Tax Havens and Apple’s Offshore $60 billion

image
Author: Bob Morris
Created: 06 Apr, 2012
Updated: 13 Oct, 2022
2 min read

Apple

In a move many viewed as tone-deaf, Apple said recently they will keep $60 billion of their $100 billion reserve parked offshore until taxes on the money are greatly lowered. Big Silicon Valley corporations often get bashed for doing what other large US corporations routinely do. For example, Google’s informal motto is “do no evil”. Thus people may get more upset with Google for doing something they perceive as dicey than they would at, say, a coal company.

Many other corporations also have large sums of money offshore and the amount has been growing, perhaps in anticipation of a tax holiday. In quite legal transactions, large corporations are able to move profits made in the US to offshore entities, thus avoiding paying taxes on the profits in the US. Again, it should be stressed that this is completely legal. One shouldn’t be surprised, however, to learn these same large corporations have armies of lobbyists working to get favorable tax laws written, in addition to battalions of lawyers and CPAs looking for every advantage and loophole. In 2008, Goldman Sachs paid $14 million in federal tax on profits over $2 billion by using 29 tax haven subsidiaries. General Electric paid no federal tax at all in 2010. These profits are still more than likely overseas.

Of course, some of the profits may have been earned entirely overseas where they are subject to foreign tax until the money returns to the US. Here it is taxable at the corporate rate of 35%. However, as we’ve seen, large corporations often already pay nowhere near that same rate for their federal taxes. The Win America Campaign is a consortium of mostly tech companies including Apple that are pushing for a tax holiday so offshore money can be repatriated with a tax rate as low as 5.25%. They say this would greatly boost the economy as the money would be reinvested and thus create more jobs. The Obama Administration says a 2004 tax holiday did little to boost help the economy and opposes it unless it is part of overall tax reform.

The amount of money currently held offshore could be $1 trillion. If it came back here and was used mainly for stock dividends and stock buybacks, then it wouldn't help the economy at large. This is what Karl Marx referred to as “fictitious capital”, which is money making money with little or no benefit to real production. (Before someone calls me a commie, I should note that the venerable Alan Abelson of Barron’s once said Karl Marx had the best understanding of capitalism that he’d ever read.)

However, if $1 trillion came back to the US and was invested directly into businesses, then it could greatly boost the economy. Perhaps a good compromise would be that corporations get a tax holiday on repatriated money as long as it is used to directly build their businesses.

Latest articles

Two wedding rings on a dictionary opened to the definition of marriage.
Record Partisan Divide Overshadows Broad Public Support for Same-Sex Marriage
It has been 10 years since the Supreme Court's decision in Obergefell v. Hodges opened the door for same-sex couples across the US to marry, regardless of what states banned it and what states had already legalized it....
30 May, 2025
-
3 min read
Grey ballot box with a white ballot going into it and the New Mexico flag in the background.
Opening the Door: How New Mexico Reformed Its Primary Elections and What Others Can Learn
More than 330,000 independent voters will have access to state-administered primary elections in future New Mexico elections after the legislature passed SB 16 in March to end the state’s use of closed primaries....
29 May, 2025
-
5 min read
Dean Phillips
Dean Phillips Breaks Ranks: A Firsthand Rejection of the Duopoly That Controls American Democracy
In the shadow of a damning new campaign exposé, the only elected Democrat to challenge President Biden in 2024 speaks out about what really happened and what must change....
29 May, 2025
-
5 min read