“Luca Maestri, who will soon take over as Apple’s chief financial officer, explained the reason for this strange behavior during the same earnings call,” Bershidsky writes. “‘Thanks to Apple’s strong growth and international expansion in recent years we’ve built substantial offshore cash balances,’ he said. ‘To repatriate our foreign cash under current U.S. tax law, we would incur significant tax consequences and we don’t believe this would be in the best interest of our shareholders.'”
“Specifically, 88 percent of Apple’s cash, or $130 billion, is overseas, and were the company to bring it home, the taxman would claim about a third of it,” Bershidsky writes. “Last year, when the Securities and Exchange Commission asked Apple about its foreign earnings, the iPhone maker replied that most of it was generated by Irish subsidiaries and ‘intended to be indefinitely reinvested in operations outside the U.S.’ If Apple issues debt in Europe, the proceeds could be used for the buyback, while the interest and principal owed to debt investors would be paid out of the Irish cash pile.”
“It is, perhaps, not entirely unwise for the U.S. to have tax rules that force American companies to globalize. It adds to their financial stability, speeds up their growth and increases their access to innovative technology and is, in the end, good for both these companies’ U.S. shareholders and for the government,” Bershidsky writes. “It would, however, be interesting to see where U.S. companies’ cash would flow if the U.S. adopted Ireland’s 12.5 percent corporate tax rate… As Richard Burton, Ireland’s minister for enterprise, once said, “we make no apologies for having a regime that’s designed to promote employment in this economy.” While the U.S. does have a more global role to play, perhaps it should also be less apologetic about promoting its own growth.”
Read more in the full article here.
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Tagged: AAPL, Apple, Apple bonds, Apple buybacks, Apple debt, Apple dividends, Apple stock, bonds, Carl Icahn, debt, iBonds, Leonid Bershidsky, repatriation holiday, share repurchases, tax holiday, tax repatriation, Tim Cook, U.S. taxes
