From Steven M. Davidoff at the New York Times (bold emphasis mine)
Apple has a cash problem. It’s not just that Apple has too much cash, $76 billion as of June 30. It’s rather that the bulk of that pile, estimated at $41 billion, is held abroad.
Apple does not want to bring it back to the United States for several reasons, primarily because of the tax consequences, but also because of its own growing foreign presence. Apple is not alone — this problem is an increasing one in corporate America. And the answer may not be more big, all-cash acquisitions, like Google’s $12.5 billion offer for Motorola Mobility.
In an analyst report in May, JPMorgan Chase estimated that 519 American multinational corporations had $1.375 trillion outside the United States. The problem is particularly acute among technology companies, which historically tend to hoard cash because of the cyclical nature of their business.
A recent Moody’s report noted that Microsoft held $42 billion abroad, or more than 80 percent of its cash. Cisco Systems has $38.8 billion, or almost 90 percent of its cash. Google — at least before Monday’s deal — had nearly $40 billion in cash, with more than 43 percent of it held abroad
Tax policy is driving much of this trend. For multinational corporations, cash earned abroad cannot easily be remitted to the United States. If it is paid back to the United States, it is subject to a dividend tax that can rise to as much as 35 percent. Companies are loath to pay this tax because while they can offset it with taxes paid abroad, the companies still end up paying a relatively high tax rate.
Again, tax policies are seen as one of the major forces in prompting for distortions of investment decisions. This greatly affects the allocations of resources or the economy.
In the case above, money which should have been used for more investments or for paying off shareholders in the US has been hoarded overseas.
On the other hand, globalization is an issue too. (bold emphasis mine)
Yet it is not just a tax issue. Many United States companies want to keep cash abroad to focus on high-growth regions for investments and acquisitions.
A recent Standard & Poor’s study found that 50 percent of sales by companies in the S.&P. 500-stock index are outside the United States. Interestingly, the report also found that these companies paid more in foreign taxes than to the United States government. For Apple, 60 percent of its sales are abroad, and like these other companies, its foreign sales are expected to only go higher.
So, for those who expect that a change in tax policy would prompt Apple and other companies to put their cash piles to use in the United States, don’t be so sure. Even if there were no dividend tax, a large portion of this cash would stay abroad as these companies focus on higher growth overseas for investment.
Of course there many other domestic factors involved too which contributes to investment or resource allocation dynamics, this comes in the substance of monetary policies, regulatory climate, growing heft of political distribution of resources (seen via deficits) and etc.
The above evinces that world is complex, with variable interloping factors at work and simply can’t be ‘modeled’.
Point is: political actions affect the economy, most of them negative.
As a caveat, this not only applies to the US but everywhere including the Philippines. Thus, we have to be vigilant with politicos calling for more regulations or taxes or other interventionist measures.