US paid Apple at least $600M on foreign cash held as bonds since 2012
Although technically refusing to repatriate its international revenue to avoid taxes, Apple is actually keeping much of it in the U.S. in the form of bonds -- and generating interest in the process, a report pointed out on Wednesday.
The U.S. Treasury Department has paid Apple at least $600 million in interest during the past five years and possibly far more, according to regulatory filings seen by Bloomberg. The company is taking advantage of an exemption which lets corporations dodge or delay repatriation taxes by buying treasuries, in this case pulling in taxpayer money instead of paying liabilities.
The interest is taxable, however, and Apple would also owe money if it sold the bonds.
Apple is believed to be one of the biggest corporate recipients of interest from the U.S. Treasury. Cisco, for instance, has pulled in $430 million since 2012, but one of Apple's main rivals -- Google -- has taken in a comparatively small $150-160 million. Some companies, like Microsoft and Coca-Cola, don't provide enough detailed accounting to track these figures.
Over 90 percent of Apple's $238 billion in cash reserves has been classified as "overseas." The company holds $41.7 billion in U.S. bonds -- while much of the rest is officially attached to its Irish subsidiaries, in reality it's being held custodial accounts with U.S. banks like J.P. Morgan Chase and State Street, simply unable to be spent unless Apple is willing to pay the taxes owed.
During his election campaign, President-Elect Donald Trump promised a one-time tax holiday of 10 percent -- down from the nominal 35 percent -- as a way of encouraging U.S. multinationals to repatriate cash. It remains to be seen if Trump will follow through on that pledge, and critics have worried that businesses will simply direct the money to shareholders and executives, rather than spending on jobs and expansion -- as happened after a 2004 tax holiday created by President George W. Bush.
The U.S. Treasury Department has paid Apple at least $600 million in interest during the past five years and possibly far more, according to regulatory filings seen by Bloomberg. The company is taking advantage of an exemption which lets corporations dodge or delay repatriation taxes by buying treasuries, in this case pulling in taxpayer money instead of paying liabilities.
The interest is taxable, however, and Apple would also owe money if it sold the bonds.
Apple is believed to be one of the biggest corporate recipients of interest from the U.S. Treasury. Cisco, for instance, has pulled in $430 million since 2012, but one of Apple's main rivals -- Google -- has taken in a comparatively small $150-160 million. Some companies, like Microsoft and Coca-Cola, don't provide enough detailed accounting to track these figures.
Over 90 percent of Apple's $238 billion in cash reserves has been classified as "overseas." The company holds $41.7 billion in U.S. bonds -- while much of the rest is officially attached to its Irish subsidiaries, in reality it's being held custodial accounts with U.S. banks like J.P. Morgan Chase and State Street, simply unable to be spent unless Apple is willing to pay the taxes owed.
During his election campaign, President-Elect Donald Trump promised a one-time tax holiday of 10 percent -- down from the nominal 35 percent -- as a way of encouraging U.S. multinationals to repatriate cash. It remains to be seen if Trump will follow through on that pledge, and critics have worried that businesses will simply direct the money to shareholders and executives, rather than spending on jobs and expansion -- as happened after a 2004 tax holiday created by President George W. Bush.
Comments
once again A+ management by Cook and Company.
not perfect of course!
Why shouldn't shareholders be rewarded? They are the ones investing their cash and taking all of the risks.
I fully expect to be rewarded. There's no reason that multiple things couldn't occur, it's not a binary scenario.
I don't understand why this remotely rises to the level of "news".
Add: But it does point to the utter vacuity and hypocrisy of our tax laws. If, instead of investing in the governbment's bonds, Apple had tried to use those funds to invest in, say, building a factory in the US, it couldn't do so unless it paid corporate taxes on that cash at the usuriously higher US rate.
Quite naive. These are the Republicans we are speaking of. The whole point of the GWBush tax holiday is to direct the money to shareholders and executives. So from their point of view, the tax holiday was a resounding success. And that's why we will see another tax holiday shortly.
Now, lest I be accused of wholesale political bias, US corporate tax rates are higher than most other industrialized countries' rates and unlike other industrialized countries, the US taxes incomes from all geographic sources, not just domestic. This is what's spurring US based corporations to convert to foreign-based status.
So, in principle, it seems entirely analogous. The only difference is, in one case you're investing in a paper asset (say stocks or bonds) and in the other, a physical asset (e.g., a factory or another company). In fact, once would think that the latter is, in some ways, more valuable to society.
Of course smart companies build domain expertise, create monetizable intellectual property, and adapt to meet the needs of the market segments they serve. This can be difficult to do with contractors. But now more than ever companies are short term focused and focused on lean/agile production of everything from marketing, planning, software & hardware development, and building & testing. Again, having a lot of overhead and difficult to morph factories and facilities slows you down and makes it difficult to compete in an open global market. The only way lean/agile works is with high levels of automation - which translates into fewer people needed to do mundane and repetitive tasks but also a need for the remaining workforce to be highly flexible and adaptable and making sure the automation works and the human element is applied where it is most valuable. The whole notion of moving from high school into a "job for life" at the local mill just doesn't exist in today's economy. The new jobs that will be created in the new economies that are getting investment dollars today are characteristic of the lean/agile fast moving and short term ROI and time to value variety. Huge capital investments in facilities like factories is scary as hell for modern companies, especially when they can go offshore and simply buy as much production expertise and capacity as they will ever need. If Apple, who is buying manufacturing today decides to build their own manufacturing in the US they'd better be damn good at it because the only way they will survive is to get non-Apple products built in those same factories to keep them going and the workers employed in between runs of new Apple products. This isn't Apple's strength, but companies like FoxConn - that's another story.
So maybe it's just semantics to say that Apple needs to build factories in the US when it is really other companies who are experts at manufacture-to-order need to build factories in the US. But again, they'd better be damn good and cost competitive because every other country in the world is going to be trying to win at the same game. China and emerging/recovering economies in Asia, Africa, South America, etc., aren't going to sit quietly on the sidelines or lay down and let the US lock them out of the global modern manufacturing economy.
Manufacturing has forever changed and the countries who win going forward are the ones who are forward thinking and looking forward. Trying to recreate the past and bring back the types of manufacturing jobs that existed in the last century in the US is like trying to stimulate horse & buggy manufacturing after Henry Ford revolutionized manufacturing and the automobile manufacturing and consumption boom was already underway. The transition is not going to be easy for some people, just like harness and saddle makers, but it's unstoppable.
The money from a tax holiday will go to shareholders, mostly Americans, who will buy something - fostering consumer spending, a new stock or a startup. It's the same as quantitative easing which targeted consumer spending, but it isn't debt used to buy debt. Instead it goes right into shareholders hand to do with what they want, but ultimately stimulates the economy ... for free - cause you're not bloating the federal debt. In fact, the 10% tax is then just icing on the cake that can be spent on roads or govt spending.
This money was made by selling items that were not made in the US to people that don't live in the US. I think 10% tax on that is generous.
Foxconn plans to have the new plant up and running by 2020, if not delayed by protests, regulations, gov't interference, etcetera.
I wish he'd just sog off!