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Overseas cash restricts Apple's options for reallocating capital

post #1 of 100
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With Apple actively exploring potential uses for its $137 billion in cash and investments, bringing all of that money back to the U.S. would be a costly move.

About 70 percent of Apple's cash balance is held overseas, and repatriating that money would have it taxed at America's 35 percent corporate rate. As noted by analyst Amit Daryanani of RBC Capital Markets, that means bringing the money stateside would cost Apple $33 billion.

But Apple also currently has $43 billion in cash domestically, which Daryanani believes, along with another $45 billion in annual free cash flow, provides Apple enough room to return additional cash to investors.

Cash
Apple added $38 billion in cash in 2012. Chart by Asymco.


Scrutiny of Apple's $137 billion in cash and investments grew considerably on Thursday after it was announced that David Einhorn, the high-profile hedge fund manager behind Greenlight Capital, has sued Apple over what he believes is a "cash problem" for the company. Einhorn believes Apple should return some of its cash to investors in the form of perpetual preferred stock with a 4 percent yield.

Apple quickly responded and reiterated that the company has been holding "active discussions" on what to do with its massive sum of cash. Apple also promised to "thoroughly evaluate" the proposal from Greenlight Capital.

The discussions suggest Apple's upcoming annual shareholder meeting could be particularly interesting, though Daryanani doesn't expect the Feb. 27 event to bring about any changes to the company's capital allocation policy.

"Given Apple's history of announcing products and changes to capital allocation policy through company specific events, we believe any change to capital allocation policy would likely occur in the March time frame after the annual shareholder meeting," he said, noting that Apple announced their dividend buyback on March 19 of last year.

Daryanani believes Greenlight's proposal would "get the stock moving upwards in the near-term." He also said that Apple has "ample cash" to fund a new, larger dividend.

RBC Capital Markets has an "outperform" rating for AAPL stock with a price target of $600. The firm believes Apple deserves to trade at a slight premium to the S&P 500.
post #2 of 100
Here's a question:

Could Apple use cash held internationally to buy back AAPL stock on foreign stock exchanges without having to pay US tax?

I'm not a lawyer, but it seems like if foreign cash is being used to buy AAPL on a foreign exchange, then that cash would never come under the purview of US taxes.

Yet, the benefit to stockholders would be the same as if Apple conducted a stock buy-back on an American exchange using domestic cash (because stock is fungible across borders).

Is this the perfect loophole?
post #3 of 100
One thing that the analyst has missed is that Apple has already reserved cash to cover taxes for much of the money stashed overseas. So bringing it back would not affect their P&L. It would, however, affect their balance sheet.

Of course, the flip side of that is that if Apple uses the cash overseas and does not repatriate it, they will get a gain by reversing the reserves.
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post #4 of 100
The "perfect loophole" that would have brought money back to the US, stimulated the economy, and intern created more tax revenue without raising taxes. Didn't get elected last November.
post #5 of 100
By "costly" to Apple what you actually mean is "paying their fair share of taxes instead of hiding profits offshore."

If they can't use the money because they'd have to pay some of it in taxes, they have $137 billion doing nothing and going to waste. If they bring it back to the U.S. they'll have over $100 billion that can be used.

Which would you prefer, a bunch of money you can't touch, can't do anything with, and is doing nothing for you, or tons of money that can be used?
post #6 of 100

If they want to avoid paying taxes they can always float a bond at 2% interest like Costco and many other companies did last year.

 

They should.  Borrowing money is dirt cheap right now and no one cares about debt as long as you have good cash flow.

post #7 of 100
Quote:
Originally Posted by jragosta View Post

One thing that the analyst has missed is that Apple has already reserved cash to cover taxes for much of the money stashed overseas. So bringing it back would not affect their P&L. It would, however, affect their balance sheet.

Of course, the flip side of that is that if Apple uses the cash overseas and does not repatriate it, they will get a gain by reversing the reserves.

Yes, I was going to comment on that. In fact, they put over $14 billion away for that last quarter. This can be a confusing topic.
post #8 of 100
Quote:
Originally Posted by Don108 View Post

By "costly" to Apple what you actually mean is "paying their fair share of taxes instead of hiding profits offshore."

