The largest U.S.-based companies added $206 billion to their stockpiles of offshore profits last year, parking earnings in low-tax countries until Congress gives them a reason not to.
The multinational companies have accumulated $1.95 trillion outside the U.S., up 11.8 percent from a year earlier, according to securities filings from 307 corporations reviewed by Bloomberg. Three U.S.-based companies ― Microsoft Corp., Apple Inc. and International Business Machines Corp. ― added $37.5 billion, or 18.2 percent of the total increase.
“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.
|An Apple store in Rio de Janeiro, Brazil (AFP-Yonhap)|
Even as governments around the world cut tax rates and try to keep corporations from shifting profits to tax havens, the U.S. Congress remains paralyzed in its efforts. The response of U.S.-based companies over the past few years has been consistent: book profits offshore and leave them there.
Congress hasn’t acted because of disagreements over whether to be tougher on U.S. companies operating abroad amid broader disputes over government spending and taxation. The stalemate has prevented the U.S. from tapping a pot of money that President Barack Obama and the top Republican tax writer in Congress have eyed for such projects as rebuilding highways.
Meanwhile, the companies are deferring hundreds of billions of dollars in U.S. taxes as they lobby to end a system they describe as a competitive disadvantage in world markets. The top 15 companies now hold $795.2 billion outside the U.S., up 10.6 percent.
That increase was slower than the 15.9 percent rise in stockpiled profits those same companies had the previous year. Pfizer Inc. reported a decrease in offshore profits this year, and General Electric Co. and Citigroup Inc. each reported growth of less than 3 percent.
The Bloomberg analysis covers the two most recent annual filings from 307 companies in the Standard & Poor’s 500 Index.
It excludes purely domestic corporations, 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.