Forgot your password?
typodupeerror
The Almighty Buck Google Government Microsoft Oracle United States Apple

Tech Firms Keep Piles of 'Foreign Cash' In US 427

Posted by Unknown Lamer
from the hanging-out-on-rusty's-yacht dept.
theodp writes "There's a funny thing about the estimated $1.7 trillion that American companies say they have indefinitely invested overseas,' reports the WSJ's Kate Linebaugh (reg. or the old Google trick). 'A lot of it is actually sitting right here at home.' And if tech companies like Google and Microsoft want to keep more than three-quarters of the cash owned by their foreign subsidiaries at U.S. banks, held in U.S. dollars or parked in U.S. government and corporate securities, Linebaugh explains, this money is still overseas in the eyes of the IRS and isn't taxed as long as it doesn't flow back to the U.S. parent company. Helping corporations avoid the need to tap their foreign-held cash are low interest rates at home, which have allowed U.S. companies to borrow cheaply. Oracle, for instance, raised $5 billion last year, paying an interest rate roughly two-thirds of a percentage point above the low post-crash Treasury yield, about 2.5% at the time (by contrast, grad students and parents pay 6.8%-7.9% for Federal student loans). Were the funds it manages to keep in the hands of its foreign subsidiaries brought home and subjected to U.S. income tax, Oracle estimated it could owe Uncle Sam about $6.3 billion."
This discussion has been archived. No new comments can be posted.

Tech Firms Keep Piles of 'Foreign Cash' In US

Comments Filter:
  • by Joe_Dragon (2206452) on Wednesday January 23, 2013 @11:21AM (#42669549)

    time for a outsouring tax?

    Be for long we will need a way to pay for all people in the USA not working.

    • time for a outsouring tax?

      Should Uncle Sam tax all the income of every worldwide transaction of every corporations with any presence in the US?

      Unless he does that, if he wants to charge Oracle an outsourcing tax, then Oracle simply becomes a, e.g. Cayman Islands corporation and outsources some of its work back to the US.

      • by TheLink (130905)

        No. But if companies include and locally declare the foreign profits/revenue as part of their profits or revenue (or as collateral when borrowing from banks etc) then they should be taxed on it, but minus whatever tax they have already paid in the foreign country on it. If they have already paid a lot then it's zero if they paid zero then it's the full amount.

        If it isn't your profit and it isn't your money you shouldn't have to pay tax on it. But if you claim that it's your money, why shouldn't you be taxed

      • Tax money leaving the US for any reason.

  • by sycodon (149926) on Wednesday January 23, 2013 @11:22AM (#42669555)

    Raise taxes and those taxed will find legals ways to avoid them. Ways that the morons in Congress never anticipated.

    To paraphrase Princess Leia, "The more you tighten your grip, Harry, the more tax dollars will slip through your fingers."

    • Re: (Score:2, Insightful)

      by h4rr4r (612664)

      So then we should have no taxes at all?

      If you want to benefit from our civilization you should expect to have to pay for it as well.

      • by sycodon (149926)

        And of course you completely made up what you believe to be the point of my post.

        That's OK, it's /. and that's what happens. I'm good with it.

        • by h4rr4r (612664)

          I must have misinterpreted. Please feel free to clarify.

          It looks like you are saying any taxes or tax increase will be avoided so we might as well have no taxes.

          • by sycodon (149926)

            I am saying that the tax law is created by Congress. It is huge, complicated and is a back door attempt to implement social policies.

            NO ONE likes paying taxes and EVERYONE tries to find a way to pay less.

            Every time someone finds a way around a tax, Congress tries to plug the hole and invariable opens a new one. The more complicated they make to try to maximize receipts and at the same time try to implement social policies, the more fragile it becomes.

            Taxes will be avoided because Congress inadvertently enab

            • by h4rr4r (612664)

              I agree that simplifying the tax goal is a good goal. I disagree that it should not be used for social policies, taxing cigarettes I think is a great example of just that.

