“Apple will avoid a potential tax bill of up to $9bn by using the proceeds from its $17bn blockbuster bond issue to pay shareholders rather than bringing back cash from abroad,” Michael Stothard reports for The Financial Times. “The technology group would have paid as much as 35 per cent in tax to bring that amount of cash back into the US, according to lawyers and accountants.”
“Apple, which has $100bn worth of offshore cash compared with just $45bn in the US, last month announced it would partly fund a record-breaking $55bn share buyback programme by using money raised in the corporate bond market,” Stothard reports. “The company will also save around $100m a year from using the debt rather than straight cash. Although the company’s $17bn borrowing from the corporate bond market this week will cost it around $310m a year in interest payments, it will regain about a third of that due to tax deductions.”
Stothard reports, “Gerald Granovsky, an analyst at Moody’s, said: “If you assume the statutory 35 per cent corporate tax rate, based on the data available and on a back of the envelope calculation, to generate in the US the equivalent of $17bn the company would need to repatriate $26bn. ‘That is less attractive than paying the $300m in interest attached to this bond sale,’ he added.”
Read more in the full article here.
Related articles:
Debt-free Apple to take on debt to avoid huge U.S. repatriation tax hit – April 26, 2013
Apple’s massive $100 billion capital return program is a perfect tax arbitrage – April 26, 2013
Apple to tap a hungry debt market; strong demand likely from investors eager to get cash off sidelines – April 25, 2013
Debt-free Apple plans to borrow to finance massive capital-return program – April 23, 2013
Apple beats Street on EPS and revenue; ups quarterly dividend by 15%; ups buybacks to $60 billion – April 23, 2013
Apple paid $6 billion in U.S. federal income taxes, 1/40th of all corporate income taxes collected by U.S. government in 2012 – January 5, 2013
Google, Apple, eBay shouldn’t pay taxes – people should pay taxes – November 25, 2012
So how much did Apple really pay in taxes? – November 1, 2012
Apple’s showdown with the U.S. government over taxes on offshore cash – July 13, 2012
Apple‘s $74 billion tops list of U.S. tech companies’ overseas cash – July 9, 2012
Apple’s dividend move puts spotlight on foreign cash holdings, repatriation tax reform – March 20, 2012
Apple: Good start; and what about the overseas cash? – March 19, 2012
Apple’s foreign cash hoard piles up: $54 billion and rapidly growing – January 11, 2012
Senator John McCain eyes Apple’s $54 billion overseas cash pile – November 3, 2011
Google joins Apple in push for U.S. repatriation tax holiday – October 3, 2011
Apple lobbies Obama for tax holiday, wants to bring overseas bounty home – August 24, 2011
U.S Senate Democrat Schumer allies with Apple, other multinationals on repatriation tax talks – June 21, 2011
U.S. companies push for tax break on foreign cash – June 20, 2011
Apple, Oracle, Duke Energy, others organize lobbying blitz for tax holiday – February 17, 2011
I love that….”JUST $45 billion” domestic cash. 🙂
Great tax laws and business climate USA. Sad situation wherein the right business move is completely non value add to society.
economic treachery: using the nation’s infrastructure but refusing to maintain it for the next generation. legality (as achieved by incessant special interest lobbies) does not make it right.
Apple has paid taxes. Taxes to a value higher than you can probably count or comprehend. She’s paid enough in taxes to probably redo the entire infrastructure of California.
They’ve paid taxes on the money they earned in this country and they’ve paid taxes on the money they earned externally, using EXTERNAL INFRASTRUCTURE.
Unfortunately most of Apple’s taxes probably go to pay for amazingly great things for the future like WMD gifts to Egypt’s Muslim Brotherhood, bankrupt solar energy companies, reality TV shows in India, welfare for Islamist terrorists, the lists go on. Government is aways wasteful, especially when they play business.
Apple’s decisions on what to do with THEIR money will be far better than what the Federal Government would do with it.
