“Over the years, Apple Inc. has become the poster child for U.S. multinationals accused of sheltering overseas profits to avoid the IRS,” Andrea Wong reports for Bloomberg. “What’s gone largely unnoticed is that it’s been paid more than half a billion dollars by the U.S. government to do just that.”
“Taking advantage of an exemption tucked into America’s Byzantine tax code, Apple stashed much of its foreign earnings—tax-free—right here in the U.S., in part by purchasing government bonds, according to people with direct knowledge of the matter,” Wong reports. “In return, the Treasury Department paid Apple at least $600 million and possibly much more over the past five years in the form of interest, a Bloomberg review of its regulatory filings shows.”
“According to tax experts interviewed by Bloomberg News, the maker of iPhones is hardly unique. Many of the biggest U.S. multinationals have seized on the same exemption, which lets them avoid or delay repatriation taxes by buying Treasuries with their overseas cash,” Wong reports. “That, in effect, enables the companies to turn billions of dollars in potential tax liabilities into millions of dollars in taxpayer subsidies—all while they publicly bemoan the sky-high taxes that make it impossible for them to bring the money home.”
“The maneuver is perfectly legal and no one is suggesting that it’s a big money maker for Apple or anyone else at today’s low interest rates. If the companies sold the bonds, the cash would still be considered foreign earnings and subject to eventual taxation. What’s more, the interest they earn from buying U.S. debt — which helps finance government spending—is taxable,” Wong reports. “Apple, which has more than doubled those holdings of Treasuries to $42 billion since 2012, received the most in interest payments [$590 million] over that time, the data show. In the same span, the Treasury has paid Cisco Systems Inc. roughly $430 million, while Alphabet Inc. (Google’s parent) has gotten about $160 million.”
Read more in the full article here.
MacDailyNews Take: Yes, as we wrote back in May 2015, for Apple, this is “free money.”
Hopefully, the next U.S. administration can work with Congress to fix the broken U.S. corporate tax “system,” so that Apple (and other multinationals) can repatriate a significant amount of their offshore mountain of cash. — MacDailyNews, September 12, 2016
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Apple has now amassed nearly $80 billion in debt – September 12, 2016