The Panama Papers scandal. The Obama administration’s new rules limiting inversion. All of that has put renewed focus on U.S. companies that keep funds offshore in order to avoid paying taxes.
Keeping funds offshore is not illegal. President Obama said as much Tuesday in announcing the new rules. “The big problem we have,” Obama said, “is that a lot of this stuff is legal, not illegal. You can trace what’s taking place, but you can’t stop it.”
Some of the biggest names in America have profits parked overseas. Here are the top half dozen, as of this past November. Coincidentally – though perhaps not directly related – none of these companies has a higher Woo Trader grade than D.
According to Citizens for Tax Justice, Apple would owe $59 billion in taxes if the $181.1 billion it has stashed overseas was brought back to the U.S. The company uses 3 tax subsidiaries to house the offshore funds.
Apple currently finds itself in a tax struggle with the European Commission, although the company said it expects “minimal tax repercussions” as a result.
The company has problems, other than taxes, following a recent downgrade of its stock by Bernstein from Outperform to Market Perform.
Microsoft said its offshore funds, in 2007, were held in 10 subsidiaries. By 2014, the number has been reduced to 5. Unfortunately, the amount of money held overseas increased from $7.5 billion to $108.3 billion, an amount that would generate $34.5 billion in taxes if held in the U.S.
Like all but one on this list, Microsoft has a D grade from Woo Trader. The company, however, just moved up from 3986 (out of 4093) to 3789, a positive of sorts.
Pfizer isn’t just known for its (just abandoned) inversion attempt with Allergan Plc (NYSE:AGND), which would have allowed the company to relocate its headquarters to Ireland and avoid U.S. taxes all together.
The company already has been keeping about $74 billion in County Cork (Ireland) not subject to taxes in the U.S.
IBM, with a reported $61.4 billion in overseas profits, is only one of 8 large U.S. tech firms whose untaxed overseas profits comprise one-fifth of the staggering $2.1 trillion in profits kept by U.S. corporations overseas.
The company's stock has "Hold" ratings by Zacks, TipRanks, Jim Cramer's TheStreet and others.
If Merck & Co. paid U.S. taxes on the $53.4 billion it has spread among 121 tax subsidiaries, the government would be $2 billion richer. The tactic employed by pharmas like Merck has been to move ownership of patents and trademarks to countries with more favorable tax rates.
As the lone Woo Trader F on this list, the company received no help when data from a recent study for Evacetrapib, “clearly suggests that CETP inhibition does not reduce cardiovascular (CV) events despite significantly lowering LDL-C and raising HDL-C. Ouch!