Apple avoids $9.2 billion in tax with debt buyout

Tax avoidance is a commonplace practise amongst the world's top companies. Facebook made $1.1 billion in 2011, but paid no tax and even got a refund of $429 million. Microsoft owe $1 billion in unpaid taxes to Denmark, $246.8 million (£159 million) to the U.K, $70 million to France and $6.5 billion to the U.S over a period of three years. Google is party to tax avoidance, with their executive chairman, Eric Schmidt, even defending the tactic

Now Apple is joining in, having avoided around $9.2 billion in taxes due to a $55 billion stock buyback deal financed by debt, rather than Apple's $140 billion offshore holdings, according to Bloomberg. Apple will pay interest of around $308 million per year on the $17 billion bond offering says Gerald Granovsky, senior vice president at Moody's.

If the funds to buyback the stock had come from their offshore cash, Apple would have to pay an effective rate of 35% tax, according to Granovsky. "From a pure corporate-finance theory perspective, this was a no-brainer," he says. In total, Apple has avoided paying $9.2 billion in taxes, as well as an ongoing figure of $100 million. 

In 2012, Apple paid $6 billion in tax, or 1 in every 40 dollars of corporate income, according to Apple spokesperson Steve Dowling. "That makes Apple one of the top corporate income tax payers in the country, if not the largest," Dowling said. Bloomberg reports that incorporating debt will "provide benefits, including access to attractively priced capital, a reduction cost of capital and an efficient leverage of the balance sheet." 

Source: Bloomberg Image via Digital Trends

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