If they can't use the money because they'd have to pay some of it in taxes, they have $137 billion doing nothing and going to waste. If they bring it back to the U.S. they'll have over $100 billion that can be used.

Which would you prefer, a bunch of money you can't touch, can't do anything with, and is doing nothing for you, or tons of money that can be used?

Apple pays their fair share. As much or more than most other companies in the same situation. And, by the way, if it's legal, it's fair. I expect a company to do what's legal to save money, and that includes taxes. All multinational companies are in this position. Google, Microsoft, and others do the same thing. You should tar all equally if you don't understand how this works.
post #9 of 100
Quote:
Originally Posted by Don108 View Post

By "costly" to Apple what you actually mean is "paying their fair share of taxes instead of hiding profits offshore."

If they can't use the money because they'd have to pay some of it in taxes, they have $137 billion doing nothing and going to waste. If they bring it back to the U.S. they'll have over $100 billion that can be used.

Which would you prefer, a bunch of money you can't touch, can't do anything with, and is doing nothing for you, or tons of money that can be used?

They can use the money. If the bulk of their future growth is to come from overseas it makes sense both from a financial and business standpoint to keep the money there. After all, expansion into China and all these new research facilities overseas is being paid for with these funds isn't it? It's no different than Toyota building cars here to minimize costs and taxes. Apple knows what they are doing and anyone who has invested in Apple in the last two decades knows how Apple operates. It is nothing new.
post #10 of 100
Quote:
Originally Posted by Blastdoor View Post

Here's a question:

Could Apple use cash held internationally to buy back AAPL stock on foreign stock exchanges without having to pay US tax?

I'm not a lawyer, but it seems like if foreign cash is being used to buy AAPL on a foreign exchange, then that cash would never come under the purview of US taxes.

Yet, the benefit to stockholders would be the same as if Apple conducted a stock buy-back on an American exchange using domestic cash (because stock is fungible across borders).

Is this the perfect loophole?

They'd have to move it to Germany, as their only other SE is APC.F
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post #11 of 100
Quote:
Originally Posted by Don108 View Post

By "costly" to Apple what you actually mean is "paying their fair share of taxes instead of hiding profits offshore."

If they can't use the money because they'd have to pay some of it in taxes, they have $137 billion doing nothing and going to waste. If they bring it back to the U.S. they'll have over $100 billion that can be used.

Which would you prefer, a bunch of money you can't touch, can't do anything with, and is doing nothing for you, or tons of money that can be used?


A French person buys an iPod made by a Chinese person, why does the US government deserve a cut of that?

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post #12 of 100
I love Apple but they need to pay their taxes like the rest of us, along with the other corporate welfare recipients!
post #13 of 100
One interesting thing to watch would be Amazon's performance once sales taxes are applied throughout the states. A lot of people complain about Apple's tax strategy but those same people I bet buy online and pay no sales tax in the U.S. nor do they declare it on their taxes. It probably won't kill their business because of the convenience and other factors, but it could make going to a closer retail store to get those items at the same price and faster a more attractive proposition for items readily available.
post #14 of 100
Quote:
Originally Posted by e1618978 View Post

A French person buys an iPod made by a Chinese person, why does the US government deserve a cut of that?

R&D, Marketing come to mind.
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post #15 of 100
Quote:
Originally Posted by e1618978 View Post


A French person buys an iPod made by a Chinese person, why does the US government deserve a cut of that?

Because the US government is a big greedy inefficient beast with an insatiable appetite. They *deserve* a cut of everything!
post #16 of 100
Quote:
Originally Posted by iSteelers View Post

One interesting thing to watch would be Amazon's performance once sales taxes are applied throughout the states. A lot of people complain about Apple's tax strategy but those same people I bet buy online and pay no sales tax in the U.S. nor do they declare it on their taxes. It probably won't kill their business because of the convenience and other factors, but it could make going to a closer retail store to get those items at the same price and faster a more attractive proposition for items readily available.

