Close

Microsoft (MSFT), Apple (AAPL) Top List as U.S. Offshore Corp. Cash Pile Swells

March 12, 2014 7:57 AM EDT
Microsoft (Nasdaq: MSFT), Apple (Nasdaq: AAPL), and International Business Machines (NYSE: IBM) were three of the largest contributors to a massive, offshore cash hoard by U.S. companies made in 2013.

Bloomberg-compiled data of 307 of the top U.S. corporations in the S&P 500 shows that profits earned outside the U.S. rose $206 billion, or 11.8 percent, to $1.95 trillion. Microsoft, Apple, and IBM contributed $37.5 billion, or 18.2 percent, to the total increase.

The top 15 U.S. companies now hold $795.2 billion outside of the U.S., up 10.6 percent over the prior year. The top 22 largest U.S. companies hold as much offshore cash as the next 285 combined. Surprisingly, that's a slowdown from a 15.9 percent gain in offshore cash the prior year, though 2012 could still be billed as a post-financial crisis recovery year for many.

The debate boils down to whether U.S. Congress should be tougher on companies operating abroad in lieu of continual disputes over taxation and spending. Companies are deferring billions in U.S. taxes as they work to end a system described as a competitive disadvantage among global markets. Academic studies have posted the annual tax loss at $30 to $90 billion, Bloomberg noted.

Tech companies have moved to shift patents and other intellectual property to locations like Bermuda, Ireland, Luxembourg, the Netherlands, and Switzerland, which are more tax-friendly for corporations.

To fund operations at home, corporations are leveraging up given the still-low-interest-rate environment. Why pay double-digit penalties on repatriation of cash when you can borrow for single-digit rates? Apple famously did this last year when it looked to perform a massive, shareholder-friendly capital allocation program. Verizon (NYSE: VZ) made a similar move when it moved to acquire the rest of Verizon Wireless from Vodafone (Nasdaq: VOD).

Apple's Tim Cook even pointed how the system works last year when he squared-off against a Senate Permanent Subcommittee on Investigations, saying Apple pays all the taxes we owe -- every single dollar ... We not only comply with the laws, we comply with the spirit of the laws.

We couldn't have said it better, Tim.

Is the system broken? You can decide for yourself the next time you look at your pay stub and see another chunk being taken out as the average worker is being taxed more, while large corporations keep avoiding taxes altogether.


Serious News for Serious Traders! Try StreetInsider.com Premium Free!

You May Also Be Interested In





Related Categories

Insiders' Blog, Litigation

Related Entities

Standard & Poor's, Definitive Agreement