              I do not mind paying taxes, I do not try to find anyways beyond filling out the forms. I have never contributed more to a 401k or charity or something just to avoid taxes. I just paid my county taxes at the bank on saturday with a smile on my face. The same smile I have when I am voting or am selected for jury duty. I have this thing calle

              • by mjr167 (2477430)
                But do you claim the mortgage deduction? Do you go out of your way to pay more taxes then you are legally required? It is not inconsistent to believe the laws should be changed but still follow them.
      • Re: (Score:2, Informative)

        by causality (777677)

        So then we should have no taxes at all?

        If you want to benefit from our civilization you should expect to have to pay for it as well.

        You avoid all these problems by taxing consumption instead of income. Not to mention, rich people consume quite a bit more than poor people so this nebulously-defined "fair share" would be achieved. The Fair Tax Act would take care of all of this neatly without burdening the poor, since those at or below the poverty level would pay no net taxes.

        Of course, like any proposal that would drastically reduce the government's control over us, the Fair Tax Act gets demagogued left and right by two major groups

        • The Fair Tax Act would take care of all of this neatly without burdening the poor, since those at or below the poverty level would pay no net taxes.

          And all you have to do is get the Federal Government involved in every intrastate commerce transaction, impose sales taxes in States that have none, and put every American on the dole ("prebates" are the best way to breed an entitlement mentality).

          It may be a mathematical solution, but it's antithetical to the American system.

          (not that the income tax system has

          • by causality (777677)

            It may be a mathematical solution, but it's antithetical to the American system.

            Can you tell me how that would be worse than the current income tax system, with all the information the government must collect to implement it, and all the carrot-and-stick methods it enables? That's the part I am missing. "It's un-American" is rather nebulous.

            If you think the federal government involved in commerce is bad, consider how much the IRS knows about your personal life. How much I spent making a transaction at a department store is small fry, especially when you consider that my name need

          • by fredrated (639554) on Wednesday January 23, 2013 @02:12PM (#42671675) Journal

            As soon as you eliminate the government, my friends and I will be over with our guns to take everything you own.

        • by h4rr4r (612664) on Wednesday January 23, 2013 @12:29PM (#42670333)

          The fair tax act is merely a way to ensure the rich don't have to pay taxes.

          Forget the poor, someone making $30k a year with a family of four should not be paying the same rate as a billionaire. Hell, under the fair tax act he would pay a higher percentage income as tax.

          Rich folks consume a far lower share of their income every year. If you make $30k or hell $100k a year and have a family of four you are consuming all or near all of that. Thus paying tax on all of it, as compared to a rich person who may only spend a very small percentage of his income.

          • by mjr167 (2477430)

            Except under Fair Tax the guy making $30k a year pays no taxes...

            Why does everyone stop reading at the words "consumption tax" and ignore the actual facts related to the proposal? The system includes prebates to cover the taxes incurred on necessities. Thus you spend your $30k but also get a check in the mail to cover the taxes you are paying when spending your $30k.

        • Not really true. (Score:5, Insightful)

          by Viewsonic (584922) on Wednesday January 23, 2013 @12:32PM (#42670367)

          Rich people consume much less than poor people. They wouldn't be rich if they spent their money. Most money is invested to make more money.

          • by Jason Levine (196982) on Wednesday January 23, 2013 @01:59PM (#42671489)

            Poor people typically consume more of their money because their income and their "minimum spending necessary to survive" are closer together. If someone makes $21,000 per year and requires $20,000 for necessities (food, rent, medical, etc.) then they're only saving $1,000 a year. Not enough to become rich at any point.

            If someone earns $1,000,000 a year and only requires $100,000 to live on (necessities plus a few luxuries), they can easily save 90% of their income every year.

