Survey Finds US Tech and Pharma Giants Move Cash Offshore to Cut Tax

A group of major US technology and pharmaceutical companies have reduced their average tax rate by a quarter since 2006 as they deposited more cash offshore than all other US companies combined, according to the
Financial Times
.

The business daily reports that nearly US$500bn of offshore cash is held by a small group of 14 US tech and pharma groups. The
FT’s
research finds that they paid an average overseas tax rate of just 10% in 2013. Over the past eight years, overall tax rates fell as their lightly-taxed foreign profits grew at nearly three times the pace of their foreign sales.

The paper reviewed the accounts of Apple, Microsoft, Google, Pfizer, Cisco Systems, Oracle, Qualcomm, Johnson & Johnson, Merck, Amgen EMC, eBay, Eli Lilly and Medtronic, which provided data on their offshore cash. Collectively they held US$479bn of offshore cash and equivalents at the end of their last financial year, or just over half of the US$947bn that credit ratings agency (CRA) Moody’s estimated was held by US non-financial companies. With Pfizer the one exception, all reported falls in their tax rates, which ranged from 10% to 66%.

American companies have lobbied for a temporary ‘tax holiday’ to encourage them to repatriate their profits to the US. However, earlier this week the US Joint Committee of Taxation, which provides Congress with non-partisan analysis, reported that any such move would cost the government US$96bn in lost revenue over a decade. It also warned of a potential “moral hazard” by signalling that tax holidays would become a regular part of the tax system.

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