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Apple now holding more cash than USA

bbc.co.uk

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Re: Apple now holding more cash than USA

#11

Post by JacobAldridge »

grannyg00se wrote: post #4

"the country has an operating cash balance of $73.7bn" How is this so? I thought the annual budget was in deficit. Quite significantly, in fact. And not to mention the country has a massive debt. Although I understand how that may not affect the operating cash balance. The headline definitely seems like it could be used as a sound bite for corporate tax increase commentary.

The difference (in very simplistic terms) is Budget v Cash flow. Think like a business - I might need to borrow funds to cover all my costs this year, but when I make a sale that's still cash coming in.

See the graph here - http://www.slate.com/id/2299845/. "you will also see some spikes in revenue after borrowing is maxed out. This can be attributed to many things - an influx of tax revenue, profits from the Federal Reserve's holdings, and the general movement of funds and debt between accounts."

Also, if the funds you borrow are sitting in an account while you wait to pay future bills, you may have a deficit but a positive cash balance.

(Of course, it's not quite that simple. Borrowings in a business are normally a liability on a balance sheet, though the interest and repayments would affect the budget.)

Re: Apple now holding more cash than USA

#13

Post by mmariani »

ctdonath wrote: post #6
apress wrote: post #3

Of course, there's actually a much deeper and more important connection. The huge cash hoards of Apple, Google, Microsoft and other big multinational corporations are a direct outgrowth of clever tax strategies they use to shift profits to low-tax countries and avoid US taxes. http://www.reuters.com/article/2011/07/27/us-microsoft-tax-i... Corporate tax payments as a percentage of total tax revenues are low and histo…

Note that those big multinational corporations can't move money made outside the country to back home in the USA without incurring an absurd ~30% tax on top of whatever other taxes they paid whoever already. Word is Apple has been pushing for an amnesty so they _can_ bring their money home; until then, that money earned outside the US stays outside the US.

Not just Apple is lobbying this tax holiday.

More info here http://money.cnn.com/2011/02/16/news/companies/repatriation_...

Re: Apple now holding more cash than USA

#14

Post by rauljara »

grannyg00se wrote: post #4

"the country has an operating cash balance of $73.7bn" How is this so? I thought the annual budget was in deficit. Quite significantly, in fact. And not to mention the country has a massive debt. Although I understand how that may not affect the operating cash balance. The headline definitely seems like it could be used as a sound bite for corporate tax increase commentary.

To use a terrible analogy that doesn't hold up under close scrutiny but is sufficiently accurate to answer your question: Just because you spend more than you earn using your credit card doesn't mean you don't have money in the bank. You can also use your credit card to put cash in your bank account.

The US doesn't hand people treasury bonds to pay them. It uses treasury bonds to put money in its treasury. Then it pays its operating expenses out of the treasury. If the treasure runs down to zero, it can't pay any of its expenses, but it will almost certainly never run down to zero. It gets in new revenues all the time (even without borrowing). Just not enough to meet all of its expenses.

Re: Apple now holding more cash than USA

#15

Post by ristretto »

apress wrote: post #3

Of course, there's actually a much deeper and more important connection. The huge cash hoards of Apple, Google, Microsoft and other big multinational corporations are a direct outgrowth of clever tax strategies they use to shift profits to low-tax countries and avoid US taxes. http://www.reuters.com/article/2011/07/27/us-microsoft-tax-i... Corporate tax payments as a percentage of total tax revenues are low and histo…

Imagine how worse this problem is for European countries, which face the same tax avoidance, and have to sustain massively more expensive public sectors.

Re: Apple now holding more cash than USA

#18

Post by gwright »

ZachPruckowski wrote: post #9
ctdonath wrote: post #6

Earlier quoted context omitted.

Note that those big multinational corporations can't move money made outside the country to back home in the USA without incurring an absurd ~30% tax on top of whatever other taxes they paid whoever already. Word is Apple has been pushing for an amnesty so they _can_ bring their money home; until then, that money earned outside the US stays outside the US.

Last time we had an amnesty, all the money that flooded back in to the USA wasn't reinvested the companies or used to grow the economy, it just want straight into bonuses and dividends.

I'm not sure I follow. Distributing profits to employees (bonuses) or to investors (dividends) is bad? The employees and investors now have more money to buy things or to re-invest.

I'm not an economist, but I think that when money flows from A to B, the economy does grow. It doesn't matter if that flow is to employees as bonuses, investors as dividends, or to vendors as business expesnses.

Re: Apple now holding more cash than USA

#19

Post by tomelders »

apress wrote: post #7
kevin_morrill wrote: post #5

Earlier quoted context omitted.

It's a bit strange to call it shifting when the profits were made overseas. And it's no surprise they'd keep it off shores once they've made it, since they'd have to give up 35% of it to bring the money inside the U.S.

This is not about profits made overseas, say like selling iPhones in China This is the use of complex strategies, like creating a shell company in the Isle of man that "owns" intellectual property and "licenses" it to the US subsidiary for a fee that just happens to equal most of the profits on US sales. The profits go to the tax haven and never come back.

In this instance, to my knowledge, Apple isn't using shell companies. It has iTunes set up in Luxembourg, but that's a very real company. And each country has it's own Apple subsidiary which again are real companies in their own right.

I'd say that it's hardly tax avoidance, since they pay their taxes in the countries where the revenue is generated. No one in their right mind would give up 35% of their wealth simply to move it to a different country, and nor should they.

Re: Apple now holding more cash than USA

#20

Post by dpark »

gwright wrote: post #18
ZachPruckowski wrote: post #9

Earlier quoted context omitted.

Last time we had an amnesty, all the money that flooded back in to the USA wasn't reinvested the companies or used to grow the economy, it just want straight into bonuses and dividends.

I'm not sure I follow. Distributing profits to employees (bonuses) or to investors (dividends) is bad? The employees and investors now have more money to buy things or to re-invest. I'm not an economist, but I think that when money flows from A to B, the economy does grow. It doesn't matter if that flow is to employees as bonuses, investors as dividends, or to vendors as business expesnses.

> I'm not an economist, but I think that when money flows from A to B, the economy does grow.

Money moving from one place to another does not always help the economy. When money flows from the corporate coffers directly into the private accounts of its executives, generally little of that money actually flows into the greater economy. When you consider that under normal circumstances 30% of that money would flow into the federal government to fund programs, it's pretty clear that less money flows into the economy in cases of tax amnesty.

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