US multinational companies are clamouring for a tax holiday to repatriate billions of dollars “trapped” overseas but are being rebuffed by the Obama administration.
Research by JPMorgan estimates that that 30-40 per cent of the almost $1,000bn in cash held by non-financial S&P 500 companies is sitting in foreign jurisdictions.
The issue of “cash on the sidelines” is becoming an increasingly pointed political and economic issue in the sluggish recovery, with Republicans blaming uncertainty created by Democrats’ healthcare and financial reforms for companies’ reluctance to invest and create jobs. But some large groups say that US tax rules are a more important barrier. JPMorgan estimated that for some companies, so-called trapped cash amounts to more than 75 per cent of cash balances. To use the cash domestically, they would have to pay tax, typically between 25 and 35 per cent.