State third largest source of repatriated US offshore cash last year

The Republic was the third largest source of offshore cash repatriated by US companies last year, according to figures released by the US commerce department on Wednesday.

The report found that almost half of the profits returned to the US came from low- or no-tax economies where US companies had held cash before a new US tax law came into force in 2017.

Nearly half of the cash US multinationals brought back onshore during 2018 came from Bermuda – $231 billion (€207 million) – and the Netherlands – $138.8 billion, according to the bureau of economic analysis figures.

The Republic was the third biggest source of repatriated cash, but the value was not available because of what the report described as confidentiality rules.

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The data gives one of the first indications at how US companies are deploying cash globally following an overhaul of the US tax system, which cut the corporate tax rate to 21 per cent from 35 per cent and changed how the Internal Revenue Service taxes overseas corporate profits.

The figures show that chemical manufacturers and electronics producers – both industries that have historically relied heavily on offshore subsidiaries for tax purposes – brought back the most. The data also show US direct investment abroad decreased by $62.3 billion to $5.95 trillion in 2018 as a result of companies repatriating cash.

Corporate behaviour

The data give US politicians a sense about how much the law, which overhauled how global companies pay taxes, changed corporate behaviour.

US corporations brought back about $876.8 billion over 2018 and the first quarter of 2019, according to US commerce department figures released last month. That's a fraction of the $4 trillion that US president Donald Trump said would be returned to the US as a result of his tax law.

Companies had kept much of their overseas profit offshore to avoid a 35 per cent tax that kicked in when they brought the money back to the US. The Republican tax law set a one-time 15.5 per cent tax rate on cash and 8 per cent on non-cash or illiquid assets repatriated to the US, regardless of where the profits sat.

In the future, companies generally only pay US taxes on the profits they earn domestically. However, the law included some exceptions, that means they can still owe on foreign profits. The global low-tax-intangible income levy, or Gilti, in the law was meant to keep US corporations from stashing profits in low- or no-tax countries.

Economists and some tax lawyers have said Gilti actually encourages companies to earn money overseas, the opposite of Congress's intention. Policymakers in Congress and the US treasury department are closely watching how companies react to the law to see if there are unintended holes that allow corporations to minimize their tax bills. – Bloomberg