Cash abroad rises $206 billion to $1.95 trillion as Apple to IBM practice tax avoidance

“The largest U.S.-based companies added $206 billion to their stockpiles of offshore profits last year, parking earnings in low-tax countries until Congress gives them a reason not to,” Richard Rubin reports for Bloomberg. “The multinational companies have accumulated $1.95 trillion outside the U.S., up 11.8 percent from a year earlier, according to securities filings from 307 corporations reviewed by Bloomberg News. Three U.S.-based companies — Microsoft Corp., Apple Inc. and International Business Machines Corp. — added $37.5 billion, or 18.2 percent of the total increase. Even as governments around the world cut tax rates and try to keep corporations from shifting profits to tax havens, the U.S. Congress remains paralyzed in its efforts. The response of U.S.-based companies over the past few years has been consistent: book profits offshore and leave them there.”

“Tthe companies are deferring hundreds of billions of dollars in U.S. taxes as they lobby to end a system they describe as a competitive disadvantage in world markets. The top 15 companies now hold $795.2 billion outside the U.S., up 10.6 percent,” Rubin reports. “Iinquiries have revealed an Apple subsidiary that earned $30 billion over four years with no home for tax purposes and loans that let HP access its off-limits offshore cash. The Organization for Economic Cooperation and Development and the Group of 20 nations are trying to negotiate a common set of rules to prevent such profit shifting.”

Rubin reports, “‘Until they change the tax law, there’s not much other than extreme distress in the United States that would precipitate a repatriation,’ said Jennifer Blouin, an accounting professor at the University of Pennsylvania’s Wharton School who has studied companies’ decisions about overseas profits. ‘I’m stumped as to why we can’t change the U.S. system.'”

Read more in the full article here.

MacDailyNews Take: Tax avoidance is legal and, obviously, the U.S. corporate tax rate is way too high.

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

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  1. Tim, as a stockholder I say keep doing it. Do not hand the money over to Barack Obama. He wants his one third cut for doing nothing. Well, he did sic his Department of “Justice” on you and all the antitrust lawyers because Apple so dominates the ebook market.

    Anyway, keep the money as far as possible from Obama as you can. He would just use it for another $500 million vacation with his five jetliners and 1000 government paid Obama servants in tow. So he can lecture us on how Global Warming is destroying the world. And then jet off with his entourage to the next stop on his I AM A ROCK STAR road show.

    1. Besides, it is not tax avoidance. State can not force private company move home its money that were earned abroad. It is free discretion by an enterprise.

      Tax avoidance is when companies move profits from USA’s sales abroad, and this is what Apple does not do, so they are the biggest payer of profit tax in USA.

  2. i have solutions. it’s obviously a criminal act to pay taxes for overseas sales and not an extortion fee when repatriating monies. criminalize.

    incarcerate tim et al food, no water.
    or, fly in navy seals, capture cash hoards, spend.
    or, burn a few ceo’s joan of arc style on pennsylvania ave to encourage cooperation from the business community
    or, double the corporate tax rate right here at home. god, that one’s so obvious.
    or, bring in some weegers. mix it up.
    or, bring in ecuadoran cannabals, blend thoroughly with well-groomed corporate types, upload foodfest to youtube. repeat.
    thank you, i’ll be here all week.

      1. one day i will gain a little stature. i’ll be someone who understands things at least enough to fool some of the people some of the time. at this point, i’m just a tiny more tech literate than your average ignoramus. but, i do like reading insightful posts even if a lot of it flies over my head.

        1. You’re off to a good start with that science fiction poetry. Yes, you have the nascent ability to set intellectual phasers to stun, as if if Emily Dickinson had joined the crew of the starship Enterprise. Keep postulating, and posting, solo me.

  3. Cue the line of dipshit elected officials looking to get a little press by bashing Apple instead of the retarded repatriation policies they crafted – and have the authority to change.

    Focus on what you can control, asshats. Sponsor a bill. Get some of that money back at a reasonable rate instead of getting none of it back at the current one.

    Make us not entirely regret the fact that you represent us.

  4. There is no tax avoidance. These companies have paid taxes in the countries where the money was made. The only thing going on here is that the money remains in the country where it was made and not taxed twice by moving it to another country. If you were to go to work in, say, France. And your income in France was taxed by the French Revenue service, would you be very happy to also be taxed again on the money you earn by the US government. I would not.

