Crackdown on cash overseas: 5 companies that could get hurt

Crackdown on cash overseas: 5 companies that could get hurt

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Companies notorious for dodging US taxes by incorporating overseas could face clawbacks by the US Government.

Called “an abuse of our tax system” by Treasury Secretary Jacob Lew, Congress has been urged to pass legislation limiting companies’ ability to store cash and reincorporate overseas. 

In an bid to avoid the high 35% corporate tax on profits in the United States, over 50 large companies have reincorporated in other countries—such as the UK where the tax is a more reasonable 20%—in the past 10 years.

Companies in the S&P 500 (SPX) have also stashed over $1.95 trillion, a number that has increased 12% in the past year, with the largest 22 making up more than half that amount.

President Obama, in many of his State of the Union addresses, has vowed to try and recover some of the funds, feeling that the US government is owed taxes on money that is made abroad. Unfortunately, Congress does not share his enthusiasm, and consequently not much has been accomplished. 

If Washington does manage to act, an increasingly likely proposition with mid-terms nearing, these five companies could see over a third of their cash reserves disappear overnight: a scary fact given the predicted rise in rates in coming years will increase the cost of borrowing.

Investors should pay close watch to the US’s move in the coming weeks, but could the impact really be as large as these numbers seem? Find out for yourself by using the tools below.

Click on the interactive chart to view data over time. 

 

1. Apple Inc. (AAPL, Earnings, Analysts, Financials): Designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide. Market cap at $472.72B, most recent closing price at $527.55.

Apple has stepped up the amount it holds abroad, nearly quintupling it from $11 billion in 2010 to $54.4 billion today.

 

2. General Electric Company (GE, Earnings, Analysts, Financials): Operates as a technology, service, and finance company worldwide. Market cap at $255.18B, most recent closing price at $25.29.

The company has $110 billion in overseas accounts with a tax liability as much as $38.5 billion.  

 

3. Merck & Co. Inc. (MRK, Earnings, Analysts, Financials): Provides various health solutions through its prescription medicines, vaccines, biologic therapies, animal health, and consumer care products. Market cap at $166.24B, most recent closing price at $56.18.

Merck holds $57.1 billion overseas, choosing to invest in the betterment of the healthcare industry rather than return $20 billion to a government that can’t hold itself together enough to prevent a shutdown.

 

4. Microsoft Corporation (MSFT, Earnings, Analysts, Financials): Develops, licenses, and supports a range of software products and services for various computing devices worldwide. Market cap at $313.81B, most recent closing price at $37.69.

Growing from around $30 billion in 2010 to around $76.4 billion today, the tech giant has more than doubled its profits kept overseas, keeping almost $27 billion in its own pocket.

 

5. Pfizer Inc. (PFE, Earnings, Analysts, Financials): Pfizer Inc., a biopharmaceutical company, offers prescription medicines for humans and animals worldwide. Market cap at $206.11B, most recent closing price at $31.99.

The drug conglomerate keeps $69 billion outside the US, in turn saving over $24 billion to reinvest into research for life-saving drugs.

 

(List compiled by Robbie Citrino. Offshore account figures sourced from Bloomberg, all other data sourced from Zacks Investment Research.)

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