Seeking Alpha

Many U.S. firms are cash rich abroad but cash poor at home, and the SEC worries they...

Many U.S. firms are cash rich abroad but cash poor at home, and the SEC worries they aren’t presenting investors with an honest appraisal of their liquidity. “That doesn’t mean they could suddenly run out of money to pay their bills," WSJ's Kate Linebaugh writes. "But it does mean there could be unseen limits on their ability to pay dividends and buy back shares."
Comments (37)
  • A consequence of U.S. tax policy. Simple fix but politically difficult to swallow. So, we'll leave it alone eh?
    4 Dec 2012, 11:46 AM Reply Like
  • And the tax policy pays for your military. Or don't you want to pay for your military, or, do you want China to pay for it?

     

    Can't have your cake and eat it too.
    4 Dec 2012, 01:40 PM Reply Like
  • Your comment does not calculate ... if the money were brought home and taxed ... then it might be paying for something .... not as long as it is parked overseas.
    4 Dec 2012, 01:58 PM Reply Like
  • Yep, Barry O has no common sense when it comes to tax repatraition holiday...15-20% of a lot is better than 100% of NOTHING
    4 Dec 2012, 11:48 AM Reply Like
  • is the cash in usd or foreign currencies?
    If the latter this could be a boon to USD
    4 Dec 2012, 11:49 AM Reply Like
  • What an excuse this article presents. Sure the corporations will use any tool to try to keep from paying US taxes and dividends. And who cares about buybacks. If the company is doing a good job of selling their product buybacks are unnecessary.
    4 Dec 2012, 12:02 PM Reply Like
  • This article coming from a conservative owned paper is worthless. Corporations are using any tactic they can to avoid paying US taxes which is one step needed to reduce our budget deficit. The money regardless is in the pocket of the Corporation wherever it is in the world and we should be taxing it at some rate not letting them hide it.
    Buy backs are for losers. If the company had a product that other companies needed, consumers would buy and at a fair price, there would be no need to buy back shares because the stock price would rise without the help.
    4 Dec 2012, 12:06 PM Reply Like
  • Just like the bigger Fiscal Cliff issue, compromise is needed here. How stupid can these people in charge be?
    4 Dec 2012, 12:10 PM Reply Like
  • The author does not follow the news. When corporations need cash and do not want to bring back overseas cash because of taxes, they just float a bond at historic low rates. The interest is a lot cheaper than the taxes if they bring back cash from overseas. They are just responding to our out of date tax policy.
    4 Dec 2012, 12:14 PM Reply Like
  • In my opinion, this is where patriotism and profit intersect. Corporations demonstrate patriotism by paying more in taxes and hiring more Americans. GE has enjoyed tax breaks beyond the pale. I own GE and I think there is a lot more that they can do for America.
    4 Dec 2012, 12:18 PM Reply Like
  • Second star to the right, and straight on 'til morning, my friend.
    4 Dec 2012, 01:03 PM Reply Like
  • As long as people keep soaking up 10-yr paper at 2.125%, I think Microsoft might be able to keep the lights on...

     

    http://bloom.bg/VtKCMt
    4 Dec 2012, 12:25 PM Reply Like
  • If I were these corporations I would rather pay the low rates on paper they issue than pay 35% in corporate taxes for bringing the money back.

     

    We need to lower corporate tax rates as a whole to make us more competative with the rest of the developed world. We should also come up with a plan to incentivize bring foreign cash back into the US. Tax it at a lower rate or something like that. From a gov. revenue standpoint, some is better than none and also bringing this money back will allow companies to do more domestic hiring and R&D. Funny how almost everything that ails us can be traced back to the piss poor fiscal policy our government seems determined to put forward.
    4 Dec 2012, 12:58 PM Reply Like
  • The issue with transferring the money to the US is the additonal 35% tax. The issue with lowering the corporate tax rate on foreign holdings is the incentive to move corporate headquarters outside the USA. What is a better choice. Lower tax rate or provide an incentive to a company to move offshore.

     

    If it is allowed once, it will become like the immigration lottery and amnesty....break the law and wait for another policy relaxation. For the companies accumulate the money offshore until another tax holiday. It is ugly either way you dice it.
    4 Dec 2012, 07:14 PM Reply Like
  • Corporations should stop being so greedy and bring the money home, suck it up and pay the taxes for the system that helped generate their business to begin with.
    4 Dec 2012, 01:17 PM Reply Like
  • This is Regan's lagacy.
    4 Dec 2012, 01:42 PM Reply Like
  • gdavidson,

     

    Incorrect. It's Idi Amin's legacy.
    4 Dec 2012, 04:29 PM Reply Like
  • The companies with money overseas should start international ETFs, buy shares in the local currencies, set up individual Swiss bank brokerage accounts for each shareholder, and then give us the shares as dividends (on top of the regular dividend please).

     

    Then WE pay tax on it when WE cash in the shares and bring the money home.
    4 Dec 2012, 01:26 PM Reply Like
  • LOL, this is an entetaining idea. Except that it would cost more to do all the BS paperwork then to just pay the taxes. Not to mention all the extra work involved (put more people to work?).
    4 Dec 2012, 01:54 PM Reply Like
  • Lot of middlemen would be making money on this amusingly circuitous deal.
    4 Dec 2012, 02:29 PM Reply Like
  • The US is one of the few countries that charge a tax on repatriated income. This is an issue, and it does affect forex dynamics, hedging strategies, etc., not to mention that if that repatriated income came back here it could be invested (private domestic investment, which is alarmingly low from where it could or should be for economic growth).
    4 Dec 2012, 02:24 PM Reply Like
  • I may be wrong about this but I seem to remember reading an article in the last week outlining things companies could do with overseas cash to bring it back into the US to avoid the tax hit and I think the article indicated that one such route was buying treasuries.

