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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Big business taxes get cut or otherwise avoid paying them, middle class working families get increased taxes.

Totally ****ing fair.

This is why the US economy is ruined and why there's such a massive unemployment rate with many families falling further and further into financial crisis.

Why can we not have anyone in office (house/senate/president) who actually knows how to properly manage a country and support its backbone rather than break it?

As someone who's family is currently struggling to even keep our house because we've never gotten back on track since the economic crash, this is absolutely disgusting.

Let me quote an article from thestar:
------
Apple has more than two-thirds of its surplus-cash hoard parked offshore. It seeks to avoid a tax bite of as much as $35 billion if it were to bring that money home. Instead, this week, Apple borrowed $17 billion in the bond market at the deep-discount rates created by the Fed's actions to make good on its payout promise.

“What Apple is doing is all too typical” of corporate America, writes Washington Post public policy analyst Neil Irwin. “It is taking advantage of low rates to funnel money to shareholders in a bit of financial engineering, rather than triggering new investment.”
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Wish they would at least raise the pay of 42,000 employed at apple stores most at minimum wage jobs and bring back the product assembly from Taiwan to America.

And everyone wonders why they pay so much in taxes. Well, here is a good example. If everyone (including companies) paid their fair share, I bet our taxes would go down.

What's the news here? Is Apple the only corp out there making huge savings in tax avoidance? It's their money and as long as they operate within the legal framework it's only rational they'd do it. This applies to any business out there too.

So fix the legal framework and tax the crap out of them until they are paying exactly the same as the middle class person who is unable to make funds offshore.

I sure do love all the nodding dolts that defend the ridiculous tax system right along with corporations avoiding it at all costs. Individuals without power that do this are called tax evaders, big (insert industry here) does it and their hailed as clever business people. I run my own business, it's ridiculous the money me others are paying out in taxes, I don't have all the cozy political relationships and/or high paid experts to figure out ways out of, just trying to make an honest living and pay a few employees enough to have actual lives, yeah I'm the problem.

Avoiding tax and evading tax aren't the same thing.

Avoiding tax is using loopholes and other tricks to *legally* avoid paying tax. All intelligent businesses do it. You can argue the morality of it, of course, but it's not illegal. Individuals can do it too - in the UK there's a nice way for small business owners to avoid paying personal income tax on all earnings below the high tax bracket (about £35,000 per year, or ~$55,000).

Evading tax is illegal, and is typically done by misrepresenting the facts. For example, declaring a lower income than you actually had to pay less tax is a basic form of evasion.

Everything discussed in the article here is about tax avoidance, not tax evasion.

So how well will this bid with the hipsters that are pro-apple, selling debt psh... that's not a "cool" thing to do...

rippleman said,
do you feel pro-apple people are cool?

*shrugs* but it seems a lot of self proclaimed "hipsters" are all over apple and use it as part of their image... you know stand out through conformity....

This really does nothing but highlight how little most people understand the tax system.

First, this is money that these companies have already paid taxes on (In the country in which it was made)... It isn't tax free cash. These companies would love to bring this money back here and create jobs here with it, but instead the tax system wants to tax them AGAIN on this money, which isn't fair, nor would an individual or corporation be thrilled to hand over an additional 35 % of their money to carry it across a border...

Instead, money that is being brought to the country should not be taxed as it has already had tax paid on it.

As for Facebook, their refund was the result of an OVER PAYMENT the prior year.

It would benefit everyone if people actually understood the tax code (As well as the problems resultant from it) before posting as if they do...

Tax avoidance and the things being discussed here are NOT the same thing...

quote: "which isn't fair" unquote

Who ever said life is fair? Who ever told you that is a liar. It don't matter if you know the tax code or if you don't, the current tax system may have worked in the past, but not now. Sorry about letting you know life isn't fair.

+1. Exactly. And not only that. Debt is considered as an asset to companies, meaning that they can depreciate more their incomes, henceforth, after paying taxes, having a greater revenue.

M_Lyons10 said,
First, this is money that these companies have already paid taxes on (In the country in which it was made)... It isn't tax free cash.

Bull.

Much of it is just money funnelling from IP licensing schemes designed to shift profit overseas to countries with more favorable tax rates.

In effect, though they made a lot of money here, they have to pay a foreign company, dropping profits down, reducing tax burden.

