Bloomberg reported last month that Apple will save nearly $10 billion on its taxes by issuing debt rather than bringing cash that is currently sitting in overseas accounts back to the U.S. Apple announced that it would issue $17 billion in debt, a record-setting transaction for corporate entities, to pay for part of a stock buyback that is now reportedly worth $55 billion. It appears that Apple is borrowing so much, despite holding roughly $145 billion in cash, because interest rates are currently extremely low.
But Bloomberg’s Peter Burrows believes another reason is taxes. He points out that to free up $17 billion in cash, Apple would have had to transfer slightly more than $26 billion from an offshore account – $17 billion for the buyback, plus $9.2 billion in additional funds to pay for a 35 percent tax surcharge. He also reminds us that interest payments on debt are also tax deductible. I suspect working men and women, who not only work hard, but also pay their taxes, will have a difficult time identifying with Apple’s tax and debt dilemma.
Source: Bloomberg and AL.com
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