01-12-2012, 01:41 AM

Most of Apple's $82 billion cash stockpile is 'trapped' overseas

Apple may have enough cash on hand to make Scrooge McDuck's money vault look like a kiddie pool by comparison, but according to SeekingAlpha, most of that cash is effectively trapped overseas. US$54 billion of Apple's overall $82 billion in cash is in offshore accounts, and Apple cannot repatriate that money to the States unless it wants to pay a huge 35 percent corporate tax on it.

If Apple attempted to bring that money into the States, right off the bat through the magic of taxes that $54 billion would transform into $35.1 billion, with the other $18.9 billion disappearing down the federal money hole. With that much cash at stake, it's no wonder that Apple hasn't been in any hurry to repatriate its huge foreign cash reserves.

SeekingAlpha's analysis of Apple's 10Ks shows that Apple's foreign cash and investments are growing far faster than those in the US, and with sales in China continuing to ramp up year after year, that pace is only going to increase.

Apple and other companies have lobbied for a repatriation tax holiday to temporarily lower the tax rate from 35 percent to something more palatable to corporations, in the neighborhood of 5 to 9 percent. That proposal has met with strong resistance from the current US administration, however, which has said that any corporate tax holiday must come as part of an overhaul of the entire corporate tax structure, something that's unlikely to happen in the near future.

Meanwhile, as Apple's foreign cash hoard grows, the money is effectively useless to Apple and its shareholders. They could build a stack of dollar bills 3400 miles tall, but can't they can't do much else with it for now.

Most of Apple's $82 billion cash stockpile is 'trapped' overseas originally appeared on TUAW - The Unofficial Apple Weblog on Wed, 11 Jan 2012 19:30:00 EST. Please see our terms for use of feeds.




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01-12-2012, 01:57 AM

It would make no sense to even bother with repatriating the funds when they may be spending the money overseas on future production/marketing/retail/etc...

At some point they may feel the need to begin paying a dividend and then they may need a large stockpile of cash back in the US, but for now that can remain overseas with little ill effect.

01-12-2012, 07:51 AM

Why would they even worry? Even according to the article, they have 28B sitting here in the US - it's not like they are running in the red and only have a few hundred million in the states. They really have a heck of a warchest on hand here alone.

Although they are making Apple stand out due to the size of its overall cash reserves and the >50% that is currently out of the country, you have to wonder - the other companies that are cash rich (Cisco, MS, Oracle, Google, etc.) that do a lot of business external to the US - how much of their cash reserves are outside of the US?

Heck, even if they took the tax hit to bring the money all home at once, they'd still have more in cash then most other companies.

01-12-2012, 09:55 AM

I don't want to infuse politics into this, but if you're a US citizen residing abroad, you still need to pay US taxes on your income. I see no reason why corporations -- which have been endowed with many of the same privileges as citizens -- ought to be exempted from filing taxes on their income too; all of it.

I also love the idea that five to nine percent is what's palatable. I would love five to nine percent taxes too. That would put six month's worth of grocery money back in my pocket. But I don't see Uncle Sam reducing my tax liability... Perhaps we all should just horde our tax money for a few years and work out reduced payment plans with the IRS too.

Tax holiday, indeed...

01-12-2012, 10:08 AM

Originally Posted by _Stormin

It would make no sense to even bother with repatriating the funds when they may be spending the money overseas on future production/marketing/retail/etc...

At some point they may feel the need to begin paying a dividend and then they may need a large stockpile of cash back in the US, but for now that can remain overseas with little ill effect.

I bet a large chunk of that money is in China. Makes it easier to pay their vendors for manufacturing if they can pay in local currency drawn off in-country banks.

01-12-2012, 10:33 AM

And people wonder why companies continue to ship their jobs overseas. It makes no sense to build a business here when it costs more that just about any other place on earth to operate it.

01-12-2012, 10:40 AM

That's what happens when US business laws allows for no competitive advantage. I would do the same.

01-12-2012, 10:53 AM

This is not intended as political comment or even an economic one. More of a philosophical one based upon on (potentially warped) view of the world.

I will add up front, that I am not wealthy (comfortable middle-class) do not have large stock holdings, nor any interests (financial or otherwise) in any corporations.

Having said all of that, it makes ZERO sense to me that corporations would pay ANY tax at all. Period, end of statement.