            If you taxed both at 10%, the poor person would need to pay $2,100 in taxes (resulting in not having enough money for necessities) and the rich person would pay $100,000 (thus reducing their yearly savings to a "mere" 80% of their salary).

            This doesn't even get into the situations where a CEO is given a "salary" of $1 and generous stock options and non-monetary perks (thus living a life of luxury despite having a very low "income"). Any simple flat tax is going to either a) have to address these cases and will quickly turn into a monstrosity again, or b) not address these cases and wind up being unfair.

        • Re: (Score:2, Informative)

          by Anonymous Coward

          You avoid all these problems by taxing consumption instead of income. [...]

          Poor people consume about 100% of their income. Rich people significantly less. If you're really rich, you will have trouble consuming even a single percent of your income, let alone a significant portion thereof.

          Second, define "consume". That private jet you're flying around with costs $30 million to buy. But did you buy it, or did company X in the Bahamas buy it? Or did they maybe rent it from an owner in Lichtenstein or Luxemburg? Maybe it doesn't exist in a taxable sense at all. OK ... but that Coca Col

      • So then we should have no taxes at all?

        Of course we should have taxes. But some taxes have much more negative effects than others. Income taxes are worse than sales or property taxes, because they inhibit productivity and job creation, instead of inhibiting consumption and wealth accumulation. Corporate income taxes are the worst, because they push jobs overseas, divert resources toward accountants and lawyers, and collect very little revenue. It would be far better to eliminate them, and tax the individual shareholders instead.

        If you want to benefit from our civilization you should expect to have to pay for it as well.

        Sure. But co

      • by magarity (164372)

        So then we should have no taxes at all?.

        There's no need to be so hysterically extreme. The solution should be obvious: the cost of paying the tax should be as close as possible to the cost of avoiding the tax. Then it's easier to just pay the tax.

        Besides, these are corporate taxes we're talking about, which are a horribly regressive burden on low income people.

      • Basically, your point is that without "taxes" we wouldn't have a "civilization", or worse, that civilization is defined by the taxes it pays, the more taxes equals the more "civilized" a society is.

        We can be civil and civilized without being forced into paying taxes under threat of guns at the hands of our government.

    • by SomeKDEUser (1243392) on Wednesday January 23, 2013 @11:39AM (#42669727)

      You know, tax codes need not be written full of loopholes... You need a big helping of corruption -- sorry, lobbying -- to get the mess that the US tax code is.

      Though in this case, this is not even a loophole: why would you tax differently US corporations buying US T-Bills and foreign corporations buying US T-Bills ?

      The companies doing these shenanigans are not even really avoiding taxes: they are simply delaying them. If the money was to flow back to the US operation, it would be taxed. The problem is that the idiot managers think that avoiding taxes at the cost of investing less is somehow a good idea. Because some moron has decreed that having large amounts of cash is somehow a good idea for a corporation -- it's not, it is a horrble waste of resources.

      And of course, it is also bad for society. But this is not really a taxation issue, it is a "people can't count and will cut their noses to spite their faces" issue. And frankly, I don't know how to solve that except by giving significantly more leverage on the board and board salaries to the shareholders.

      • by H3lldr0p (40304)

        It's only a waste of money (remember folks, cash is not capital!) if there's nothing else to invest in that would generate a better return than the base interest rate.

        Given that the tax on such investments are zero then any interest rate is going to be pure profit. For a business that's a pretty good deal, especially since this is a guaranteed profit at that. The money is not at risk and the bonds can be sold for face value if they need the liquidity at any given moment. For a business this is a great situa

        • T-Bills have a negative real yield. You can't really justify the investment strategies of those big corporations. It's not that there are not better investment to be made, starting spin-offs, investing in blue-sky research. It's that managers at those corporations understand investment seemingly only in terms of financial instruments.

      • why would you tax differently US corporations buying US T-Bills and foreign corporations buying US T-Bills ?

