It's interesting how some of these companies are sitting on piles of cash but are still so tax avoidant. Many companies aren't doing anything with the money they're saving on taxes. I don't understand it.
The cash is factored into the stock price. Stockholders figure that sooner or later there will be a tax holiday or equivalent which will let companies bring this money into the US for free, or at least cheaply, and pay it out as dividends or share buybacks.
Also, lots of US companies use this overseas cash as collateral to take out low-interest debt from inside the US to fund US expansion (again, because those issuing the cheap debt know that Google etc * could * pay it off if necessary, it's just dumb to pay the 35% if you don't have to).
+ they can use it do fund big acquisitions outside the US. Luxembourg based Skype, for example, for which Microsoft (probably, maybe) overpaid significantly was acquired with foreign reserves. Overpaying on a deal isn't nearly as bad if the alternative is to lose 35% of said money.
The money isn't really lost though. It would go towards services and infrastructure for everyone. Are those alternatives considered in the corporation's accountings?
Absolutely, and they are completely irrelevant to a corporation. For example: a canadian pension fund doesn’t care one bit about paying taxes in France; they care about hitting their targets and achieving a certain annual yield on their (tens of) billions of dollars under management for their beneficiaries.
If I’m said fund and a shareholder in a company, if I notice management paying excessive taxes somewhere, I will intervene and force them to reduce taxes as much as legally possible.
>Absolutely, and they are completely irrelevant to a corporation.
Why would a corporation account for irrelevancies?
A pension fund isn't really a typical corporation; it's more of a holding facility. If a Canadian pension corporation thinks that common services and infrastructure are irrelevant, they probably aren't going to be around vey long, as their civilization crumbles.
Pension funds hold controlling stakes in various companies (private and public) globally. It’s not uncommon for a US or Canadian pension fund to hold a controlling stake in a private European business. Meaning they often have indirect influence over the actions of corporations. The same applies to hedge funds or investment vehicles controlled by activist investors.
Why would a US pension fund care about paying tax in France? I could understand why it matters if they paid tax in the US (even though a CA based fund probably wouldn’t care about contributing in NY), but what do they have to gain by overpaying tax in France?
the IRS is on record as telling people that they should practice tax avoidance.
Tax evasion is about lying to the government so you don't have to pay the taxes you should. Tax avoidance is about changing your behavior in order to reduce your tax burden based on what the government has chosen to incentivize.
That money will keep the lights on (or pivot) when hard times come, which they will (because of economic cycle, landscape changes etc etc). Unlike nation-states, corporations have little incentive to distribute their wealth as soon as they accumulate it.
I wonder if Google will soon use its Deep Mind AI to optimize for where to pay the lowest possible taxes in the world for every single service they offer (and I hope I didn't just give them this idea).