    1. Actually, your statements are not factual in most cases. In most cases the money is transferred out of where it was “made” by legal means to other asset and IP rights holding companies in other countries. Just read about the recent accounts of the legal transfer of funds out of Australia. The income was created in Australia, but the monies were shuffled out of Australia by perfectly legal means in order to avoid paying taxes in Australia on that income. There are many, many other cases that are similar. In some cases the effective tax rate on corporations that do this is significantly less than 1%.

      The problem is that the system is broken. There are many legal ways to avoid taxes. If it were as simple as “You must pay taxes in the country where the money is made.” then the problem would be solved, mostly. The real issue is that there are many differing laws as to how to define “taxable” profits. By engineering “costs” in a high tax country by paying for IP rights and other “costs” to another company in an extremely low tax country a company can have effectively zero taxable profit in the original country. All perfectly legal.

      1. And your statements are not fully factual either.
        First: Not in “most” cases, rather some cases;
        Second: Within the British related countries, there are agreements that allow the transfer that you are pointing out. Similar to USA States and USA Territories.
        As an American native, I lived overseas for 26 years and although working for a USA organization, I paid INCOME taxes in the country of residence; I paid SS in the USA. Some of the US tax laws concerning US companies working overseas are crafted in collaboration with foreign countries.

        And, When working with other countries, One size does not and cannot fit all. IF the US tried to do with laws that “tax-it” pundits here wished, we would find that these companies would be severely hindered from production or sales in those countries. The inequity in tax laws from country to country as they cooperate with the US – only disturbs those who want what others have.

        “If you have it, I want it; if you do it, I’ll control it; If I don’t get my way, I will whine like a 5 year old.”

      2. Shadowself, what you said is correct in terms of what Apple does in Australia. Legal though it may be, it’s not terrible fair to the Australians.

        But that does not negate Cococanuck’s point that the US Government should not be permitted to tax profits made by US companies a second time upon repatriation. It’s just plain wrong not to mention damaging to long term US competitiveness. Most other countries do not do this. And yet all the media and some lawmakers are talking about is reducing the tax rate of repatriated funds and not eliminating it altogether. Why?

        The Senate and Congress are full of self serving fools. But collectively we voted for them. The sad truth is that we all deserve the government we get.

      3. You’re right, but (and I’m sure you’ll agree with this) everyone should play by the same rules. It’s not just Apple that should be paying taxes properly in the countries in question.

        Regarding repatriation… I’d imagine other countries would hate to have that money moved back to the US.

  5. Intentionally dishonest is the manipulative media repetitive drone of “the do-nothing Congress.”

    Let’s set the record straight on this issue.

    Congress in a New York minute will heed Tim’s call and lower business taxes.

    It is the DO-NOTHING SENATE, controlled by the President’s party that repeatedly refuses to lower tax rates.

    That’s the fact, Jack!

    1. I think you missed the memo. You are not allowed to say a single negative word about Obama. If you do that simply means you are racist. Even if he makes new laws every day with Executive Orders on whatever whim he has at the moment. No criticism or you are a racist and probably also a “climate denier”!!!! Do not deny the climate. Or be a racist. Just vote straight Democrat and the name calling will stop. And you will get health care, and it will save you $2500 per year and you will be able to keep your doctor and your health plan and the Ambassador to Libya will actually not be dead, but just vacationing in Aruba.

      1. Yes, but the Democrat Party is the one that worships high taxes and as many abortions as possible, federally funded of course, and hopefully done by Catholic nuns forced to do them at gunpoint, so they will stop being so “religious”.

        1. Dear Kent. When you try to make a point by going way overboard and making wild and crazy accusations, then we have to suspect EVERYTHING that you say. Crazy here… then crazy there.

          —Catholic nuns are not forced, at gunpoint, to perform abortions.
          — The federal government does not try to increase the number of abortions.
          — Several states are actually passing laws that are designed to close abortion and health care clinics by putting very onerous rules on them. Forcing a free person who may need the health support (including abortions in some cases) to forgo the assistance because some people believe that its their right to force their beliefs on other people.

          It does not matter if you like or support a policy or not, if government takes away your choice, then they are restricting your freedoms. Just a thought.

          1. Is the Democrat Party forcing Catholic hospitals to supply health care plans that include abortions and directly contradict their religious beliefs? Groups like the Little Sisters of the Poor?

            Is the Obama administration forcing and DOJ working to force individual business owners, like a Christian woman who owns a bakery, to bake a cake for a homosexual wedding and participate in the wedding against her religious beliefs?