Great point. How many people on here whining about Apple not paying taxes shop online to avoid sales tax? Despite the fact that, by law, we're all required to declare those purchases and pay that tax to our respective states. That's outright tax dodging compared to what Apple is doing, which is perfectly legal. Yet lets tar and feather all those big evil corporations!
post #17 of 100
Quote:
Originally Posted by Don108 View Post

By "costly" to Apple what you actually mean is "paying their fair share of taxes instead of hiding profits offshore."

If they can't use the money because they'd have to pay some of it in taxes, they have $137 billion doing nothing and going to waste. If they bring it back to the U.S. they'll have over $100 billion that can be used.

Which would you prefer, a bunch of money you can't touch, can't do anything with, and is doing nothing for you, or tons of money that can be used?

You're the poster child for people who have no concept of how global businesses work.

Apple pays its fair share of taxes everywhere in the world, if by 'fair', you mean "the amount that the various governments require them to pay." There has never been any accusation that Apple is paying less than required by law (other than, perhaps, a minor technical glitch in their filing, but I'm aware of any). They pay every penny that the various governments require them to pay.

Now, in the course of operating their business, they generate profits and cash in countries around the world. They can do several things with that money:
1. Leave it where it is and pay the local taxes where necessary.
2. Bring it back to the US - which means that they pay a great deal of additional tax
3. Invest it in something in the country where the money is located.

Now, if they have $1 B in cash in China and plan to expand in China in the future and buy products in China, why in the world would they pay the taxes to bring that money back to the US, only to send it back to China? It makes sense to keep money in the places where it will be used. And, for the large part, Apple's future growth will be coming from outside the US, so repatriating the money would be silly. If they want to do that some time, they can do it when needed - and pay the taxes then. Repatriating it now serves no useful purpose.

Let's say that Apple doesn't know where the money will be spent (which is almost certainly the case). In that scenario, they have two choices:
1. Bring it back to the US now and pay taxes - even though they might need to send it back overseas at some point, so the taxes would be largely wasted
2. Leave it where it is until it is needed - and then bring it back and pay taxes at that point.

Obviously, #2 makes far more sense.

All the people whining about Apple not bringing the money back to the US are missing the entire point. For Apple to bring the money back to the US, there needs to be a reason for them to require the money here. Give them an incentive to build new facilities. Build factories. Begin production in the US. Oh, but wait - as soon as a municipality does that, people are screaming and yelling that it's not fair and Apple is evading taxes because some city gives them a reduction in state and local taxes.

No matter what Apple does, they can't win the PR game, so they need to continue to do what makes sense from a business perspective. If you want that money to come back to the US, lobby your legislators to do the things that are necessary for the US to be competitive in manufacturing again.
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post #18 of 100
Quote:
Originally Posted by robbyx View Post

Great point. How many people on here whining about Apple not paying taxes shop online to avoid sales tax? Despite the fact that, by law, we're all required to declare those purchases and pay that tax to our respective states. That's outright tax dodging compared to what Apple is doing, which is perfectly legal. Yet lets tar and feather all those big evil corporations!

Exactly. And, if they're so eager for tax justice, they should be lobbying the government to require all online purchases to be taxed. Of course, that would remove any shred of a hope of Amazon ever making a profit, but that's too bad.
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post #19 of 100
Quote:
Originally Posted by e1618978 View Post


A French person buys an iPod made by a Chinese person, why does the US government deserve a cut of that?

 

 

Quote:
Originally Posted by PhilBoogie View Post


R&D, Marketing come to mind.

 

Even more so than R&D and marketing- Apple doesn't make a whole lot of money in France.  They also make next to nothing in 'profits' in the US.

 

Apple's Irish subsidiary has China build iPhones for them for $250.  Apple Ireland sells these to their Dutch subsidiary with 'IP rights' for $650.  The Dutch subsidiary sells it back to the Irish subsidiary for $650.  The Irish subsidiary deposits the profit in a Bank in the Bahamas.  Apple's Irish subsidiary then sells the phone to the US Apple for $650.  Apple US then sells it in their stores to US customers for $650.  Since they paid $650 for it they made $0 in profit in the US.