        Because you have less/no legal authority over the foreign corporations. I should have thought that was obvious. Good luck collecting taxes for a foreign corporation that does no business in the USA.

        The problem is that the idiot managers think that avoiding taxes at the cost of investing less is somehow a good idea.

        It is a good idea to keep the cash parked overseas if the return on the investment is less than the cost of the taxes. Taxes on repatriated earnings effectively raise the cost of capital and reduce the number of available investment opportunities for that cash with a net present value greater than zero. If yo

    • by g0bshiTe (596213)
      That's funny, you mention the morons in Congress I fear you are underestimating those morons. I'm sure they know about that already and there's a reason why it's ignored. Raising taxes is meant to put the crunch on the masses not the mega corps that could withstand to absorb 6b a year in taxes. What I want to know is why they are only paying 2.5% vs 6.9%+. That should be your real concern. It seems like since corporate entities are treated like people, people should be able to incorporate themselves in orde
    • by Ryanrule (1657199)

      Make that illegal then. Boom.

  • by Anonymous Coward on Wednesday January 23, 2013 @11:24AM (#42669589)

    It sounds to me like they are using their foreign profits like a 401k, keeping them in accessible until they need them, and then paying tax on them when they do.

    I don't have a problem with Oracle paying more taxes. The "fix" though seems to be that in charging them for any foreign assets on shore that we simply create the pressure that causes them to leave their foreign profits overseas. By letting them use these profits as collateral for loans, we get billions of extra dollars sitting on our banks allowing those banks to give out cheaper loans to the rest of us.

    Whether or not Oracle deserves a tax-deferred-savings account like mine, the fix of pushing the money back overseas, seems worse than the illness.

    • by causality (777677) on Wednesday January 23, 2013 @12:16PM (#42670157)

      Whether or not Oracle deserves a tax-deferred-savings account like mine, the fix of pushing the money back overseas, seems worse than the illness.

      Yes but this calm, rational, mature, objective point of view doesn't provide the visceral "satisfaction" of punishing people who are easily demonized and easy (often with reason) to hate. So politically, it doesn't sell very well. It doesn't appeal at a base level to the masses who vote emotionally instead of taking the time to recognize certain cause-and-effect relationships.

      Politics should be about how to best manage a nation, not what it's become now, which is how to ineffectively resolve one's discontentment with life by trusting liars who don't give a damn about you.

  • the interest is tax deductible making it like free money

    why pay employees from your bank account when you can borrow short term, pay the low interest, deduct interest from your taxes and just roll the notes over into new notes every year or so?

    retail companies do this to pay for the product you see on the shelves during the holidays

    and its also good for use peons since the money goes into money market accounts and back to the regular folk. not like banks are lending their own money either

    • by nedlohs (1335013)

      Unless your marginal tax rate is 100%, something being tax deductable does not make it "like free money".

    • the interest is tax deductible making it like free money

      Not precisely though the tax shield can make some investments possible/attractive that might otherwise not be feasible. What makes it close to free money is the fact that interest rates are so low. The deducti

      why pay employees from your bank account when you can borrow short term, pay the low interest, deduct interest from your taxes and just roll the notes over into new notes every year or so?

      There are two big reasons why you might not do this. The first and most important is cash flow. It's fine to borrow like you describe but if you have an interruption in cash flow and cannot repay your obligations then you have killed the business. For a company like Oracle or General Electric this

  • by ranton (36917) on Wednesday January 23, 2013 @11:49AM (#42669821)

    Why would you compare the interest rate that Oracle can borrow money at with an average college student whose family does not have enough funds to pay for college themselves? Oracle has over $30 billion in cash reserves, so they are a much safer bet to lend $5 billion than a college student who can't scrape together $100k.

    Do people honestly think banks should lend money with rates based on how sympathetic the borrower is?

