Support the Wall Street Examiner! Choose your level of support to receive a free proprietary report as my thanks. Click the button below to see your options. Become a Patron!

These “Tax Haven” Companies Have the Most Profits Stashed Overseas [CHART]

This is a syndicated repost courtesy of Money Morning - We Make Investing Profitable. To view original, click here. Reposted with permission.

With the U.S. corporate tax rate at 35% – the highest in the world – hundreds of U.S. companies have piled up billions of foreign-earned profits in overseas tax havens.

Liquidity moves markets!

Follow the money. Find the profits! 

As long as they don’t bring the money home, they can avoid paying Uncle Sam.

According to a study last year by the Citizens for Tax Justice, nearly three out of four companies in the Fortune 500, or at least 358 companies, use tax havens. As of 2015, these companies were holding about $2.2 trillion in offshore accounts.

tax havens

The Citizens for Tax Justice report estimated that if that money were to be brought home to the United States, it would generate more than $620 billion in tax revenue. That’s more than enough to cover every bit of the $600 billion the U.S. Department of Defense spent in fiscal year 2015.

Related: Donald Trump Outlines His Top Priority Economic Policies

And while the use of tax havens is common among multinational corporations, the bulk of the money held in them belongs to just 30 companies.

This 6% slice of the Fortune 500 has squirreled away $1.4 trillion in foreign-earned profits – 65% of the Fortune 500 total.

Take a look at this chart from cost information website

tax havens

You’ll recognize a lot of the names here, starting with the company at the top – Apple Inc. (Nasdaq: AAPL). Apple’s $181.1 billion in foreign-held cash would result in a $59.2 billion tax bill if all of it were brought home.

These days Apple generates about 63% of its profits from overseas operations. To avoid that nasty tax bill, the tech giant funnels most of those foreign earnings to its Ireland-based subsidiaries, where they can sit untaxed indefinitely.

Ireland is one of the world’s favorite tax havens because of its low 12.5% corporate tax rate and laws that make it easy to pay even less.

Nobel Prize-winning economist Joseph Stiglitz recently characterized Apple’s arrangement, and those of other tax haven aristocrats, as a “fraud” in an appearance last month on Bloomberg TV.

That didn’t sit well with Apple CEO Tim Cook.

In a recent Washington Post interview, Cook defended the use of tax havens. But he also made a suggestion that would do away with them…

Why Tax Havens Aren’t the Real Problem

Let’s be clear: What Apple and the other multinational corporations do is what they’re allowed to do – which Cook pointed out.

“The tax law right now says we can keep that in Ireland or we can bring it back. And when we bring it back, we will pay 35% federal tax and then a weighted average across the states that we’re in, which is about 5%, so think of it as 40%. We’ve said at 40%, we’re not going to bring it back until there’s a fair rate,” Cook told The Washington Post. “It is legal to do. It is the current tax law.”

In fact, CEOs like Cook have a fiduciary obligation to avoid taxes by any legal means at their disposal. To do otherwise would be a breach of their responsibilities to shareholders.

While politicians like to lay the blame for the widespread use of tax havens on America’s CEOs, the lawmakers themselves are the real culprit.

Don’t Miss: The main problem with our do-nothing Congress isn’t what you think. Here’s the shocking truth about what lawmakers really do all day…

“Everybody’s screaming and yelling about companies like Apple doing this, but the reality is that they’re doing exactly what Congress put in place – the Foreign Direct Investment Act, tax incentives. There’s hundreds of billions of dollars incentivizing companies like Apple to keep their money over there,” said Money Morning Chief Investment Strategist Keith Fitz-Gerald in an appearance on FOX Business program “Varney & Co.” on Monday.

Instead of attacking U.S. companies, the lawmakers in Washington should try doing their jobs and get to work on serious corporate tax reform.

Cook helpfully made a few suggestions…

Tim Cook’s Plan to Make Tax Havens Unnecessary

Cook told The Washington Post he thinks “it’s in the best interest of the U.S. to have corporate tax reform” even though it would result in Apple paying more taxes.

“What I’ve always felt should happen is that every dollar should be taxed immediately with no deferral,” Cook said. “But as a consequence of doing that, you should have free flow of capital. What would happen is if a system like that were put in place, it should have more investment going into the United States. We’re the only major country in the world that has a system like this. It’s not good for the U.S., it’s not good for the economy, it’s not good for jobs, it’s not good for investments.”

Cook said he’d prefer to bring Apple’s foreign profits back home, provided Washington creates a fair system. And if that happens, Apple wouldn’t be the only company to do so. Surprisingly, Cook is hopeful such changes are on the horizon.

“There’s a difference of view with different people about how to fix it, but I think everybody agrees the current system isn’t working. So I’m optimistic that, in 2017, there will be some sort of corporate tax reform,” Cook said, suggesting the proceeds be used to invest in the nation’s crumbling infrastructure.

This much is for sure: America is long past due for an overhaul of its corporate tax system. Tax havens are just one symptom of a bigger problem. For example, a recent study by the Government Accountability Office found that two out of three U.S. corporations pay no federal income tax whatsoever…

To get full access to all Money Morning content, click here

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and visitors become smarter, more confident investors.

Disclaimer: © 2016 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.


The post These “Tax Haven” Companies Have the Most Profits Stashed Overseas [CHART] appeared first on Money Morning – We Make Investing Profitable.

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. I may receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

Try Lee Adler's Technical Trader risk free for 90 days! Follow the money. Find the profits!

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.