 

Reality:

The transactions are all on paper.  Apple HQ in the US drives design and orders.  The phones ship straight from China to the US.  The phones are sold in the US by hard working people who generated the wealth to buy the phones in the US.  As soon as they buy the phone, the wealth they spent to purchase it is gone from the US economy, no taxes paid.  Blech.

 

So the problem the e16 posted isn't right.  The problem isn't that Apple isn't paying taxes on phones they sell in France.  The problem is they aren't paying taxes on the phones that are sold in the US- which by and far are the majority of their profits.

 

Apple paid a total rate of 2.3% in taxes.  Apple isn't evil, they are simply maximizing profits.  As stated most every large multinational does it.  Many pay $0 and billions in profits.  The 'perfect loophole' of allowing the money back into the US is a tempting carrot, but disastrous in practice since now every corporation has a 0% effective tax rate by simply offshoring all profits then repatriating them for free.

 

The problem isn't Apple.  Its our laws and how ineffective they are.  'Lowering the corporate tax rate' is a common buzz phrase, but it is really just an excuse to lower the taxes on wealthy individuals.  No actual corporation pays anything close to the corporate tax rate.  A better fix would be no corporate tax rate (or possibly even personal tax rate)- just have a higher sales tax rate.  Items would be taxed at the point of purchase.  Savers would be rewarded.  Consumers would pay according to how much they consume.  Anything sold by wealth created in the US would result in revenues in the US instead of shipping the money offshore.

Economists can come up with a much better plan I'm sure :p

post #20 of 100
Quote:
Originally Posted by jragosta View Post

No matter what Apple does, they can't win the PR game, so they need to continue to do what makes sense from a business perspective. If you want that money to come back to the US, lobby your legislators to do the things that are necessary for the US to be competitive in manufacturing again.

Sadly I don't see that ever happening. We've become way too much of an entitlement culture to ever be competitive again.
post #21 of 100
Quote:
Originally Posted by jragosta View Post

Quote:
Originally Posted by robbyx View Post

Great point. How many people on here whining about Apple not paying taxes shop online to avoid sales tax? Despite the fact that, by law, we're all required to declare those purchases and pay that tax to our respective states. That's outright tax dodging compared to what Apple is doing, which is perfectly legal. Yet lets tar and feather all those big evil corporations!

Exactly. And, if they're so eager for tax justice, they should be lobbying the government to require all online purchases to be taxed. Of course, that would remove any shred of a hope of Amazon ever making a profit, but that's too bad.

 

While I'm not like the lefty trolls on these boards screaming for Apple to "pay their fair share" (a disgusting political soundbite that makes anyone that parrots it seem like they let others think for them), I am a liberal, and I do believe that Amazon was exploiting a hole in federal/state/local tax code as a business model for profit. They could undercut any B&M business and they did. I truly believe they had a hand in bringing down many physical businesses, at least indirectly. It's hard or near impossible to compete with a business that doesn't have to charge sales tax. Finally some states are filling that hole in their tax codes and I applaud them for it. It puts all businesses, online or otherwise, on a more level playing field.

 

That said, did I purchase things on Amazon? Absolutely. It wasn't illegal and it's a human characteristic to take advantage of a situation when it presents itself. Amazon wasn't evil for exploiting the tax hole. I wasn't evil for exploiting the lower prices that tax hole created. And the governments aren't evil for filling that hole to make B&M businesses more competitive with online businesses. Will I end up paying more in taxes? Yes, but that's the price you pay for living in a relatively safe, stable, and equal society. And I will pay gladly.

 

If Amazon can't make a profit after the law changes, their business wasn't very good in the first place.

When a company stops chasing profit and start chasing the betterment of their products, services, workforce, and customers, that will be the most valuable company in the world.
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post #22 of 100
Quote:
Originally Posted by jragosta View Post


Exactly. And, if they're so eager for tax justice, they should be lobbying the government to require all online purchases to be taxed. Of course, that would remove any shred of a hope of Amazon ever making a profit, but that's too bad.

