Apple dodges taxes it would owe on repatriating cash

Apple's $17 billion bond sale -- meant to help finance a $55 billion stock buyback, part of a plan to return $100 billion to shareholders by 2015 -- is saving the company about $9.2 billion in taxes, according to an estimate from Moody’s Investment Services. Had Apple decided to use repatriated foreign cash, it would have paid a 35 percent tax rate, and hence owed the US about $9.2 billion.

The company will still have to pay roughly $308 million per year interest for its bond offering, but that interest is tax-deductible, which should lower the real cost by about $100 million per year. Spokesman Steve Dowling comments that for its 2012 fiscal year, Apple paid about $6 billion in federal income taxes, which Dowling claims is 1 out of every 40 dollars in corporate income taxes the US government took in.

Apple has roughly $145 billion in cash reserves, but only $45 billion of that is situated in the US. The company has joined with other businesses in trying to pressure politicians for a "tax holiday," which would temporarily lower the tax rate on repatriated cash. That option may be politically difficult, however, given the government's budget crisis and public demands for fair taxation.

by MacNN Staff