Strange that dividends and stock buybacks are not mentioned in the article, two traditional ways of disposing with excess cash that keep shareholders happy. Perhaps tax strategy explains some of the cash-holding, if the cash is held offshore to comply most cost-efficiently with tax law. I know mk was not too pleased with this behavior. I recall the peculiar reversal of roles as government figures whined and fumed that "It's not fa-a-a-i-r!" while the business figures answered that they don't make the rules, they follow them. As Eric Schmidt put it, "When legislators are doing the lobbying and companies are articulating the law as it stands, it's a confusing spectacle for everyone." Wikipedia says Ireland is changing the rules for just this reason.
I remember hearing an interview with Tim Cook on NPR a few months ago. Apple has something like $150 billion in cash reserves, most of it offshore. Cook definitely claimed that taxes were the sole reason Apple won't repatriate that money. However, the author of this article says taxes can only explain part of the holdings. I know the one thing that the CEOs and CFOs always cite is uncertainty. Democrats and Republicans keep talking about overhauling the corporate tax structure, but they can never agree on how. Thus, corporations sense that change is coming, but don't know in which direction things will move. My guess is that a lot of the cash hoarding has to do with fear of being caught with their pants down when the new rules finally materialize. Discouraging investment may be one specific way that political dysfunction harms the economy (provided we're agreeing that sitting on cash, as opposed to investing it in employees, capital goods, etc is generally harmful to the economy).Perhaps tax strategy explains some of the cash-holding, if the cash is held offshore to comply most cost-efficiently with tax law.
Yes, it is unseemly. That doesn't mean that I don't understand why they do it, and the genesis of this situation clearly lies with the legislature. Still, the decision is Google's to make. Large companies like Google play a significant role in shaping our world. That is, I don't see everything that Google does as an inevitable response to market demand. My example of selling babies to a food processor is absurd. However, I don't think it is wrong to fault both the US legislature and Google. IMO it is reasonable to hold corporations to expectations other than maximizing shareholder value. True. Buy backs and dividends have been relatively frequent over these past few years. However, I have read that even Apple has issued bonds for these purposes. That might be part of the reason. When debt is so cheap, why spend money?Strange that dividends and stock buybacks are not mentioned in the article, two traditional ways of disposing with excess cash that keep shareholders happy.
No matter what legal amount Google pays in taxes, it will be possible for Google to legally pay more in taxes, right? How should Google decide how much to pay? You do not pay more than you are required to pay in taxes, do you? Perhaps you even spend money on tax software or tax advisers to discover new legal deductions. Maneuvering to pay fewer taxes can be described as "dodging," but tax law is intentionally complex, as legislators attempt to create incentives that lead to desirable outcomes. I think it's asking a lot of the taxpayer to both follow the letter of the law and also figure out the intention of the law and make sure they do not subvert it. It seems strange that Apple would sit on cash while also borrowing cash to give to investors. I can think of two explanations, both probably wrong. 1. The cash mountain is in a tax shelter, so importing it to pay investors would cost a tax penalty. 2. Apple considers its cash position to be a healthy amount, and it only appears absurdly large because Apple itself is absurdly large. Making a cash distribution to investors without reducing their cash position requires taking on debt.the decision is Google's to make
Apple has issued bonds for these purposes.