How Much Profits Are U.S. Companies Really Holding Overseas?

u.s. companies

How Much Profits Are U.S. Companies Really Holding Overseas?

How much money does the U.S. government collect in corporate taxes every year on average? While there is no exact answer the following numbers provide a relatively close approximation. In 2014, the Government collected $3.02 trillion in taxes, with about 11 percent of that coming from corporate taxes. That equals roughly $332 billion in taxes from corporations. This year, the Federal Reserve estimates that total tax revenues will be roughly $3.2 trillion. That means the corporate tax bill will likely be even slightly higher than last year, if you consider $20 billion a slight increase. Regardless of the exact numbers, it’s clear that the U.S. government takes a huge sum of money every year from American companies. So it’s no wonder that so many companies look for ways to lower their tax bills, including keeping large sums of profits overseas.

A Lot of Missing Tax Dollars

Just how much money are U.S. companies leaving in other countries? According to the numbers, the amount companies pay in corporate taxes pales in comparison to the amount they leave in foreign countries. According to Citizens for Tax Justice and the U.S. PIRG Education Fund, some 350+ American companies are collectively holding a reported $2.1 trillion in profits in foreign lands. Together those companies hold more than 7,600 separate subsidiaries in foreign countries. So what would the expected tax bill be for $2.1 trillion in profits? The U.S. government is apparently missing out on $620 billion in additional tax revenue because these companies are leaving that money in overseas accounts.

Inside the Numbers

A closer look at the numbers shows that more than half of the total profits are generated by a very limited amount of companies. Of the more than 350 companies that hold offshore subsidiaries and accounts, just 30 of them account for $1.4 trillion in profits. According to the report, the tax amount could be even larger because not every company discloses the amount of tax money they would actually owe if they didn’t leave those profits in foreign lands. Among the companies who hold the most money in offshore subsidiaries include, Apple, which leads the way with a reported $181 billion in profits outside the U.S. Pfizer accounts for another $74 billion of the total. They are not alone, either, as a report from Reuters in 2013 estimated that nearly three-fourths of the 50 largest technology groups in the U.S. leave profits in foreign countries in order to save on their tax bill.

Right or Wrong, It’s Still Legal

The debate will go on as to whether or not these companies are robbing the United States government of valuable tax dollars. While some argue that they are, the fact is these companies are using legal tactics in order to keep their companies in the best financial position as possible. On the other side of the argument are those that contend that these companies would not have to resort to these measures if U.S. lawmakers would come up with a solution to fix the country’s broken corporate tax system.

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Alan Olsen, CPA

Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of  GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.


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