Apple is holding more cash overseas than any other corporation in the U.S. and it’s paying off big time by helping the company avoid an estimated $59.2 billion tax bill.
Of course, Apple’s not alone in holding massive amounts of cash overseas. A new study released today found that the 500 largest companies hold more than $2.1 trillion in profits offshore to dodge paying U.S. taxes. Collectively, the companies would owe an estimated $620 billion if they repatriated the funds.
Apple currently holds $181.1 billion offshore in three overseas tax havens. The study says the iPhone maker would owe an estimated $59.2 billion.
Other companies holding massive amounts of cash offshore include Microsoft with $108.3 billion in five tax haven subsidiaries. General Electric has $119 billion in 18 tax havens, while drug company Pfizer has $74 billion in 151 subsidiaries.
Instead of bringing the cash back to the US and paying taxes, Apple has repeatedly decided to borrow money to pay for things like its stock buyback program. Tim Cook has publicly commented on the high US tax rate saying it’s not a viable option for businesses, and that the US needs to restructure its corporate tax code.
Buster Hein is a freelance writer who lives in Phoenix, Arizona. Twitter: @bst3r.
29 responses to “Apple dodges $59.2 billion tax bill by holding cash overseas”
Makes sense to me. If I were business like the mentioned companies I would be doing it to. It’s the archaic tax system that’s out of whack.
One can only wonder who else benefits from this, our leaders should be looking at this, its not a win win situation, its costing us the people most likely.
Big corporations are not the only ones doing this. Anyone with at least $10K can set something like this up.
What I dont understand is why would Apple pay taxes on earnings not made here in the US. So they have to pay tax to the foreign govt and then to the US again? That’s like you paying your income tax 33% to federal govt and then 33% to state govt. Apple has always said lower the tax and they will bring the money home.
I’m a complete n00b so I’ll probably botch this, and by botch I mean show my complete ignorance of tax law as an average American.
If you’re an American and you make money overseas, then you report that as foreign earnings. Let’s say the US tax is 35% and the money you made in France by France for 20%. As I understand it, from a basic philosophical standpoint, the money you made in France automatically incurs the 20% tax bill and you pay that. Then you bring the money home and the US has a 35% tax bill for you. However, you get credit for “foreign taxes paid”, so your 35% is reduced by the 20% you already paid and you owe the US 15%, the difference. What complicates this is probably that let’s say you make, in 2014, $100M in the US and $100M in France. You pay $35M to the US and $20M to France, but you don’t repatriate the overseas money. The $35M tax filing you create for the US still probably credits you for the Foreign Tax you paid that year. So for 2014, you actually pay $15M to the US and $20M to France. Now if you repatriate the foreign funds, you’ll owe a full $35M because you’ve already used your Foreign Tax Credit and it will feel like you’re paying 55% on foreign earnings, even though you aren’t and you got a discount on domestic earnings by claiming the foreign tax credit.
But, like I said, I have no clue what I’m talking about. Can we get some tax experts up in here to point out the flaws in my perception?
Hands up who wants to pay more tax?
Hold on. … You make it sound as if Apple were keeping money from the US government that it earned in the US. … All the money you are talking about was made all over the world. … Are you saying that the US has the right to tax monies earned world wide? I suppose you also agree that China, India, Russia, Australia, Canada, … every friction’ country in the world can tax Apple’s worldwide monies? … What a load of misdirected, feeding the politicians, feeding the haters, bowl of crap that kind of thinking is.
Yes, they do. [Unfortunately.] Ignorance is a bowl of crap.
Ignorance allows you to assume a mistaken belief that they are cheating. You just want your belief to be true.
If they owed the money, the government would collect the money.
I never said they are cheating. And its not a belief, its a fact of reality. Look things up, instead of dreaming them up. Life is a ton easier that way.
Apple is breaking no US tax laws. If they were you can be assured the US gov. would be prosecuting Apple.
I bet you take advantage of all legal tax breaks you can. I sure do.
Apple and thousands of other companies and individuals make money out of the U.S. and pay taxes in the countries where they make the money. There is no law that says they have to bring this money back to the U.S., so they are breaking no laws. However, there is such a huge amount of money at stake that somehow their actions are looked at as unpatriotic, deceptive and even borderline criminal — not because it is any of those things, but governments and socialists just LOVE to take other people’s money because it’s so tempting. Since Apple (and thousands of other companies and individuals) aren’t doing anything illegal, stop trying to make it sound like there’s a problem.
The US’s corporate tax rate is nuts, and you can think the Left for that. Anybody listening to Bernie Sanders? He wants to increase corporate taxes even more and make the top earners pay 90%. It’s just nuts.
Good. GE pays NO tax. Let the corporations, who are successful thanks to the resources that America provides, pay and leave the middle class – who makes the corporations their money by buying the s**t – alone.
Okay, let’s think about this..
If corporations are taxed too much, they can’t hire people. So there are fewer jobs. Remember that the ultimate purpose of a company is to MAKE A PROFIT. That’s how capitalism works. They don’t exist just for the benefit of the world. Somebody had to come up with the idea, have the money to start the company, invest money in the company, etc, etc. So if they can’t make a reasonable profit, the company isn’t going to last. And so if they’re taxed too much, like I said, it won’t be cost-effective for them to be in business.
The middle class already pays VERY little in income tax. What you’re seeing coming out of your check is social security withholdings — you know, that “savings plan” that is going bankrupt. Right now it’s paying for people much older than you/us. Actual income tax is minuscule by comparison.