Oh if only they’d stick to infrastructure, and farm that out to private companies.
http://www.examiner.com/article/study-obama-gov-t-wastes-42-6-billion-reckless-spending
http://www.coburn.senate.gov/public/index.cfm?a=Files.Serve&File_id=a28a4590-10ac-4dc1-bd97-df57b39ed872
The profits from your gasoline purchases have done more to fund terrorists than any other single source.
US tax revenues, if you had bothered to actually read the budgets, are primarily spent on military and social programs — as well as paying accrued debts from 60+ years of fiscal mismanagement under two entirely corrupt political parties.
‘Apple’s decisions on what to do with THEIR money will be far better than what the Federal Government would do with it.’
Thelonious – well said.
The government should try doing what it preaches to rest of us ‘living within it’s means’.
You the MAN, TM! Tell it exactly like it is!
Once again you display awesome courage as you exercise your right to free speech. And I salute you.
The nation has voted in governments that create these laws. Just remind me now, which political party was in power when these laws were made?
none in Canada, that’s for sure.
I’m a Canadian and I think that was a great comeback.
I once visited some people with a little dog that just couldn’t seem to leave my leg alone. Are you a reincarnated little dog or just in love with me?
That was an indecent piece of imagery you made me imagine. There are better ways to prove your point then to reduce your comments to such graphic imagery.
Spoken like a true socialist. The last three generations have already spent the futures of the next 9 generations.
Now tell me again which special interest is incessant.
Eisenhower’s farewell address identified the chief agents of US federal corruption — the industries that use their size and influence to buy representatives of both corrupt parties and, hence, the federal purse strings. Even the Pentagon, the most wasteful socialistic department in the land, is on record for repeatedly questioning the excessive pork spending that corrupt representatives authorize.
For the record, the last decent republican was Eisenhower, and the last decent democrat (all things considered) was FDR. FDR and Eisenhower saved much of western civilization — and then Eisenhower was smart enough to pay off the resultant debts. Ever since, the USA has been run by two corrupt parties that BOTH overspend on useless programs and even more useless saber rattling, and then kick the debt down the road to the next generation.
The problem with the USA is that corporations DO NOT pay the nominal tax rate, instead the burden primarily falls on small businesses. It will be a sad day when the only businesses in your town are minimum-wage paying corporations and maybe an independent restaurant that serves reheated Sysco canned food. In most of America, that’s clearly what’s happening.
And the top marginal personal income tax rate in the Eisenhower Administration was over 90%, on incomes above the equivalent of about $4M per year. He used those high taxes to pay off WWII and to fund the national highway infrastructure. The Republican Party has completely lost their way since they welcomed the Dixecrats who changed to the Republican Party as part of their outrage toward the Democratic Party because of the passage of Civil Rights in the ’60s. Not a group any reasonable person can associate with.
I LOVE revisionist history.
The Civil Rights Act passed IN SPITE of Democrats, not because of them. Democrats fought it tooth and nail the whole way.
There were “Dixiecrats” who joined the Republican party, but more because of their support for states’ rights and economic conservatism. The Republican party, from its beginnings, has been pro-civil rights; it’s basically what got the party started.
The facts of the case seem to belie your allegations. To begin, this Act was a legislative initiative of JFK, a Democrat, as you may recall. Here is the voting record on the bill:
The original House version:
Southern Democrats: 7–87 (7–93%)
Southern Republicans: 0–10 (0–100%)
Northern Democrats: 145–9 (94–6%)
Northern Republicans: 138–24 (85–15%)
The Senate version:
Southern Democrats: 1–20 (5–95%) (only Ralph Yarborough of Texas voted in favor)
Southern Republicans: 0–1 (0–100%) (John Tower of Texas)
Northern Democrats: 45–1 (98–2%) (only Robert Byrd of West Virginia voted against)
Northern Republicans: 27–5 (84–16%)
In every case the Democrats voted more strongly for the Bill than the Republicans. Those Southern Democrats (the Dixiecrats) abandoned the Democratic Party and started calling themselves Republicans, which initiated the decline of of the Republican Party, away from great leaders like Teddy Roosevelt, Abraham Lincoln and Dwight Eisenhower toward todays bunch of arrogant ignoramuses who take the rest of the country for fools.
