Companies with Profits Stashed Overseas

Last updated on June 30, 2023

It is common knowledge that multinational companies that have resources legally evade taxes through tax loopholes.  It is well known that Apple Inc. does everything it can to avoid the United States’ high corporate tax rate. Whether evasion of taxes because of the high corporate tax rate can be justified is debatable, but understanding how companies use loopholes in the tax code to evade taxes is essential. Fool.com shares the details of which companies are keeping how much of their profits overseas.

“Apple is perhaps the most famous example, with more than $50 billion of accumulated profits held outside of the U.S. according to data from Bloomberg. However, you may be surprised to learn that Apple’s stockpile of cash isn’t the largest held outside of the U.S. In fact, General Electric has more than double Apple’s amount with $110 billion in foreign countries.

“In fact, there are four other companies with more assets stashed overseas. In all, the S&P 500 companies combine for nearly $2 trillion stashed outside of the U.S.

“Will the money ever come home?

“So, when might the U.S. see some of this money come back ashore? Perhaps soon, if certain U.S. Senators get their way.

“There is talk of a ‘repatriation tax holiday’ for corporate profits, which would give these companies a one-time opportunity to bring their profits to the U.S. for a greatly reduced tax rate. Most overseas profits are taxed at 35%, and while there is no definite number for a ‘holiday’ yet, last time a similar offer was expended to corporations, they were allowed to bring cash in by paying just a 5.25% tax rate.

“This has the double benefit of saving these corporations (and their shareholders) billions of dollars, and could also provide a nice windfall to the U.S. government. Even if half of the cash overseas was to be repatriated at a low rate, it could still mean more than $50 billion in additional tax revenue for the U.S. The whole amount coming back home would mean more than $100 billion, and this only includes cash held by the S&P 500 companies.”

Fool.com shares the names of companies that have billions of dollars of profits that they are unwilling to bring to the U.S. because of the high corporate tax rate.

1. Citigroup with overseas profits of $43.8 billion

2. Exxon with overseas profits of $47 billion

3. Cisco with overseas profits of $48 billion

4. Johnson & Johnson with overseas profits of $50.9 billion

5. IBM with overseas profits of $52.3 billion

Apple’s rival, Microsoft has overseas profits $76.5 billion. Even though the case of Apple Inc. received wide publicity, their case is not unique. Multinational companies that have the resources to keep their profits earned overseas may not bring them back home due to high taxes. This problem can only be resolved if the loopholes that companies use to evade taxes are fixed.