Silicon Valley Firms Stash Billions Offshore but Don’t Report Tax Benefit

Thursday, February 21, 2013


It is not a crime for a company to make billions of dollars, or stash those billions of dollars in overseas tax havens, or fail to report that tax benefit to the government. In fact, only 17 of the 50 California tech companies in Silicon Valley surveyed by The Bay Citizen bothered to comply with the voluntary option of giving the U.S. government tax estimate information requested on forms.

What they do disclose is how much money they have stashed in offshore accounts where they avoid the 35% U.S. corporate tax in exchange for tax rates below 15%. The Bay Citizen calculated that the top 50 Silicon Valley corporations have $225 billion overseas, accumulated through foreign subsidiaries, and all but three of them dodge U.S. taxes by designating the funds “permanently reinvested.” 

Cisco Systems, which did not report the tax benefit to the government, has $41.3 billion overseas, followed by Apple ($40.4 billion), Hewlett-Packard ($33.4 billion), Google ($24.8 billion) and Oracle ($20.9 billion). Apple told the government it estimated its tax benefit at $13.8 billion and Oracle reported $6.3 billion.

Stashing money in tax havens isn’t a particular specialty of tech companies. Citizens for Tax Justice reported that 285 corporations in the Fortune 500 had accumulated $1.5 trillion in unrepatriated profits by 2011 that they paid little or no taxes on. About half of that money was accounted for by just the top 20 companies. It is suspected that much of that money ended up in tax havens, but it is impossible to know for sure because corporations aren’t required to disclose that information.

Conservative estimates are that the tax dodge costs the federal government around $90 billion a year, about half as much again as corporations pay now. When anti-tax advocates talk about high corporate taxes in the U.S. compared to other nations, they complain about the 35% rate but don’t factor in all the untaxed profits sitting offshore. 

Senator Bernie Sanders (D-Vermont) introduced a bill earlier this month to do away with the tax break for “permanently reinvested” profits, but it is given little change of passage outside of a larger deal that includes some corporate perks. Corporations would prefer a one-time tax holiday, like one in 2004, that would let them bring their money home at rates that could be as low as 5%.

Supporters of the 2004 tax holiday said it would generate big bucks for the government and help the economy in general, but a study by the U.S. Department of the Treasury showed it didn’t. “The goal was to encourage U.S. multinationals to pay bigger cash dividends from their overseas subsidiaries and use the cash to make investments in the United States,” the report said. “Unfortunately, there is no evidence that it increased U.S. investment or jobs, and it cost taxpayers billions.”

The congressional Joint Committee on Taxation actually told Congress before the 2004 tax holiday that it was going to cost the country billions, so the result wasn’t totally unexpected. The law required corporations taking advantage of the amnesty to use money transferred to the U.S. for research and development and for job growth.

The nonpartisan Congressional Research Service (CRS) reported that most of the largest beneficiaries of the tax holiday did not use their windfall to hire new workers and expand their businesses. Instead, “the largest beneficiaries of the holiday actually cut jobs in 2005-06.”

Around 92% of the $300 billion that companies brought home ended up paying for shareholder dividends, according to the National Bureau of Economic Research.

The Top 10 Silicon Valley corporations with offshore assets are:



Company Offshore assets Reported tax benefit
Cisco Systems $41.3 billion Did not report
Apple $40.4 billion $13.8 billion
Hewlett-Packard $33.4 billion Did not report
Google $24.8 billion Did not report
Oracle $20.9 billion $6.3 billion
Intel $14.2 billion Did not report
Ebay $10.0 billion Did not report
Gilead Sciences $5.8 billion $2.0 billion
Agilent Technologies $5.2 billion Did not report
Yahoo $3.2 billion Did not report



–Ken Broder  


To Learn More:

Silicon Valley Firms Shelter Assets Overseas, Slash U.S. Tax Bill (by Matt Drange, The Bay Citizen)

Which Fortune 500 Companies Are Sheltering Income in Overseas Tax Havens? (Citizens for Tax Justice) (pdf)

Just the Facts: The Costs of a Repatriation Tax Holiday (by Michael Mundaca, U.S. Department of the Treasury)

Offshore Tax Dodges that Cost California $7.1 Billion Seem Off Limits to Reform (by Ken Broder, AllGov California)




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