    • by Dan667 (564390)
      No, governments should lend money when it is in the public interest. Making low interest loans to students allows them to get good degrees and get much better jobs. They then make much much higher wages, typically get in less trouble, and pay many multiples back in taxes over the course of their lives. Low interest rate loans to students are the single best return on investment a government can make.
  • by inode_buddha (576844) on Wednesday January 23, 2013 @11:52AM (#42669859) Journal

    I've been saying for years that we need to go back to Ronald Reagan's 1986 Tax Reform act. We could tax capital gains as regualr income, and do away with corporate tax altogether. That would eliminate the entire discussion. All sides of the debate would have to STFU since they got what they wanted. And there wouldn't be any more of this off-shoring and subsidiaries for tax purposes. It wouldn't matter how CxO's take their pay, because they will still be taxed - the same as everyone else. It wouldn't matter any more how the books get moved around. And the Occupy types wouldn't have anything more to bitch about. The only ones who would get truly shafted would be the greedy.

  • Holiday (Score:5, Interesting)

    by the eric conspiracy (20178) on Wednesday January 23, 2013 @11:53AM (#42669867)

    The main reason corporation are doing this is that they are hoping for an overseas earnings tax holiday.

    Unfortunately it's not a wish upon a star. Such a holiday has been granted before, in 2004. So it is a perfectly logical strategy to hold out as long as possible in hopes of getting another cookie.

    There is actual evidence that the last tax holiday led to job cuts as well.

    Considering that we are in a liquidity trap now there is certainly no rational expectation that a repatriation tax holiday will benefit anyone except perhaps the stockholders of these corporations.

    Such tax holidays are extremely bad policy for a variety of reasons. Which means I guess it's going to happen.

    In reality what is needed is an overhaul of the tax system which includes reducing the top rate and elimination of many loopholes. Of course this is beyond the ability of our completely dysfunctional Congress. But the benefits to the economy would be massive.

    • Re:Holiday (Score:5, Informative)

      by IamTheRealMike (537420) <mike@plan99.net> on Wednesday January 23, 2013 @12:11PM (#42670111) Homepage

      The loopholes exist because of the economic benefits. RTFA, the USA is the only economy in the developed world to try to tax foreign earned income the same as domestically earned income. This is true for citizens and green card holders too, by the way, which places US citizens into the unique and perverse situation of moving abroad and still paying Uncle Sam taxes, despite getting no services for that tax.

      For US persons, this is merely an unfair affront to basic common sense. For US companies it's the difference between being competitive or being double taxed into total lack of competitive-ness. So these "loopholes" as you call them have been around for a long time and don't get closed because they're the thing that's keeping US business on a level playing field with the rest of the world.

      You're right that the US tax system should be simplified and loopholes removed. If the US gave up on trying to tax income regardless of where it was earned, it'd be the same as every other tax system and there'd be no need to maintain these "loopholes", they'd just go away naturally. Also, US companies would be more likely to spend foreign earned money in the USA because there'd be no double taxation. And US citizens would not be trapped by the financial "Berlin Wall" that is resulting in them being systematically evicted from the worlds financial institutions. It'd be a win all round, but of course, nobody in Congress is talking about doing that because it'd be revenue neutral.

      • by fl!ptop (902193)

        ...which places US citizens into the unique and perverse situation of moving abroad and still paying Uncle Sam taxes, despite getting no services for that tax.

        US citizens working abroad can enjoy the comfort of an embassy and US Marines protecting them in times of war and/or crisis. Hell, they'll even evacuate you back to the US if the shit really hits the fan. I'd pay my taxes for that, especially if I was working somewhere that's dangerous.

        • US citizens working abroad can enjoy the comfort of an embassy and US Marines protecting them in times of war and/or crisis. Hell, they'll even evacuate you back to the US if the shit really hits the fan. I'd pay my taxes for that, especially if I was working somewhere that's dangerous.

