Because of high US corporate tax rates, most of Apple's $82 billion cash stockpile is 'trapped' overseas

  • Posted by a hidden member.
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    Jan 14, 2012 10:38 PM GMT
    http://www.tuaw.com/2012/01/11/most-of-apples-82-billion-cash-stockpile-is-trapped-overseas/

    Apple may have enough cash on hand to make Scrooge McDuck's money vault look like a kiddie pool by comparison, but according to SeekingAlpha, most of that cash is effectively trapped overseas. US$54 billion of Apple's overall $82 billion in cash is in offshore accounts, and Apple cannot repatriate that money to the States unless it wants to pay a huge 35 percent corporate tax on it.

    If Apple attempted to bring that money into the States, right off the bat through the magic of taxes that $54 billion would transform into $35.1 billion, with the other $18.9 billion disappearing down the federal money hole. With that much cash at stake, it's no wonder that Apple hasn't been in any hurry to repatriate its huge foreign cash reserves.

    SeekingAlpha's analysis of Apple's 10Ks shows that Apple's foreign cash and investments are growing far faster than those in the US, and with sales in China continuing to ramp up year after year, that pace is only going to increase.

    Apple and other companies have lobbied for a repatriation tax holiday to temporarily lower the tax rate from 35 percent to something more palatable to corporations, in the neighborhood of 5 to 9 percent. That proposal has met with strong resistance from the current US administration, however, which has said that any corporate tax holiday must come as part of an overhaul of the entire corporate tax structure, something that's unlikely to happen in the near future.

    Meanwhile, as Apple's foreign cash hoard grows, the money is effectively useless to Apple and its shareholders. They could build a stack of dollar bills 3400 miles tall, but can't they can't do much else with it for now.


    http://seekingalpha.com/article/318794-apple-s-foreign-cash-hoard

    Increasingly, Apple's cash lies overseas out of easy reach, a trend that will pose a considerable challenge for the company in instituting a significant dividend, buyback, or U.S. acquisition. For the foreseeable future, Apple's foreign wealth will keep getting larger: Ultimately, Apple may become more of an overseas business with a U.S. division hindered from a lack of ready cash.


    Bottomline: high taxes are causing US based companies to starve their US operations of money for further expansion and investment. This means fewer jobs. Some politicians want to increase taxes.
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    Jan 14, 2012 11:29 PM GMT
    Cry me a river...
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    Jan 15, 2012 12:11 AM GMT
    Christian73 saidCry me a river...


    Says the guy who doesn't understand how resources get created - and doesn't understand that capital is required in capitalism?
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    Jan 15, 2012 12:20 AM GMT
    The US tried this in 2004. Companies were allowed to bring back money at a 5.25 % tax rate, but the $312 billion that came back was used primarily to buy back stock - it did not create jobs and research investment was minimal.

    Forbes a conservative investment corporatation reported that for 2010 Apple's tax rate fell to 24%.

    The corporate tax rate of 35% is misleading. That is the tax before all the breaks they get for R&D, depreciation (I"d love to depreciate my computer), interest of any type, taxes - wouldn't we all love to be able like businesses to deduct the tax we pay on fuel at the pump. And a lot of corporate income in the US is taxed at a nominal rate of less than 35% - for instance oil depletion allowances allow corporations to pay at most taxes on 65% of profits, making 35% of profits tax exempt right off the top and in many cases, no tax is paid depending on how the books are cooked - letting them thereby take a loss offsetting paying taxes on profits.

    In many cases comparing US tax rates and foreign tax rates is like comparing apples to automobiles (not even oranges). For example, in Germany the corporate tax rate is 15%, however, once you add corporate trade and solidarity taxes, the effective rate is 30%. Those are taxes the US doesn't have.

    Still using Germany as an example, even with their effective 30% tax rate, like other countries they supplement the income with with higher taxes on individuals and taxes such as value added taxes and solidarity taxes. In Germany the highest individual bracket is 45% and capital gains may be taxed at up to 25%

    Certainly the tax system needs to be overhauled, but not just for one group, but for all Americans. Unfortunately, not may people or businesses will support getting rid of their tax breaks and those that get no tax breaks but which do pay taxes have no clout.



