Richest companies' cash out of reach of shareholders
Published 09/08/2014 | 02:30
Some of Ireland's biggest private sector employers are among a handful of US corporations holding billions of euro in cash outside the US.
Just 18 American businesses held 36pc of corporate wealth in 2013, up from 27pc in 2009, according to a report from Standard & Poor's (S&P).
The bottom 80pc have lost ground, with just 11pc of corporate wealth.
The top 1pc of richest companies is a who's who of multinationals, including Microsoft, Google and Apple - all with major operations here. They reap a big share of profits from non-US sales.
Because tax law discourages moving that money back to the US, cash is piling up abroad and companies are taking novel steps to adapt, including borrowing against those assets to finance operations at home.
"Unlike individuals, corporations don't want to be in that top 1pc," said analyst Andrew Chang, who wrote the S&P report. "This rising cash balance among the richest is tax-policy driven."
American multinationals are taxed by the country where profits are earned and by the US when - or if - the money is brought back.
The corporate tax rate in the US is the highest in the developed world at 35pc.
"Overseas cash continues to accumulate without being touched," Mr Chang said.
That's bad for investors, who like to see money put to use or returned to shareholders. It's also not good for the deficit- ridden US Treasury, which missed out on an estimated $83.4bn (€61bn) in tax revenue this fiscal year as companies delay bringing back earnings, according to the congressional joint committee on taxation.
"Obviously we'd rather have our cash work for us because it's sitting in accounts with low interest rates and there'd be better ways to invest that money," said Fernando Vivanco, a spokesman for multinational Medtronic.
W"Are there any companies that you know that could say we love having our cash trapped?"
While Mr Chang estimated 83pc of cash held by the wealthiest 1pc comes from foreign earnings, domestic assets are shrinking to the point that there's not always enough to finance US operations, he said.
That's one reason Apple, Cisco Systems and other companies are borrowing, despite sitting on cash. Cash- rich Apple caused a stir last year when it raised debt to make dividend payments because it was cheaper to pay interest on the debt than to pay US tax on repatriated profits. (Bloomberg)