All online purchase should be taxed and eventually they will.  Just wait, it's already started on Amazon in several states and it will eventually go nationwide.

post #23 of 100
Quote:
Originally Posted by jragosta View Post

One thing that the analyst has missed is that Apple has already reserved cash to cover taxes for much of the money stashed overseas. So bringing it back would not affect their P&L. It would, however, affect their balance sheet.

Of course, the flip side of that is that if Apple uses the cash overseas and does not repatriate it, they will get a gain by reversing the reserves.

 

Ahh.... the fallacy of non-accountants. Cash is not the same as income. Let's assume that Apple earns a $100 millions overseas, and if brought back to the US, it would be taxed at 35%. On their income statement, Apple reserves $35 millions for this tax, in the form of Taxes Payable. So their Net Income is $65 millions, which can be considered an understatement because it counts taxes they don't have to pay yet. However, they still have $100 millions on hand, and bringing those cash back to the state will coset them the $35 millions they recorded, but not paid at the time.

post #24 of 100
Quote:
Originally Posted by zoffdino View Post

Ahh.... the fallacy of non-accountants. Cash is not the same as income. Let's assume that Apple earns a $100 millions overseas, and if brought back to the US, it would be taxed at 35%. On their income statement, Apple reserves $35 millions for this tax, in the form of Taxes Payable. So their Net Income is $65 millions, which can be considered an understatement because it counts taxes they don't have to pay yet. However, they still have $100 millions on hand, and bringing those cash back to the state will coset them the $35 millions they recorded, but not paid at the time.

I fully understand the difference between cash and income. Don't make stupid statements.

The part you're ignoring is this:

1. Apple brings $100 B back to the US. They have $35 B reserved to pay those taxes. Apple now has $65 B in US money to spend and the US government gets $35 B.

2. Apple leaves the $100 B in a foreign country. They have $100 B to spend as they wish (the cash is there even if they've reserved it on their income statements) in that country. And if they DO spend it, they get to spend the full $100 B and reverse the tax reserve. The US government gets zero, Apple spends $100 B.

It is CLEARLY advantageous to leave the money overseas rather than repatriating it - even if the taxes are reserved.
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post #25 of 100
Quote:
Originally Posted by silverpraxis View Post

While I'm not like the lefty trolls on these boards screaming for Apple to "pay their fair share" (a disgusting political soundbite that makes anyone that parrots it seem like they let others think for them), I am a liberal, and I do believe that Amazon was exploiting a hole in federal/state/local tax code as a business model for profit. They could undercut any B&M business and they did. I truly believe they had a hand in bringing down many physical businesses, at least indirectly. It's hard or near impossible to compete with a business that doesn't have to charge sales tax. Finally some states are filling that hole in their tax codes and I applaud them for it. It puts all businesses, online or otherwise, on a more level playing field.

That said, did I purchase things on Amazon? Absolutely. It wasn't illegal and it's a human characteristic to take advantage of a situation when it presents itself. Amazon wasn't evil for exploiting the tax hole. I wasn't evil for exploiting the lower prices that tax hole created. And the governments aren't evil for filling that hole to make B&M businesses more competitive with online businesses. Will I end up paying more in taxes? Yes, but that's the price you pay for living in a relatively safe, stable, and equal society. And I will pay gladly.

If Amazon can't make a profit after the law changes, their business wasn't very good in the first place.

You miss the point. You are already required to declare these purchases and pay sales tax. Yes, the law will eventually change and businesses will be required to do the tax collecting for you. But make no mistake, all of us buying sales tax-free items online and not declaring and paying taxes are already in violation of the law. We're all tax dodgers.
post #26 of 100
Quote:
Originally Posted by robbyx View Post

You miss the point. You are already required to declare these purchases and pay sales tax. Yes, the law will eventually change and businesses will be required to do the tax collecting for you. But make no mistake, all of us buying sales tax-free items online and not declaring and paying taxes are already in violation of the law. We're all tax dodgers.

True.