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    Jan 15, 2012 12:28 AM GMT
    webster11111 saidThe US tried this in 2004. Companies were allowed to bring back money at a 5.25 % tax rate, but the $312 billion that came back was used primarily to buy back stock - it did not create jobs and research investment was minimal.

    Forbes a conservative investment corporatation reported that for 2010 Apple's tax rate fell to 24%.

    In many cases comparing US tax rates and foreign tax rates is like comparing apples to automobiles (not even oranges). For example, in Germany the corporate tax rate is 15%, however, once you add corporate trade and solidarity taxes, the effective rate is 30%. Those are taxes the US doesn't have.

    Still using Germany as an example, even with their effective 30% tax rate, like other countries they supplement the income with with higher taxes on individuals and taxes such as value added taxes and solidarity taxes. In Germany the highest individual bracket is 45% and capital gains may be taxed at up to 25%

    Certainly the tax system needs to be overhauled, but not just for one group, but for all Americans. Unfortunately, not may people or businesses will support getting rid of their tax breaks and those that get no tax breaks have no clout.





    Um you do know that the corporate tax rates as reported by Forbes are blended against foreign tax rates? Did you miss entirely the point of the article? That in fact, the reason why they don't bring in the capital is because of the tax?

    You're right the tax system does need to be overhauled and not only because it's ridiculously complicated to give every special interest group their own little tax break. Germany isn't the only place Apple has their cash in fact I highly doubt it's Germany. It's not just Apple that has this issue - it's Google as well.

    At least dividends or stock buybacks puts money and cash back into mostly US hands for reinvestment or reallocation. These barriers to capital are simply unintended and disastrous consequences to poorly thought out and often populist policies.
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    Jan 15, 2012 12:38 AM GMT
    You miss the point. Using the last time this was done, if they bring it back it will just go to profits, it won't be used for hiring, R&D or investments - at least in the US.

    As reported by S&P, corporations are sitting on over $ 1.4 trillion in cash; the Federal Reserve states that if you add other liquid assets (WSJ 9/17/11) it is over $2 trillion; these companies are doing quite well with the US corporate tax system but they are not using it for major developments.

    If Apple (and Google) are allowed to bring the cash back at a lower tax rate, there is no indication they will do anything but add to that 2 trillion sitting - and it serves no one if they don't invest it here.

    BTW, I made no suggestions that Apple keeps it money in Germany.

    And TUAW is not exactly unbiased since it is an Apple related website.
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    Jan 15, 2012 1:01 AM GMT
    riddler78 said
    Christian73 saidCry me a river...


    Says the guy who doesn't understand how resources get created - and doesn't understand that capital is required in capitalism?


    Nope. The guy who doesn't believe your fairy tale of "value creation" and "free markets".
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    Jan 15, 2012 1:06 AM GMT
    Christian73 saidCry me a river...

    I'm sure this completely escapes you, but you continue to make yourself look extremely foolish to those of us who understand the substance and implication of the article.
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    Jan 15, 2012 1:09 AM GMT
    socalfitness said
    Christian73 saidCry me a river...

    I'm sure this completely escapes you, but you continue to make yourself look extremely foolish to those of us who understand the substance and implication of the article.


    No. I understand it perfectly. Apple's investors and executives do not want to bring the money back to the US and pay a historically low tax rate on it because they are greedy.

    And as Webster111 correctly noted, if the taxes were lowered or there was a tax holiday, it's highly unlikely that the money would be used for anything expect stock buy backs.
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    Jan 15, 2012 1:14 AM GMT
    Christian73 said
    socalfitness said
    Christian73 saidCry me a river...

    I'm sure this completely escapes you, but you continue to make yourself look extremely foolish to those of us who understand the substance and implication of the article.


    No. I understand it perfectly. Apple's investors and executives do not want to bring the money back to the US and pay a historically low tax rate on it because they are greedy.

    And as Webster111 correctly noted, if the taxes were lowered or there was a tax holiday, it's highly unlikely that the money would be used for anything expect stock buy backs.

    Two points:
    1) There are workers' pension plans invested in Apple stock.

    2) Greedy - the term used by the radical left in their extreme envy and hatred of success to describe those driven by the free market profit motive.
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    Jan 15, 2012 1:17 AM GMT
    socalfitness said
    Christian73 said
    socalfitness said
    Christian73 saidCry me a river...