Excellent strategy.
But WAIT, wait. If Tim Cook is as stupid and “toast” as bloggers would have us believe, how could he do such large deals and get such great prices and great press….
Maybe he is just super lucky, ……. right?????
much /s
The problem is that Apple isn’t avoiding paying the bill, they are just delaying paying the tax bill.
I’m one of the biggest Apple Fanboys around…. I even own stock in Apple, but as long as multi-national corporations like Apple resist paying their “fair share” of US Taxes, all that lost revenue means less schools, less police and firemen.. less road and bridges repairs…. and the list goes one.
Regardless of whether you are a Democrat, a Republican, or some other party, the single, biggest problem facing the USA is income inequality. This is not about “lazy people” refusing to work, this is about government run for the advantage of corporations, at the dis-advantage of everyone else on the planet.
Apple pays the taxes they are required to pay under the current tax code. Say with me, I do not want to pay one penny more than I need to.
http://bostonherald.com/news_opinion/local_coverage/2013/04/tsarnaev_family_received_100g_in_benefits
You are right. Income inequality. Not much taxpayer $$$ to be had.
apple is paying full taxes on the money it earned in the U.S
why does U.S citizens have rights to money earned overseas from Non U.S citizens?
Many countries have smarter tax laws that allow their corporations to take money home , taxing foreign earnings less than money earned domestically. This smart strategy allows their corporations to ‘funnel’ other countries (like Chinas) cash back home to build up their own country but the USA stupidly doesn’t encourage this. So Apple has to store or invest China earnings back in China. (Tim Cook has been arguing for smarter tax laws for years).
Some corporations have moved their financial headquarters overseas to get lower tax rates. Although the bulk of Apple’s earnings is overseas (two thirds) Apple still hasn’t done so.
US corporations doing overseas business benefit from the American infrastructure and should pay some tax to cover that. I don’t know what the rate should be, but it should not be zero. Apple, and other companies, benefit from the US currency, the US military (very expensive) keeping the peace, courts enforcing patents and trademarks and other services.
Apple, among many other companies asking for either a permanent change in tax law or a tax repatriation holiday, aren’t asking for a 0% rate. They’re asking for 5%. Sounds fair to me.
Double taxation ain’t cool.
“US corporations doing overseas business benefit from the American infrastructure ”
american infrastructure.
do you know many american companies now invest their foreign earnings into FOREIGN infrastructure because of the freaking dumb tax laws.
where the factories (glass, components, assembly etc ) in USA that apple is using? ( your american infrastructure). Apple is just using office space basically and testing labs in U.S. Apple is using a heck a lot more $$$$ infrastructure in Japan, china — in factory complexes the size of cities (those factories are worth billions of bucks)
Cook wants to build factories in U.S (like the new Mac factory opening this year and the samsung chip factory it helped to finance in Texas) ,but not allowing him to take Chinese, Japanese, Korean etc money back to build USA factories is stupid. Now he has to give financing to toshiba, sharp , foxconn to build factories overseas with his overseas cash.
Many countries like Malaysia, singapore etc (which are aggressively industrializing) give crazy tax BREAKS to companies that want to invest there (i.e Tax holidays) “come buddy spend here and build our country with you FOREIGN CASH’ but the U.S is REVERSED, it wants its successful corporations to keep its OVERSEAS EARNED CASH OVER THERE!
US politicians KNOW its stupid but it they know being ‘SOFT’ on big corporations isn’t going to win votes…
Fair Share? Apple paid 28% tax this quarter. Had they brought it in the US they would have paid 35% on the money and then the state and federal governments would of taxed us another 35% (numbers would change depending on state)…..do you really think the goverment who did not risk anything should get 70% of profits?