There are two important factors to consider:
1. While everyone is supposed to pay sales tax on items purchased out of state (where required by law), few people do so. If the law changes to require the seller to collect the money, it will add significantly to state tax revenues.

2. People are choosing to go through the hassle of buying online at least partially to save on sales tax. If they have to pay the sales tax anyway, the savings for shopping online are decreased (particularly if you have to pay shipping). This should add to the competitive of brick and mortar stores. This will also harm Amazon significantly - their business model is partially based on being cheaper and if the cost advantage is decreased, it could hurt their business. And with net margins in the 1-2% range (at best), they can't afford to absorb the difference.
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post #27 of 100
Quote:
Originally Posted by Don108 View Post

By "costly" to Apple what you actually mean is "paying their fair share of taxes instead of hiding profits offshore."

They didn't pay taxes offshore in the first place. Was that fair?

 

Why do people think Apple is sitting on a mountain of money like Scrooge McDuck?

 

 

15.147  U.S. Treasury securities
15.630  U.S. agency securities
  4.063  Non-U.S. government securities
  0.763  Certificates of deposit and time deposits
  0.144  Commercial paper
42.405  Corporate securities
  5.398  Municipal securities
13.742  Mortgage- and asset-backed securities
 
These are long term investments, in total more than 97 billion $.

Edited by smalM - 2/8/13 at 12:02pm
post #28 of 100
Quote:
Originally Posted by frankie View Post

I love Apple but they need to pay their taxes like the rest of us, along with the other corporate welfare recipients!

That's right.  If you aren't paying money to the federal government that you earned overseas then you are clearly "receiving" welfare.  If the IRS or other agency believes that Apple isn't "paying their taxes" I'm sure they have a way to let Apple know.  Apple isn't being very good at keeping this "tax evasion" secret after all.

post #29 of 100
Quote:
Originally Posted by e1618978 View Post


A French person buys an iPod made by a Chinese person, why does the US government deserve a cut of that?


Well said!

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post #30 of 100
Quote:
Originally Posted by smalM View Post

They didn't pay taxes offshore in the first place. Was that fair?

That's not true. Apple complies with all local tax laws. Why should they be double taxed? The income was earned outside the us and taxes were paid where the income was earned. Instead of demanding more tax revenue from businesses (who employ Americans, half of whom pay income tax), why aren't we cutting all the waste? Our military budget is absurd. And for what? Instead of punishing success, why don't we get realistic about spending? I'm not talking about social programs, many of which I support. I'm talking about the black hole of defense spending. If we didn't have that anchor around our collective necks, we'd be the most prosperous country on earth. Where's the uproar over all that needless waste?
post #31 of 100
Quote:
Originally Posted by Don108 View Post

If they can't use the money because they'd have to pay some of it in taxes, they have $137 billion doing nothing and going to waste. If they bring it back to the U.S. they'll have over $100 billion that can be used.

They are getting return off the international holdings, and using it to add value to the company. The one thing they cannot use it for (without paying taxes on the profits) is paying a dividend or investing in US operations.

It isn't like it is sitting in some cocaine dealer's attic being eaten by rats. It may not be optimally deployed, but it is being invested.
post #32 of 100
Quote:
Originally Posted by frankie View Post

All online purchase should be taxed and eventually they will.  Just wait, it's already started on Amazon in several states and it will eventually go nationwide.

 

I don't think it's the actual sales tax that bothers Amazon but the difficulty in complying with 50 different states' labyrinth tax codes. Tax all online sales at 5% and remit to the appropriate state based on destination of goods. Simple. There, I just solved the problem. I'd say have the states match that rate for in-state business as well by simplifying the tax code and eliminating many deductions. I'd bet states would end up with more money.

 

In WA state, we get the juicy benefit of paying a B&O tax based on gross sales, zero deductions. Yes, you read that right. The deductions take four pages. And I'm sure CA is worse.

 

Simplify. Lower the rates for all. Make compliance easy and efficient and inexpensive. It's win-win.