These companies would love to bring this money back here and create jobs here with it,

The last repatriation holiday was a disaster for everyone but executives of large companies, who made out like bandits. Not a single job was created.

rippleman said,
quote: "which isn't fair" unquote

Who ever said life is fair? Who ever told you that is a liar. It don't matter if you know the tax code or if you don't, the current tax system may have worked in the past, but not now. Sorry about letting you know life isn't fair.

You're right, it doesn't work, and all of the jobs and money going and being held outside of our country is proof of that. LOL

Mordkanin said,

Bull.

Much of it is just money funnelling from IP licensing schemes designed to shift profit overseas to countries with more favorable tax rates.

In effect, though they made a lot of money here, they have to pay a foreign company, dropping profits down, reducing tax burden.

The last repatriation holiday was a disaster for everyone but executives of large companies, who made out like bandits. Not a single job was created.

When companies are selling products and investing resources in these countries, they are paying tax on the revenue they generate THERE. Your post, though long, does nothing but show a lack of understanding.

As for your second point, that is simply not true. Those that argue against companies having money like to narrow down figures to show that jobs weren't created, when in fact, being able to bring the money into the country to fund operations HERE not only creates jobs (Which is proven, as without money HERE, there are no facilities or jobs HERE), but saves jobs here. It's not a complicated thing really. LOL

M_Lyons10 said,
When companies are selling products and investing resources in these countries, they are paying tax on the revenue they generate THERE. Your post, though long, does nothing but show a lack of understanding.

Selling products in a foreign country isn't the only way a company generates revenue in that country. These days, it's quite common to use IP licensing to lower your tax burden in one country, and raise it in another. See: Double Irish arrangements and similar.

As for your second point, that is simply not true.

The US treasury disagrees: http://www.treasury.gov/connec...patriation-Tax-Holiday.aspx

M_Lyons10 said,
This really does nothing but highlight how little most people understand the tax system.

First, this is money that these companies have already paid taxes on (In the country in which it was made)... It isn't tax free cash. These companies would love to bring this money back here and create jobs here with it, but instead the tax system wants to tax them AGAIN on this money, which isn't fair, nor would an individual or corporation be thrilled to hand over an additional 35 % of their money to carry it across a border...

Instead, money that is being brought to the country should not be taxed as it has already had tax paid on it.

As for Facebook, their refund was the result of an OVER PAYMENT the prior year.

It would benefit everyone if people actually understood the tax code (As well as the problems resultant from it) before posting as if they do...

Tax avoidance and the things being discussed here are NOT the same thing...


What? Its like saying...ok I buy my friend who live in another country a gift and I paid the tax on it. So when I ship it to their country, because I paid tax they shouldnt have too?
PLEASE!

This is not a tax refund you do know that right? stop calling it a tax refund because you think it is and want it to be a fact.

coderchi said,
This is not a tax refund you do know that right? stop calling it a tax refund because you think it is and want it to be a fact.

I believe he read the article...and saw this line "Facebook made $1.1 billion in 2011, but paid no tax and even got a refund of $429 million"

macrosslover said,

I believe he read the article...and saw this line "Facebook made $1.1 billion in 2011, but paid no tax and even got a refund of $429 million"

Refund for a corporation means that same thing it does for a person. Getting money back that YOU overpaid during the year. It is NOT free money from the government. People who do their own taxes understand this.

I_Kaplan said,
Now is that fair?

They likely would have paid out of their significant coffers had they been able to bring money made out of this country back... Instead, they had to take out a loan and pay interest on it. So, I would agree, that's not fair... lol

Why should anyone, or any business, have to pay taxes twice? Once in the country that the money sits in, and once to simply move it across the border (e.g., back into the US).

Ignoring that, the 35% tax rate is obscene--just to move your money back into the US.

The US government needs to stop adding loophole-filled laws for a little while and actually fix the laws that we have. In the process, they should be able to greatly simplify our taxcode, and even reduce the tax rate once they actually fix all of the loopholes.

pickypg said,
Why should anyone, or any business, have to pay taxes twice?

Good question!

So I'll also ask why do people living and working in the USA have to pay taxes when they earn their money, then pay taxes again when they spend it?

I_Kaplan said,
Now is that fair?

Probably it is. I don't understand why articles like this exist. Yes, EVERYONE tries to avoid paying more taxes than they need to. If they can do something slightly differently to pay less taxes and not break any laws, where is the problem?

A few years ago, a good friend of mind was in trouble and needed some cash to avoid losing their house. I could have just given it to them, but instead I found a charity that was willing to work with them, so I donated the money to that charity. Now its tax deductible! Is someone going to do a write-up on me making me sound evil for "Avoiding over $400 in taxes!!?"