    I'm sure this completely escapes you, but you continue to make yourself look extremely foolish to those of us who understand the substance and implication of the article.


    No. I understand it perfectly. Apple's investors and executives do not want to bring the money back to the US and pay a historically low tax rate on it because they are greedy.

    And as Webster111 correctly noted, if the taxes were lowered or there was a tax holiday, it's highly unlikely that the money would be used for anything expect stock buy backs.

    Two points:
    1) There are workers' pension plans invested in Apple stock.

    2) Greedy - the term used by the radical left in their extreme envy and hatred of success to describe those driven by the free market profit motive.


    1) Not sure what your point is here.

    2) No. I'm using the dictionary definition. Greed - excessive or rapacious desire, especially for wealth or possessions.

  • mrsmithers

    Posts: 213

    Jan 15, 2012 1:17 AM GMT
    I have a cure for that...

    Move your company overseas for cheap labor to do business in the United States, like AT&T for example, who places call centers in India. Come up with some kind of international Tax, and "Tax them to Death". Problem solved.....
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    Jan 15, 2012 1:25 AM GMT
    The free market profit motive is a fallacy. Even Alan Greenspan admitted so much before Congress when he saw as a laizze faire economist his life's work go up in smoke. His conclusions were:

    1) Corporations don't act in the best interest of their shareholders - (and that is to make money).

    2) The idea of "efficient markets" doesn't work.

    The free market profit model makes sense on paper, but it leaves out the human element - that humans will act in their own self interest. We saw that in the meltdown in 2008 where what was good for the corporation was replaced by the desire for short term profits and ego boosting.

    We have had in this nation since its founding a recognition that some business regulation is good even at the expense of a free market. That the interest of the nation as a whole comes first. As I have said before, this was the policy of President Washington as made evident by the second piece of legislation of his administration and it has withstood the test of time.
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    Jan 15, 2012 2:18 AM GMT
    mrsmithers saidI have a cure for that...

    Move your company overseas for cheap labor to do business in the United States, like AT&T for example, who places call centers in India. Come up with some kind of international Tax, and "Tax them to Death". Problem solved.....


    Yeah that would be a great solution when they leave, decide not to focus on American markets and make their money elsewhere. That's the problem here - they are already selling to foreign markets and just not repatriating the profits because of the high taxation.
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    Jan 15, 2012 4:43 AM GMT
    riddler78 said
    mrsmithers saidI have a cure for that...

    Move your company overseas for cheap labor to do business in the United States, like AT&T for example, who places call centers in India. Come up with some kind of international Tax, and "Tax them to Death". Problem solved.....


    Yeah that would be a great solution when they leave, decide not to focus on American markets and make their money elsewhere. That's the problem here - they are already selling to foreign markets and just not repatriating the profits because they are greedy and unpatriotic


    Just corrected Rid's quote a bit. icon_lol.gif
  • ozhanSean

    Posts: 186

    Jan 15, 2012 5:48 AM GMT
    Hahahah, No, this is wrong! Period! corporations will NEVER hire more people, they will always hire less people. The over all graph has not changed, since the industrial revolution the amount of man hours made available has be shrinking once it hit its peak irrespective of fiscal policy. That's just the way the cookie crumbles, get used to it.
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    Jan 15, 2012 7:07 AM GMT
    Christian73 said
    riddler78 said
    mrsmithers saidI have a cure for that...

    Move your company overseas for cheap labor to do business in the United States, like AT&T for example, who places call centers in India. Come up with some kind of international Tax, and "Tax them to Death". Problem solved.....


    Yeah that would be a great solution when they leave, decide not to focus on American markets and make their money elsewhere. That's the problem here - they are already selling to foreign markets and just not repatriating the profits because they are greedy and unpatriotic


    Just corrected Rid's quote a bit. icon_lol.gif


    So the question is why don't you pay more than what you're assessed in taxes?
  • Posted by a hidden member.
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    Jan 15, 2012 7:07 AM GMT
    ozhanSean saidHahahah, No, this is wrong! Period! corporations will NEVER hire more people, they will always hire less people. The over all graph has not changed, since the industrial revolution the amount of man hours made available has be shrinking once it hit its peak irrespective of fiscal policy. That's just the way the cookie crumbles, get used to it.