 

By the way, as we're discussing Amazon paying sales tax. One way or another, states attempt to get their revenue. If Amazon does not pay the sales tax, the customer is supposed to remit the tax to state. It's called a Use Tax and is equal to the sales tax.

post #33 of 100
Quote:
Originally Posted by Don108 View Post

Which would you prefer, a bunch of money you can't touch, can't do anything with, and is doing nothing for you, or tons of money that can be used?

Who says you "can't touch" it?

 

My understanding is that it can be used to acquire or invest in assets abroad in a tax-efficient way. For example, Microsoft used its dollars stashed abroad to buy Skype for $8+ billion, a couple of years ago.

post #34 of 100
Quote:
Originally Posted by frankie View Post

All online purchase should be taxed and eventually they will.  Just wait, it's already started on Amazon in several states and it will eventually go nationwide.

All online purchases should be taxed? What about offline then?

 

Obviously, you are a leftie (nothing wrong with that at all) and are concerned perhaps more with issues of equity as opposed to efficiency, but do you realize that it is the most regressive form of taxation?! I.e., the poor pay more as a share of their income than the rich?

post #35 of 100
Quote:
Originally Posted by Frood View Post
'Lowering the corporate tax rate' is a common buzz phrase, but it is really just an excuse to lower the taxes on wealthy individuals. 

Here's a question for you: who do you think actually pays the corporate tax?

post #36 of 100
Quote:
Originally Posted by smalM View Post

They didn't pay taxes offshore in the first place. Was that fair?

 

Why do people think Apple is sitting on a mountain of money like Scrooge McDuck?

 

 

15.147  U.S. Treasury securities
15.630  U.S. agency securities
  4.063  Non-U.S. government securities
  0.763  Certificates of deposit and time deposits
  0.144  Commercial paper
42.405  Corporate securities
  5.398  Municipal securities
13.742  Mortgage- and asset-backed securities
 
These are long term investments, in total more than 97 billion $.

Do you have any evidence that Apple doesn't/didn't pay the required taxes offshore? If so, please post it or provide a link/cite. Otherwise, stop making dumb statements.

 

Regarding the $97B, what the heck makes you think it belongs to anyone other than shareholders -- or to Apple's management decisions to invest so as to create future cash flows for shareholders -- anyway? You do realize that it's after-tax money, right?

post #37 of 100
Quote:
Originally Posted by jragosta View Post

I fully understand the difference between cash and income. Don't make stupid statements.

The part you're ignoring is this:

1. Apple brings $100 B back to the US. They have $35 B reserved to pay those taxes. Apple now has $65 B in US money to spend and the US government gets $35 B.

2. Apple leaves the $100 B in a foreign country. They have $100 B to spend as they wish (the cash is there even if they've reserved it on their income statements) in that country. And if they DO spend it, they get to spend the full $100 B and reverse the tax reserve. The US government gets zero, Apple spends $100 B.

It is CLEARLY advantageous to leave the money overseas rather than repatriating it - even if the taxes are reserved.

To make these things even more complicated, and where most journalists FAIL.

We'll use the nice round numbers you two were using, and this is a grossly simplified example.

Say Apple makes $125 million in country abc, then they pay 20% tax on the $125 million to the government of country abc, so they now have $100 million sitting in country abc.

What most bloggers and even Reuters journalists don't even understand is that the US government gives US based global companies "credit" for paying the other country's taxes. In this example, since Apple already paid 20% tax, the US government wants 15% tax, but on the $125 million.

In this hypothetical and grossly simplied example, if Apple wants to bring the $100 million back to the US, they will pay $18.75 million (15% x $125 million), not $35 million.

I don't feel like there is any need for Apple to bring the money back to the US right now. It's the Hedge funds and other short-term investors who want the money to come back so they can make more money buying and selling the stock.

Apple sees no "need" to bring the money back if they haven't figured out where or what they will do with it.
post #38 of 100
Quote:
Originally Posted by Spacepower View Post

I don't feel like there is any need for Apple to bring the money back to the US right now. It's the Hedge funds and other short-term investors who want the money to come back so they can make more money buying and selling the stock.

I agree that there is no need at all for Apple to bring its money back.