My reasoning is this:
1) Ultimately the corporation pays salaries, bonuses and dividends (all of which are taxed).
2) They purchase materials and equipment (all of which are taxed)
3) They sell product and services (which also are normally taxed)

If we need more revenue adjust or reform those tax streams. All taxing corporations does is pass the tax burden by stealth down to the ultimate consumer and tax payer.

I would say do away with corporate taxes entirely and reform the rest of our tax structure accordingly. My opinion FWIW.

01-12-2012, 03:40 PM

Originally Posted by Razormac

This is not intended as political comment or even an economic one. More of a philosophical one based upon on (potentially warped) view of the world.

I will add up front, that I am not wealthy (comfortable middle-class) do not have large stock holdings, nor any interests (financial or otherwise) in any corporations.

Having said all of that, it makes ZERO sense to me that corporations would pay ANY tax at all. Period, end of statement.

My reasoning is this:
1) Ultimately the corporation pays salaries, bonuses and dividends (all of which are taxed).
2) They purchase materials and equipment (all of which are taxed)
3) They sell product and services (which also are normally taxed)

If we need more revenue adjust or reform those tax streams. All taxing corporations does is pass the tax burden by stealth down to the ultimate consumer and tax payer.

I would say do away with corporate taxes entirely and reform the rest of our tax structure accordingly. My opinion FWIW.

Agreed. Corporate taxes are merely modifiers on what they charge for an item. Zero out taxes, and you see what something could cost a consumer. Cost = materials + labor + profit + tax burden. That said, I'd guarantee you if we cut corporate taxes to zero tomorrow, you wouldn't see any drop in prices for items nor any hiring. They'd pocket the difference as hiring only occurs due to business need and cutting prices only happens when there is a change in competition, supply or demand. And all of that is fine by me as well - not my company.

I'd go further and suggest that in addition to corporate income tax, personal income tax (a relatively new invention of the 20th century) should go as well. One could draw pretty similar lines, as stated above by Razormac, that personal income is already taxed several times. I view myself as a small business called "Keeping Dave's Family Fed and Profitable Enough to Expand Someday" and also do the following:

1) I pay people to perform functions to keep me running such as maintaining my home, vehicles, lawn, do my taxes, etc... so I can focus on what makes my family money.
2) I own a car, buy gas, own land, buy clothes, etc... all of which are taxed and all of which could be argued as enabling me to meet work responsibilities.
3) I sell my services to my employer and others and am taxed for SS and other things already (outside of income tax). I pay taxes on things I already bought and then sell such as a vehicle or a home or stocks, etc...

Only difference in my mind is that I'm not incorporated, don't have employees, and put most of my money back into the local economy, at least temporarily, before it goes to China's. Yeah, it's a stretch and the law doesn't see it that way, but it's the same concept. I spend money that was taxed to make money that will be taxed and then taxed again when I spend it on things.

01-13-2012, 10:38 AM

Originally Posted by Shikarnov

I see no reason why corporations -- which have been endowed with many of the same privileges as citizens -- ought to be exempted from filing taxes on their income too; all of it.

I totally agree. And why should they get to wait until the "repatriate" the money?

01-16-2012, 12:21 PM

Because Apple isn't earning it...

The money is being earned by Apple China, Apple SE, Apple GmbH, etc... All of whom are owned by Apple, but operate as a independent entity. These foreign source profits don't have to be brought back to the parent company. As stated in my original post, they're paying taxes on the money as they earn it overseas and then having to spend it (salaries, manufacturing expense, etc) so why the heck would they pay the taxes to "bring the money back" when they're just going to need to spend it overseas in the future?

If anyone for a moment thinks that Apple views the US market as the one in which it is going to show the most growth, they're only kidding themselves... Apple will need billions overseas to handle future expenses, so why not leave the money (that has already been taxed) in the country in which it was earned?

01-16-2012, 12:26 PM

Originally Posted by MacPastor

And people wonder why companies continue to ship their jobs overseas. It makes no sense to build a business here when it costs more that just about any other place on earth to operate it.

This is only true when it comes to things like call centers and hardware manufacturing for devices that are going to be used in the US. Sometimes it makes a lot more sense to make things overseas.

The real question is, why would Apple make phones in the US and pay a higher labor cost, when they are just going to ship most of those phones overseas? They are a global hardware and software company. Many companies now are.

The real issue here is that we are not competitive with foreign countries when it comes to manufacturing/labor costs and regulation. If we want companies to build stuff in the US or house jobs here, then we as a nation must somehow have an advantage to present them.

01-16-2012, 02:38 PM

is this really happening?