The Wall Street Journal did an analysis of 60 large U.S. corporations to see where they were storing their earnings and found that combined they had $166 billion in offshore earnings. This is legal – the U.S. tax law doesn’t make companies pay on foreign earnings, as long as the money stays abroad. However, this is naturally upsetting some people, who feel it’s unfair that U.S. companies are able to avoid taxes just because of where the money was earned.
Some spokespersons for these large corporations have asked for a tax holiday, that would stimulate the U.S. economy. Last time this happened was 2004 and studies found little to no benefit to the economy, and most companies were using the money to reimburse investors through dividends and share buy-backs.
Apple is one of the biggest companies to use foreign countries to store their earnings – they had $40.4 billion in untaxed earnings when the announced it last on the 29th of September. If the money was to come into the U.S. they’d owe $13.8 billion in taxes (their estimate), falling just short of the 35% tax rate for corporations.
Not only is this is annoying general citizens but it’s also annoying investors – why is Apple hoarding so much money? They aren’t even taking advantage of investing this cash in things like research, development or marketing.