 

In all fairness, however, the hedge fund proposal -- which I happen to think is dumb for other reasons -- makes clear that it will involve only Apple's funds in the US: http://blogs.wsj.com/deals/2013/02/07/einhorns-letter-dear-fellow-apple-shareholder/?KEYWORDS=text+of+einhorn+letter

post #39 of 100
Quote:
Originally Posted by jragosta View Post
...
2. Apple leaves the $100 B in a foreign country. They have $100 B to spend as they wish (the cash is there even if they've reserved it on their income statements) in that country. And if they DO spend it, they get to spend the full $100 B and reverse the tax reserve. The US government gets zero, Apple spends $100 B.

It is CLEARLY advantageous to leave the money overseas rather than repatriating it - even if the taxes are reserved.

Yes, that's what I'd do if I ran Apple, why not?  And Apple has already stated increased CAPEX to be spent in places like China (remember that rumored future R&D facility in China which was later revised to be a manuf-related facility?).  I predict there will be more spending overseas.

 

Would be good if U.S. revised the repatriation of cash... to qualify reduced taxation based on a rigorous and specific spending/investment plan of those dollars.  For example, Apple would submit an investment plan including information such as: corporate/operational requirements & SoW , options to fulfill those requirements (including overseas options as well), and benefit/disadvantages of those options.  The investment options would describe everything from location of site, equip, matls, and labor.

 

In fact, I can't see how this would be any different from states luring out-of-state/international investments in their state by clarifying and revising state/local administrative laws.

post #40 of 100
Quote:
Originally Posted by jd_in_sb View Post

Quote:
Originally Posted by e1618978 View Post


A French person buys an iPod made by a Chinese person, why does the US government deserve a cut of that?


Well said!

 

A French person buys an iPod made by a Chinese person, why does Apple deserve to profit from that? Do you see the hyperbole now?

 

Quote:
Originally Posted by bugsnw View Post

Quote:
Originally Posted by frankie View Post

All online purchase should be taxed and eventually they will.  Just wait, it's already started on Amazon in several states and it will eventually go nationwide.

 

I don't think it's the actual sales tax that bothers Amazon but the difficulty in complying with 50 different states' labyrinth tax codes. Tax all online sales at 5% and remit to the appropriate state based on destination of goods. Simple. There, I just solved the problem. I'd say have the states match that rate for in-state business as well by simplifying the tax code and eliminating many deductions. I'd bet states would end up with more money.

 

In WA state, we get the juicy benefit of paying a B&O tax based on gross sales, zero deductions. Yes, you read that right. The deductions take four pages. And I'm sure CA is worse.

 

Simplify. Lower the rates for all. Make compliance easy and efficient and inexpensive. It's win-win.

 

By the way, as we're discussing Amazon paying sales tax. One way or another, states attempt to get their revenue. If Amazon does not pay the sales tax, the customer is supposed to remit the tax to state. It's called a Use Tax and is equal to the sales tax.

 

If B&M stores can navigate 50 different states' sales tax systems, online stores should be just as nimble.

 

Quote:
Originally Posted by anantksundaram View Post

Quote:
Originally Posted by frankie View Post

All online purchase should be taxed and eventually they will.  Just wait, it's already started on Amazon in several states and it will eventually go nationwide.

All online purchases should be taxed? What about offline then?

 

Obviously, you are a leftie (nothing wrong with that at all) and are concerned perhaps more with issues of equity as opposed to efficiency, but do you realize that it is the most regressive form of taxation?! I.e., the poor pay more as a share of their income than the rich?

 

I agree with anatksundaram, but only because other businesses are forced to collect sales tax. Online stores should also have to collect it, or otherwise allow B&M businesses to stop.

 

Yes, sales tax is arguably the most regressive (read: flat) tax our country has, but that's why we have a broad range of taxation instead of only one. It's near impossible to legally dodge or deduct your way out of all of them.

When a company stops chasing profit and start chasing the betterment of their products, services, workforce, and customers, that will be the most valuable company in the world.
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When a company stops chasing profit and start chasing the betterment of their products, services, workforce, and customers, that will be the most valuable company in the world.
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