Offshore accumulations of IT companies

2016

Trump wants to return billions of American IT companies to the United States

In November 2016, it became known that the largest American technology companies could return billions of dollars in income to the United States after the appointment of Donald Trump as president of the country, reports Investor's Business Daily.

During his election campaign, Donald Trump promised to reduce corporate taxes in the United States from 35% to 10%. If this happens, huge funds can return to the country.

During his election campaign, Donald Trump promised to reduce corporate taxes in the United States from 35% to 10%

According to the international rating agency Moody's Investor Service, by the end of 2015, American companies not related to financial markets stored about $1.3 trillion outside their native country. Most of this amount falls on IT companies.

Moody's predicts that by the end of 2016, Apple's foreign accounts will accumulate $230 billion. Microsoft's reserves abroad will grow to $113 billion, Cisco - to $62 billion, Oracle - to $52 billion, Google - to $49 billion. Thus, the accumulations of these IT companies placed outside the United States will reach approximately $506 billion (86% of total cash) against $441 billion in 2015.

Economist HSBC Kevin Logan says Trump's idea of ​ ​ repatriating capital to the United States "could return cash flows to the country that can be spent on dividend payments, stock buybacks and capital investments."

According to Richard Lane, vice president of Moody's, many companies will probably want to take advantage of the reduced tax rate to return most of the cash to the United States. If we assume that $1.3 trillion of income stored abroad will be taxed at 10 percent, then we will get a tax revenue of $130 billion, which can be spent on the development of national infrastructure, Lane notes.

Bringing money back to the U.S. would allow local companies to shed corporate debt, fund asset purchases more freely and invest in new technology. At the same time, if American companies do decide to repatriate a significant part of foreign profits, they will have less incentive to buy foreign assets.^[1]

Apple and Microsoft accumulated $300 billion

On April 14, 2016, the human rights organization Oxfam, which deals with poverty in the world, announced offshore savings of Apple, Microsoft and other American companies.

According to experts, by April 2016, Apple holds $181 billion in the accounts of three offshore companies, which is the largest value among all American companies. In second place in terms of capital withdrawn from the United States is General Electric: with the help of 118 firms, the concern stores $119 billion offshore.

Apple took $181 billion in osfora

Microsoft has similar savings in the amount of $108 billion. In addition, the list of Oxfam includes the pharmaceutical company Pfizer, Alphabet holding (built on the basis of Google) and the oil giant Exxon Mobil.

It is estimated that the 50 largest companies registered in the United States hold a total of $1.4 trillion offshore. Thanks to this, they were able to reduce their effective tax rate to an average of 26.5%, while in the United States it is at least 35%.

In the period from 2008 to 2014, leading American corporations made a profit of $4 trillion, as well as $11 trillion in support from the state (loans from the federal budget, loan guarantees and debt obligations). The total amount of state support funds amounted to about $27 for each $1 dollar of tax paid.

The huge sums that large companies hide in tax havens should fight poverty and restore US infrastructure, and not hide in offshore Panam, the Bahamas or the Cayman Islands, says Raymond Offenheiser, president of Oxfam. - Once again, we have received evidence of massive systematic abuse of the global tax system. We  cannot continue to live in a situation where the rich and those in power do not pay their fair share of taxes, leaving all the others of us with a balance sheet.[2]

2015: Microsoft takes more than $100 billion offshore

In August 2015, it became known that Microsoft had withdrawn more than $100 billion offshore, as a result of which the software giant became the second American company to reach this mark.

According to the Bloomberg news agency, citing documents sent by Microsoft to the US Securities and Exchange Commission (SEC), in 2014, profits held in offshore zones increased by 17% compared to a year ago and reached $108.3 billion. Previously, only General Electric overcame the $100 billion milestone among American corporations.

Microsoft took more than $100 billion offshore, as a result of which the software giant became the second American company to reach this mark

The publication notes that Apple it stores much more money abroad than Microsoft (about $180 billion), but the manufacturer's accounting iPhone iPad involves the payment of significant taxes on foreign income. American taxes were not subject to $69.7 billion in Apple's profits in 2014.

To optimize taxation, Microsoft actively uses offshore zones such as Puerto Rico, Ireland and Singapore, where income taxes are close to zero. In the United States, the tax rate is one of the highest in the world - 35%, so local companies often withdraw capital abroad.

According to Bloomberg observers, Microsoft will have to pay a tax of $34.5 billion to return $108.3 billion to its homeland.

One scheme used by Microsoft to save on taxes is the sale of American assets, including intellectual property, to offshore companies at low prices.

In January 2015, US President Barack Obama proposed collecting 14% of profits received and stored outside the country from each American corporation. The head of state proposes to direct the money attracted in this way to the budget to infrastructure development programs.^[3]

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