U.S. multinationals hoarding $2T in cash overseas

U.S. multinationals have around $2 trillion cash stored in overseas accounts, largely due to the repatriation tax and other inefficiencies in the tax code.

According to data analyzed by Bloomberg, U.S.-based companies have added $206 billion to their offshore accounts. These companies have accumulated $1.95 trillion outside the U.S., up 11.8 percent from a year earlier. Microsoft, Apple and IBM added $37.5 billion, or 18.2 percent of the total increase.

Governments across the globe are lowering tax rates and closing loopholes, to ensure that companies do not park their money offshore. But the U.S. has been sluggish in this regard, and companies are now booking profits abroad and leaving the money there.

The U.S. government has given "tax holidays" in the past encouraging companies to bring back money earned abroad, but only tax reform will solve the problem. Opponents claim that eliminating the repatriation tax would actually encourage companies to book more and more profits abroad and avoid U.S. taxes.

“The loopholes in our tax code right now give such a big reward to companies that use gimmicks to make it look like they earn their profits offshore,” said Dan Smith, a tax and budget advocate at the U.S. Public Interest Research Group, which seeks to counteract corporate influence.

The Bloomberg analysis looked at the most recent annual filings from 307 companies in the S&P 500 index, excluding truly domestic companies, those that don’t disclose offshore holdings, companies with headquarters outside the U.S. and real estate investment trusts that aren’t subject to corporate taxes.

According to a 2013 Congressional Research Service report, U.S. multinationals reported 43 percent of their earnings in Bermuda, Ireland, Luxembourg, the Netherlands and Switzerland, far exceeding their investments in those markets.

[Bloomberg]