U.S. Firms Keep Billions Overseas The Washington Post via Yahoo!News (4/2)
With sales up 5 percent last year, Merck & Co. was not satisfied: To hold down costs, the pharmaceutical giant shed 3,200 jobs as 2003 drew to a close, and announced that an additional 1,200 positions would go this year.
But Merck's picture abroad was quite different. It made 1,300 new hires in 2003 outside the United States, on top of the 900 brought on the year before. Company documents indicate that Merck had a cumulative $18 billion in foreign earnings untaxed by the end of last year, $3 billion more than in 2002. And the company said it had no intention of ever paying U.S. taxes on that burgeoning sum.
"Foreign earnings of $18.0 billion . . . have been retained indefinitely by subsidiary companies for reinvestment," Merck's annual filing with the Securities and Exchange Commission said. "No provision is made for income taxes that would be payable upon distribution of such earning."
By the end of its 2003 fiscal year, Hewlett-Packard Co. had "indefinitely" deferred taxation on $14.4 billion of foreign earnings, according to SEC filings, a move that helped lower its effective tax rate from the statutory corporate income tax rate of 35 percent to 12 percent.
Domestic employment at Intel Corp. slipped by more than 3,300 people last year, but it grew by more than 4,300 abroad. By the end of 2003, the company had $7 billion in cumulative foreign earnings, $700 million more than it had sheltered in 2002, according to SEC filings. The semiconductor powerhouse stated that it "intends to reinvest these earnings indefinitely in operations outside the U.S."
Corporate tax revenue in 2003 fell for the third straight year, to its lowest in a decade. As a percentage of the economy, business taxes last year reached the second-lowest level since the Great Depression.
There's more, especially about John Kerry's tax plan, so go read for yourself: it's worth your time.