Schools are predominantly funded by property taxes. Appel pays substantial property taxes along with its 100’s of employees. I suspect Apple pays more in US taxes than a combined total of 75% of the S&P 500 companies. I find nothing problematic about Apple’s tax deferrral strrategy.
I agree that a more reasonable tax law should be put in place. Lowering overall corporate tax rates, closing loopholes, lowering repatriation rates for earnings held overseas, etc. But remember that more than 50% of American adults pay no federal income taxes whatsoever.
There’s taxes that corporations already pay and then there’s this:
50 Largest Corporate Foundations by Total Giving
The list below includes the 50 largest corporate foundations ranked by total giving. All figures are based on the most current audited financial data in the Foundation Center’s database as of April 20, 2013.
http://foundationcenter.org/findfunders/topfunders/top50giving.html
And this only scratches the surface of corporate giving.
Most of us are still feeling the effects of a struggling economy, but the corporate elite and the Wall Street banksters are doing better than ever. Many corporations have seen record profits in recent years, which have fueled buying sprees on Wall Street, pushing the DOW Jones to it’s all-time high. But, the income gap between workers and CEOs, which has gone up almost 20% since 2009, shows that all that profit is going straight to the top.
This is exactly why many people don’t feel the effects of the modest economic recovery – because this recovery is not our recovery – all the gains are going directly to the top 1%. And this is why corporations are actively fighting the part of the Dodd-Frank act, that directs corporations to report the income differential between workers and CEOs. In 1960, the average CEO was paid about 40 times as much as the average worker. By 1990, CEOs were raking in over 100 times the amount that workers received. And by 2011, some corporate executives – like the one who works for JC Penny’s – were making more than 1700 times the salary of an average worker.
A Bloomberg analysis indicates that everyday employees are the only ones who are not benefiting from the historic profits seen since the 2008 economic meltdown. This is not only unacceptable, but it’s undesirable – without a broad, inclusive economic base, long-term economic growth is impossible. It’s time to stop the economic locusts who are sucking every last bit of profit out of our economy for the benefit of themselves alone.
Dodd-Frank is forcing the oligarchs to disclose the income disparity, now let’s start working to correct it. Let’s implement a Wall Street transaction tax, set limits on executive pay, and start taxing those who are obsessed with hoarding money.
-Thom
You should either move to Denmark or Finland, or stay here and try to make some money.
And why exactly do you think those corporations can afford to “give” all that money away? Because they’ve managed to avoid paying taxes, and they’ve managed to beat down their workforce into barely livable wages. While I applaud all this “Giving”…. don’t think for one second that they are doing so out of the kindness of their hearts… They are giving because it is financially beneficial for them to do so. If Walmart can afford to give all that money away, why can’t they afford to cover ALL their employes, both full and part time, with medical insurance ?
They are making the money overseas so it is staying overseas – they are not trying to send money overseas to avoid taxes like other companies do. Our government also needs to make it easier for companies to bring that money back into the states.
This article is full of misleading information. Apple does not pay anywhere near 35%. They report the tax rate they pay is close to 25%. Also, Apple never said they are borrowing money in order to avoid repatriating overseas cash. That is pure speculation. Borrowing money like this would still be a good deal for Apple even if all their money were in the US.
Apple currently pays about 2.5% dividends on their stock. The rate they pay on the bonds is about 2.5%. They are using the money to buy back stock so they will no longer be paying dividends on the shares they buy back. Therefore, the dividend and interest payments are about equivalent. However, interest is a business expense and tax deductible but dividends are not. So, smart move by Apple.
If Apple brought all that money back and didn’t pay taxes on it, they’d just waste it on cigarettes and whiskey. They’re such irresponsible children.
This is idiotic by Apple…
Taking on debt. Just pay the share holder less and invest more overseas…