The wealthy in this country already pay over 90% of all income taxes… that’s the top 1% of earners. If you look at the tax charts, you’ll see what I mean.
Lower taxes is better for everybody. It allows companies to hire more, to invest more in themselves, make new stuff, etc, etc. Think about it from their point of view. They ARE people too.
Social Security has the largest surplus ever right now. If everyone stopped working it would run out in 27-30 yrs. But as we know ppl will still work. Billionaires fund “think tanks” to discredit social security so they can privatize it and make money off you. The wealthy pay 90% because the top 3/10 of 1% make 85% of all new income. Bernie sanders net worth $400,000 . Any other cannidate 5 million+
Find real facts and not ones from billionaire think tanks
Wow, where do you get these ridiculous facts? Post a link please. Meanwhile, I’m sick of arguing with idiots. Enjoy believing what you do because it’s flat wrong. I’m out.
So, using your logic, Apple is not being taxed too much because they keep hiring new people.
If making a profit is the ultimate purpose of a company, then you’d think they’d pay their CEOs a few million less.
You’re rehashing the same ‘ole trickle-down theories that have been used by Republicans for the last 30 years. How has that worked out for the economy? Companies – and the people that run them – have made out like bandits, while the middle class has all but disappeared and wages have essentially been flat (inflation adjusted) for these 30 years. Youre trying to tell us that if we tax companies too much, they can’t hire. Well, companies have had record profit after record profit – but all manufacturing and many service jobs went overseas anyway. YES, the official corporate tax rate in the US is one of the highest in the world (Republicans like to point that out whenever someone suggests more corporate taxes), but the “effective” tax rate (what corporations actually pay after taking advantage of the many legal loopholes and deductions mostly republican politicians granted them in return for “favors”) is actually pretty low.
Bernie Sanders is looking pretty good to this disillusioned Republican. Unfettered capitalism is not a good thing – and the pendulum has swung too far in that direction.
I hate to burst your bubble, but over the last 5 years GE’s tax rate has varied from as low as 4.19% (2013) to 28.5% (2011). This information is easily available. Whoever you are listening to is making stuff up or lying.
Yes, and Trump also says he wants to increase corporate taxes … including his own. In fact, I just saw a video news clip today where he says this. So, it’s not only those evil socialists.
Apple isn’t dodging anything. They don’t have an outstanding US tax bill.
Yep, and we see the big problem with companies like apple. Dodge paying taxes, but the white collar man has no access to the same loop holes. It is a disgrace, and patriotic americans should be just as upset.
fuc# apple, trump, Romney, republicans, and any and all people and corporations that hold money offshore and do not pay taxes. They want all the protections and benefits and freedoms of living and working in the United States, but the scum bagged 1% and the companies they control do not want to pay their fair share for that privilege. No, they want me to pay for it, funny that sounds an awful lot like socialism. We should tax the shit out of them, then cut off their heads and eat them.
Hahaha this is awesome. I mean you have no idea what you’re talking about, but I like your style.
If the US would give a tax holiday or offer a lower rate of tax to these corporations the money would flood back to the USA. As a result the country would be better off with some tax in their coffers with a benefit for everyone. Secondly, the corporations would have a mountain of cash to invest or return to shareholders that would benefit the economy.
Sadly, such tax holiday happened before – with the same promise (companies will reinvest the money in the US). Sometime in 2001-2006 Republicans gave the same reasons and basically let these companies bring the money home for a paltry 5% or so. Sure, the government got 5% (couldnt they at least have tried for 20%?), but instead growing the companies, the money mostly went into executive bonuses and to pay for dividends or stock buy-backs – both of which disproportionately help the wealthy.
Hi TJ, Thanks for your comment; but keeping money off-shore is a complete waste of cash. Instead, Apple have to pay Wall Street to arrange loans so that they can buy-back their shares. Even if the money went into stock buy-backs, share prices would hold or increase and this does not disproportionately help the wealthy, it helps everyone who has a pension. Executives pay tax on their bonuses so the government gets back part of what they give away in tax breaks. Someone should ask Luca Maestri what percentage he would be happy to pay taxes at and then go to the government and ask what they will do.
Ian, I agree that the cash overseas is not invested optimally, but it’s hardly a waste since it does generate some return. I obviously disagree with you completely that buy-backs and dividends don’t disproportionately help the wealthy. First the buy-backs: in the long term, they shouldn’t move the stock price – after all, the current price includes cash-on-hand; if you use that cash to buy shares in your own company, you’re just moving around chairs. But share buy-backs do tend to cause short-term increases in the stock price. I haven’t researched the topic, but I suspect the reason is two-fold: (1) during the buy-back period, there’s obviously more demand – and since the supply didn’t increase, the price goes up. (2) Superficial investors see EPS for AAPL increasing, so they buy! Never mind that EPS only went up because share count went down rather than due to increased earnings.
The wealthy disproportionally benefit from the buy-backs because they’re able to trade on the stock movement due to the buy-back. A pensioner can’t.
The story for dividends is similar: the wealthy have a much larger proportion of their wealth tied up in the stock market than your average joe – therefore, they’ll benefit much more from dividend payouts. Top it all off, the largest source of income for the middle class is from actual work. The largest source of income for the wealthy are investments – take a guess which income is taxed higher? A fair tax system would tax all forms of income equally – or even reward actual “work” (vs. playing the stock market) with a lower tax rate.