Most U.S. companies who do business overseas usually don’t bring their money back into the United States because of a heavy 35% repatriation tax that would hit the money if they brought it back into the U.S. This has been a political hot button and part of the overall conversation for many decades of why our tax code needs to be demolished. Even now President Donald Trump ran on a campaign to lower the 35% tax to 10%. Currently around $2.6 Trillion in money sits overseas of these U.S. companies.
Just a reminder, U.S. politicians are the dumbest people on the planet when it comes to economics. Them and their supporters just think they can pass a tax rule and it all works out. Unbeknownst to them, there are smarter people in the world and they tend to get hired by companies to shield them from the tax rule. In this particular case, U.S. companies overseas plays the federal government for fools.
Taking advantage of an exemption tucked into America’s Byzantine tax code, Apple stashed much of its foreign earnings—tax-free—right here in the U.S., in part by purchasing government bonds, according to people with direct knowledge of the matter. In return, the Treasury Department paid Apple at least $600 million and possibly much more over the past five years in the form of interest, a Bloomberg review of its regulatory filings shows.
Many of the biggest U.S. multinationals have seized on the same exemption, which lets them avoid or delay repatriation taxes by buying Treasuries with their overseas cash. (The top 10 alone hold over $100 billion of the bonds.) That, in effect, enables the companies to turn billions of dollars in potential tax liabilities into millions of dollars in taxpayer subsidies
Read the rest here via Bloomberg.com