    Yeah and that's why the unemployment rate keeps rising and rising and rising - ever since industrialization...
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    Jan 15, 2012 10:22 AM GMT
    riddler78 said
    Christian73 said
    riddler78 said
    mrsmithers saidI have a cure for that...

    Move your company overseas for cheap labor to do business in the United States, like AT&T for example, who places call centers in India. Come up with some kind of international Tax, and "Tax them to Death". Problem solved.....


    Yeah that would be a great solution when they leave, decide not to focus on American markets and make their money elsewhere. That's the problem here - they are already selling to foreign markets and just not repatriating the profits because they are greedy and unpatriotic


    Just corrected Rid's quote a bit. icon_lol.gif


    So the question is why don't you pay more than what you're assessed in taxes?


    No, the question is why you're making excuses for money being kept offshore at a time of historically low corporate taxes. icon_rolleyes.gif
  • Posted by a hidden member.
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    Jan 15, 2012 1:48 PM GMT
    riddler78 said
    Christian73 said
    riddler78 said
    mrsmithers saidI have a cure for that...

    Move your company overseas for cheap labor to do business in the United States, like AT&T for example, who places call centers in India. Come up with some kind of international Tax, and "Tax them to Death". Problem solved.....


    Yeah that would be a great solution when they leave, decide not to focus on American markets and make their money elsewhere. That's the problem here - they are already selling to foreign markets and just not repatriating the profits because they are greedy and unpatriotic


    Just corrected Rid's quote a bit. icon_lol.gif


    So the question is why don't you pay more than what you're assessed in taxes?
    For the same damn reason YOU don't.
  • mrsmithers

    Posts: 213

    Jan 15, 2012 11:53 PM GMT
    This is why America went down the tubes.. It's become all about quantity, and NOT quality.. Too many corporations are hiring people that don't qualify for the positions.. This person will do this job for $6 an hour, (Which is most likely a high school dropout) so why hire that one who requires $9 an hour.. Many don't realize in the long run this is hurting them... This is why I shop at Publix for groceries and NOT Walmart.. Im tired of going there to find out the Frosted Flakes are always out of stock, and I'm tired of asking a worker who is clueless to where a certain department is located..
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    Jan 16, 2012 2:49 AM GMT
    TropicalMark said
    riddler78 said
    Christian73 said
    riddler78 said
    mrsmithers saidI have a cure for that...

    Move your company overseas for cheap labor to do business in the United States, like AT&T for example, who places call centers in India. Come up with some kind of international Tax, and "Tax them to Death". Problem solved.....


    Yeah that would be a great solution when they leave, decide not to focus on American markets and make their money elsewhere. That's the problem here - they are already selling to foreign markets and just not repatriating the profits because they are greedy and unpatriotic


    Just corrected Rid's quote a bit. icon_lol.gif


    So the question is why don't you pay more than what you're assessed in taxes?
    For the same damn reason YOU don't.


    Yeah because I don't believe that the governments spends money efficiently or effectively. But you on the other hand argue that we should give it more. How do you handle the inconsistency?
  • Posted by a hidden member.
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    Jan 16, 2012 2:49 AM GMT
    Christian73 said
    riddler78 said
    Christian73 said
    riddler78 said
    mrsmithers saidI have a cure for that...

    Move your company overseas for cheap labor to do business in the United States, like AT&T for example, who places call centers in India. Come up with some kind of international Tax, and "Tax them to Death". Problem solved.....


    Yeah that would be a great solution when they leave, decide not to focus on American markets and make their money elsewhere. That's the problem here - they are already selling to foreign markets and just not repatriating the profits because they are greedy and unpatriotic


    Just corrected Rid's quote a bit. icon_lol.gif


    So the question is why don't you pay more than what you're assessed in taxes?


    No, the question is why you're making excuses for money being kept offshore at a time of historically low corporate taxes. icon_rolleyes.gif


    And yet they're not.
  • xher

    Posts: 168

    Jan 16, 2012 9:47 PM GMT
    I'm sure all the retarded Apple fanboys are perfectly happy with their (borrowed) money being held in offshore accounts.

    The right thing to do would be for consumers to punish Apple and buy from companies that aren't anti-competitive and overpriced, but people are pretty stupid.

    They should be banned from selling their products in the United States until they learn to play by the rules.