The co-chief executive officer of Oracle, Mark Hurd, has pledged to support tax reforms which would allow the enterprise software maker to repatriate cash reserves held overseas back to the United States. Currently the U.S. government is in plans to have the corporate tax rate at the federal level reduced from a maximum of 35% to 20%.
If successful the tax reforms would also see tax system in the United States changed to territorial from worldwide. Consequently the profits held overseas by U.S. companies would be taxed at 10% when repatriated. Oracle currently has cash reserves amounting to $66 billion held overseas.
“We are certainly supportive of repatriation. The opportunity to bring our cash back to the US and to invest it is certainly very attractive. And so for that part of tax reform we are very supportive,” Hurd said during the Web Summit technology conference taking place in Lisbon, Portugal.
According to Hurd, tax reforms which would make repatriation of cash reserves more attractive would allow the enterprise software maker to use its cash more efficiently as it would be used in making investments such as hiring more employees, putting up new facilities or in mergers and acquisitions.
Hurd’s sentiments come in the wake of similar comments from the chief executive officer of Apple, Tim Cook, who said a few days ago that tax reform was badly needed in the United States. In a conference call held three months ago, Cook disclosed that 94% of its total cash reserves was sitting overseas. With Apple’s cash reserves having grown to $268 billion this is about $248 billion.
Besides allowing companies to now pay taxes depending on where the sales occur without double-penalizing them, the U.S. government’s plan to have the tax system switched to territorial from worldwide would also see U.S. firms punished for shifting income internationally as a tax-avoidance strategy. This could affect Apple in a big way as its international sales are routed through overseas subsidiaries to obtain favorable tax rates.
Apple and Oracle are however not holding their breath concerning the passing of tax reforms. To reward their shareholders the two tech firms are tapping the bond markets in order to finance dividends and stock buybacks. Oracle, which has about 87% of its cash reserves held overseas, is selling bonds in five parts to reward shareholders while Apple is selling bonds worth $7 billion to finance a program which is aiming at returning approximately $300 billion to shareholders before April 2019.