Re:Apple's cash hoard swells to $246B
by valuearb on Sunday April 16, 2017 @06:45PM
(#14127982)
Every company is doing it already, because it can be tax efficient even if no tax holiday ever occurs. let me show how.
Let's assume Apple earns 2.5% on its Ireland cash, but is paying 4% to borrow against it. On US profits it has to pay almost 41% in taxes, on its Irish interest income it's laying almost zero. It's debt interest is tax deductible and hence costs less than 2.4%, making this example profitable. And nothing stops Apple from buying short term investments that yield close to its boeriwng costs.
But even if it's close to break even it's a no brainer. Once you repatriate profits you can never undo the tax consequences for those profits. And events other than tax holidays can happen that may cause you to regret not waiting.
For example, if Apple decides to do a large international acquisition/investment (Porsche?), and pay $50B in cash as part of it. They would have had to repatriate over $80B to have $50B after tax. Or they could do the acquisition from Ireland for only $50B.
Let's assume Apple earns 2.5% on its Ireland cash, but is paying 4% to borrow against it. On US profits it has to pay almost 41% in taxes, on its Irish interest income it's laying almost zero. It's debt interest is tax deductible and hence costs less than 2.4%, making this example profitable. And nothing stops Apple from buying short term investments that yield close to its boeriwng costs.
But even if it's close to break even it's a no brainer. Once you repatriate profits you can never undo the tax consequences for those profits. And events other than tax holidays can happen that may cause you to regret not waiting.
For example, if Apple decides to do a large international acquisition/investment (Porsche?), and pay $50B in cash as part of it. They would have had to repatriate over $80B to have $50B after tax. Or they could do the acquisition from Ireland for only $50B.