     

    Why don't these companies bring the cash back, buy a bunch of 2 years and just pay tax on the miniscule interest they earn instead of the billions and billions of cash they would have access to after that 2 year time?
    4 Dec 2012, 02:40 PM Reply Like
  • The money should be repatriated at a low or no rate, and allowed to be invested. Look up private domestic investment as a % of GDP - alarmingly low and going lower.

     

    We don't need more investment in fixed income "safe havens," we need the money to be invested in infrastructure and new business activity. Giving the money to the gov't to accomplish this is a lousy idea.
    4 Dec 2012, 02:46 PM Reply Like
  • Government was created to be inefficient, and it's doing it way better than the founding fathers ever intended...
    4 Dec 2012, 02:47 PM Reply Like
  • I'm not suggesting the government should be the one to invest in new business activity, I'm just simply saying that if I understood the article correctly and that is a way to get around the bulk of the taxes on the overseas money, why don't more companies take advantage of that to bring cash home? If you can only use the money for foreign operations while it's offshore, why not lock it up for two years and earn a small bit of interest on it just to gain access to the whole lot when the paper matures?
    4 Dec 2012, 02:51 PM Reply Like
  • CORRECT!
    5 Dec 2012, 02:43 AM Reply Like
  • How do other countries tax profits made here? Is it fair to tax as normal profits in both countries?
    4 Dec 2012, 03:02 PM Reply Like
  • It depends on the country. For instance the UK only taxes income at the difference between the two rates. So say you're doing business in the US and paying 35% on the income and the UK has a tax rate of 40%. They will only charge you that 5%. If the UK has a tax rate of 35% or lower, they won't charge you any tax. That's the way it works for personal taxes, I believe corporate is similar however I'm not positive.

     

    It depends on any agreements the countries have in the form of treaties, etc. My understanding of foreign tax policy is a little hazy at best.
    4 Dec 2012, 03:10 PM Reply Like
  • My wife and I lived and worked in London through most of the last decade. She was paid in pounds for her job and we had other income in the US. Only the income earned in London was taxed at UK rates and we received a credit on our US taxes for what we paid to Inland revenue. The idea behind the treaty is for you to pay no more in taxes than you would living in the States.
    Income in the states was taxed at US rates.
    In 2007 Gordon Brown initiated a 30,000 pounds surcharge, per person per year, for those people who had lived in the UK for 7 or more years regardless of how much you made. This made the overall cost too high and we came back, as did thousands of other ex-pats from many countries.
    4 Dec 2012, 03:36 PM Reply Like
  • And your return to the US created new jobs for locals. That was a great move on the part of Gordon Brown.
    4 Dec 2012, 07:17 PM Reply Like
  • Very few corps pay 35% taxes in earned income here in the US.
    4 Dec 2012, 09:49 PM Reply Like
  • bgold, the next time you try to make something up, get the terminology correct. Earned income applies to individuals, not corporations.
    5 Dec 2012, 12:35 AM Reply Like
  • Here you go. Keep in mind as well that unlike many countries the US has a multi-tier system of federal, state, and local taxes. To compare apples to apples and see the true effect of the US's high corporate tax rates you have to factor in State tax rates in addition to the federal tax rate.
    http://cnnmon.ie/QGjxTw
    5 Dec 2012, 12:44 AM Reply Like
  • bgold - I don't know what you're talking about. I've read hundreds of company transcripts and quarterly reports and almost every company I can think of is paying between 30-35%. The only real exceptions are the truly global guys and they're paying right at the 20% level. I think you might want to do some research.
    5 Dec 2012, 04:24 AM Reply Like
  • Don't forget that 35% tax rate is only levied on what is left after all kinds of deductions and subsidies and credits etc.. So if you look at the tax bill paid vs profits before all those gimmicks, it is no longer 35% of what many other countries would define as profit.
    13 Mar, 11:18 PM Reply Like
  • I'm confused by the bias to confiscate the money to the US. There is growth and profits outside of the US. Why not work to achieve successfully leaving the money where the potential for growth exists - It is likely people are working for less than fair wage (US purchasing power) that generated these profits. Let the money reinforce their economy. You can still share in the profits without trolling off all the cream. And oh yeh, it sucks for the military industrial complex, but you just might make more friends.

     

    Transferring the money to the US with taxes allows government programs to fund the buying of the stuff the companies produced overseas. A dividend may do a fraction of the same as long as liquidity is balanced enough to land dividend spending - at least for the right choice stocks. I have no interest in another asset bubble as it forces too many CEOs to chase dumb investment options to satisfy dumber P/E ratios.

     

    Share buy backs is a different story. If negative interest rate policy (NIRP) is our monetary future, I would starting thinking twice or perhaps three times about where this path may play out for share buy backs.

     

    This appears to be the strangest of monetary futures. As Buzz would say "to infinity (zero) and beyond".
    5 Dec 2012, 09:33 AM Reply Like
  • It's stupid policy, but since the NEA and teachers' unions have controlled the gubermint skools system since the 1960s the US public has been dumbed down sufficiently by now, and is correspondingly sufficiently parochial, to buy into "the world owes us" mindset and that profits earned anywhere are due and payable to the US government.
    5 Dec 2012, 02:15 PM Reply Like
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