would just have the factory stick a $1 bill in the box of every iPhone, iPad, iPod, and Mac shipped to their US stores, to be removed by store personnel upon receipt, they could repatriate that money in no time!

    /joking

  7. Okay, it’s no secret that roughly 2/3rds of Apple’s cash is held by overseas subsidiaries. According to a couple reports on taxes, it appears that Apple pays 31% on its US-earned income, one of the highest in the S&P500. Since Apple’s net tax rate is 24%, which you can look up in its financials, and since we know 1/3rd of Apple’s profits are made in the US and 2/3rds is made overseas, then we can easily figure out that Apple PAYS 21% on its foreign-earned income. Do the math:

    31% on 1/3rd, plus, 21% on 2/3rds, equals 24% on the total.

    What that implies is that if Apple were to repatriate its foreign-earned income that it already has paid roughly 21% on, it would have to pay about 10% more to the IRS. So, the additional tax bill on Apple’s $54B in foreign cash would only be about $5.4B. Big money, but not the amount implied if a 35% marginal tax rate were applied.

    1. Okay, I made a math error. Let’s do that again.

      If Apple has paid 21% for foreign taxes on that $54B in cash, that implies a gross income of $68.5B, and $14.5B paid in taxes.

      31% on that $65.8B is $21.2B. The difference of $21.2B and $14.5B is $6.7B.

  8. There once was a country called the USA that was the most business friendly nation on earth.

    50 years ago the US was the largest creditor nation on earth, now we are the largest debtor.

    Sad times for this country and the future does not look bright.

  9. No such thing as repatriating this money. It’s largely money earned by overseas laborers making products bought by overseas consumers. Apple pays taxes where they are due. It’s Apple’s money, not USA state property.

    1. Well, it’s Apple’s money and Jobs and Apple have pleaded to Obama to be able to bring it back. Even Prez Clinton agreed with this (as well as lowering the corporate tax rate). No, it just comes down to Obama being the worst Anti-Business President ever. Even staunch Dem supporters who voted for him are outraged.

  10. Apple manufactures everything overseas. Apple in the US is Management, Engineering, Design, Development, sales and service. They don’t need too much money to run their business in the US.

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