            1. Why are you such a “Christophope” that you would force a good person to do a thing that violates their religion when you could easily pick a person who has no problem doing the thing you want without compulsion? What makes you such an evil person that you enjoy coercing good moral people to violate their consciences using the power of the government? You are truly a “freedomphobe”.

  6. Tax avoidance?

    Are there people out there who actually think that it is wrong to avoid paying taxes that the government says you don’t have to pay? How many people are willing to pay more tax than the government wants?

    1. People are supposed to pay the maximum taxes because it helps the government provide vital services. The only exceptions are people like Tim Geithner, former Treasury Secretary, who forgot to pay his taxes. And Harry Reid, who forgot that he owned the land in Bullhead City, Arizona that he made millions on. And other Democrats who suffer from Tax Thought Repression Syndrome. Everyone else must pay. Especially Tea Party members because the IRS now have about a billion rounds of ammunition and will not only audit you into bankruptcy just for existing, but will come in with SWAT teams and weapons firing. Must make a few examples. This is the new Obama Law. “You pay so we don’t have to.”

      1. Apple also pays the maximum taxes that are REQUIRED by the government. I don’t think you get my post at all. No one is WILLING TO PAY MORE THAN THEY HAVE TO. The laws say that Apple must pay tax on income in the US an do not have to pay tax on money earned in a foreign country IF THEY DON’T BRING IT INTO THE USA. They are allowed to use it to grow their company in those foreign lands with the money they earn over there.

  7. The politicians will do nothing to fix the tax code. It is very clear that they are all afraid of the lobbyists who will protect all the tax breaks and loopholes their various organizations get. If one of them tries to do anything they will lose their financial support and the next election.
    A simplified tax code is the solution but there are too many interested parties to allow that to happen.

    1. The Revolutionary War, the original Tea Party in Boston was organized and the tea was tossed into Boston Harbor over a less than 1% tax! And we are sitting still for confiscatory taxation rising over 60% of incomes in some areas today. Absurd!

  8. I’m getting so sick of this labeling in society. If AAPL chooses to do something for the good of mankind with it’s money, that’s their call, but shielding the maximum amount you can is not “tax avoidance,” especially if it’s L-E-G-A-L. Get over it! I’ve got news for you, they’re doing EXACTLY what the law says they SHOULD do, actually MUST do, which is be beholden to maximizing the ROI for their investors. This notion they should be “good citizens,” B.S. I don’t have a half million in a company so they can feed starving people in Botswana.

  9. Apple pays taxes in the country where the revenue originates. It’s not tax avoidance. It’s greed from the US government to charge crazy amounts for repatriating cash. Why wouldn’t they want Apple to bring it back to the US to spend?

  10. Why doesn’t the government just give Apple tax money to Samsung? It’s pretty obvious that while the US doesn’t like protecting it’s own, they feel it necessary to help fund foreign competitors so that they can copy American products.

    I mean, look at Samsung’s watch. They need all the help they can get.

  11. Hey Carl Levin and delusional stooges:

    Are you getting the idea that you’re antiquated old buffoons who’ve damaged our country with your tomfoolery? It’s time to bring the cash back home the RIGHT way: With deliberately discounted taxing of foreign profits FOREVER.

    Go listen AGAIN to what Rand Paul stated at your grotesque witch hunt hearing with Apple. Go on! Give it a listen and UNDERSTAND.

    Note that I’m no drugged Rand Paul supporter. He just happened to make perfect sense that day and Carl Levin’s ilk NEVER did. Here’s the complete version:

          1. I call myself, among other things, and optimist cynic. I expect the worst, but act toward the best. Of course everyone ‘should’ be yelling to high heaven to put both parties in jail for collaborating in treasonous acts against the citizenry. But what do I expect to happen? Nothing. And that doesn’t matter. I’m speaking up. Someone spoke up. Don’t ever say nobody spoke up. Etc. I’m not into enabling crooks and fascists with silence or ignorance. And so forth.

  12. When I can work overseas and not be doubly taxed I might be moved concerning the plight of the corporate tools that preach on this subject. Nobody uses much ink or airtime to bitch about how expatriate Americans are ripped by the tax code but we always hear this line about businesses.

    The truth of the matter is that although we have a high quoted tax rate we have a fairly low effective tax rate. Corporate welfare is alive and well in America.

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