You're missing nothing.

Saying "waiting for a lower tax rate" is just a nice way of saying "never". There is no good reason a corporation would bring offshore cash back unless they absolutely have to. The whole point of putting it there in the first place is to isolate it.

Unless something changes dramatically that makes the current practice really unfavourable to them, there should be no expectation that corporations are actively looking to use this money and are simply waiting for the "best time".

If the government really cared, wouldn't/couldn't they just force banks to forbid transactions with known tax havens?

This isn't about tax havens, it's about the fact that US law levies taxes on corporate income earned anywhere in the world.

So iPhones sold in Sweden or France (not tax havens) generate tax liability in the US. This tax is only due when the profits of those sales are brought back to the US. Companies like Apple therefore have an incentive to keep overseas profits generated outside the US.

There's no magic trick I know to borrow indefinitely at a low accumulated interest rate. If they borrow money with the overseas cash as collateral, how do they repay it? If they do it by borrowing more money, they need to cover the initial debt + the interest. That way the interest cumulates, and eventually the accumulated interest rate dwarfs the original interest rate as well as the tax rate on overseas cash repatriation.

Let me also ask: what am I missing?

> how do they repay it?

Out of cash flow in the US. The companies in question have no problem generating cash in all their markets.

> the accumulated interest rate dwarfs the original interest rate as well as the tax rate on overseas cash repatriation

See a post down thread about this, but I'm assuming the offshore cash is held in e.g. Treasuries earning ~2%+/-, or roughly 100 basis points below where they can issue debt.

This math also neglects the fact that the interest on the debt reduces US tax liability, plus any sweeteners other jurisdictions may offer for keeping piles of cash stored there. Depending on where the cash is stored, it also may be subject to lower tax rates on earned interest than it would be in the US after repatriation.

3.25% is the annual interest rate, it compounds and will cost considerably more than a one-time 10% tax would.

But surely much of that overseas cash is invested and earning enough that 3.25% interest is erased or at least mostly offset?

Doesn't the word "cash" imply that the money is not invested? If they bought factories or something else productive, we'd usually refer to that as "capital".

IIRC the term is typically "cash and equivalents." [1] There is definitely not the expectation that Apple has $200B+ sitting in checking accounts unable to earn any interest.

Treasuries and certain other government securities count as "cash" in most cases.

Edit: Apple reports most of the amount bandied about as their "cash" as being in "long-term marketable securities." [2]. So it's a mix that is definitely not designed to all be instantly convertible to USD with no penalty. I'd guess most other large companies manage their cash similarly.

1 - https://en.wikipedia.org/wiki/Cash_and_cash_equivalents#Comp...

2 - https://www.apple.com/newsroom/pdfs/Q2FY17ConsolidatedFinanc...

The interest is tax-deductible in the US, which further reduces their US tax liability.

Also, as ryonwaggoner points out, they are free to buy e.g. Treasuries with the offshore cash so that the effective interest rate closer to 1% (before the effect of the reduction in tax liability).

Thank you. I was confused.