          Are you shitting me? The US military spends its time blowing up goat herders in Afghanistan. If you live in Germany, that is really the least helpful thing they could be doing. And if you live abroad then it's going to be the

      • Re:Holiday (Score:4, Informative)

        by Chowderbags (847952) on Wednesday January 23, 2013 @01:25PM (#42670995)

        which places US citizens into the unique and perverse situation of moving abroad and still paying Uncle Sam taxes, despite getting no services for that tax.

        Except that you can exclude the first $90000 or so of income from taxation and generally deduct foreign income taxes from your US taxes.

        • $90,000 sounded like a lot when Congress set that amount back in the 70s, but the dollar has been steadily in decline for decades. Here is a graph relative to the Swiss Franc [to-ma.ch]. People who would have been considered incredibly rich by meeting this standard back when it was set are now merely normal people earning in a currency stronger than the dollar.

          The real problem with trying to tax people who don't actually live in your country is the logistics of it. How can you do that? America's approach is to try and

          • It's not just a $90,000 exemption. There are housing exemptions, credits on foreign taxes paid as so forth. Then add in the fact that the US tax code for people with less than $45,000 or so in taxable income is pretty progressive, and if you have half a brain in your head you are contributing to an IRA it is very unlikely that you are paying significant US taxes unless your income is $170,000 and up.

  • As long as we have the current system, there will be loopholes like this.
  • by Ryanrule (1657199) on Wednesday January 23, 2013 @11:55AM (#42669905)

    We need a use it or lose it tax.

  • where are they when people point these massive corporate welfare entitlements?
  • by medcalf (68293) on Wednesday January 23, 2013 @12:23PM (#42670245) Homepage
    People try to maximize their well being. People respond to incentives. If you give them perverse incentives, they respond perversely. Companies, in that respect, act like people, except that it's the executives and board of directors working to maximize their and their shareholders' well being. So who is surprised when companies respond perversely to perverse incentives? If you want companies to act sanely about money, you have to stop forcing them to comply with insane rules. (The several suggestions in this comment section to add more insane rules would just result in a different insane corporate behavior.)
  • by apcullen (2504324) on Wednesday January 23, 2013 @12:23PM (#42670257)
    Seems like what the US needs is an alternative minimum tax for corporations doing business in the states. If I have to pay, so should they.
  • We're already keeping profits from foreign subsidiaries (profits that have already been taxed in the jusrisdiction they were generated, something the US does that few if any other countries do) out of our economy. Now we're going to chase it out of our banks too?

    It's stupid in the practical sense - in that they'd just park the money somewhere else. And it's stupid in the moral sense - that indignant people see no problem with and have no shame advocating as much confiscation as possible of something belon

  • [Oracle pays] about 2.5% at the time (by contrast, grad students and parents pay 6.8%-7.9% for Federal student loans).

    Why bother to add this? Oracle is a very credit worthy company with large assets. In contrast, student loans have a very high default rate and are risky to lenders (or the government if they assure them).

    Obviously it was added to try to create some outrage where none rightly exists.

  • by gmuslera (3436) on Wednesday January 23, 2013 @01:25PM (#42670999) Homepage Journal

    "Stealing" imaginary property, doing copies for no profit or private use: Lawsuits for hundreds to millons of dollars, or years in prison

    Actually stealing billons of dollars in taxes: no consequences

    Putting world economy at stake: bailout

    Clearly we got it wrong. Stealing is not the wrong thing, just doing in small to zero scale does.

    • It's not so much the scale of the theft as it is the scale of the person/company doing the theft.

      Home user uploading a hit song to a P2P network = Small user = Big penalties

      Phone company charging each of their customers $1.99 a month in "Federal Recovery Tax" (where no such tax exists) = Big user = At most a stern finger wagging and a fine much less than the money they raked in from the fees.

      Of course, the big difference is that your average small/home user doesn't have the means to lobby Congress. The big

From Sharp minds come... pointed heads. -- Bryan Sparrowhawk

Working...