21 ms·

What possible reason could Apple have to repatriate their cash hoard (even with a tax holiday?) They don't manufacture anything in the us -- do they need those

What possible reason could Apple have to repatriate their cash hoard (even with a tax holiday?) They don't manufacture anything in the us -- do they need those kinds of billions to hire more software developers in Cupertino -- that seems pretty unlikely to me. Do they need it to build more US apple stores (nope they've got that covered). They are already paying a dividend with free cash flow from their US business ... I can't imagine why they would ever want to "increase investment" in the us vs the many far more productive things they could conceivably do by spending that money outside the us ...

sparkzilla 10y ago
If they don't need it, they should return it to their shareholders.
- arrrg 10y ago
  The argument here was about not needing the money in the US (but possibly investing it elsewhere on the planet), not not needing it in general.
- melling 10y ago
  That's not what Warren Buffett would do: http://www.businessinsider.com/warren-buffett-on-dividends-2013-3 http://www.businessinsider.com/warren-buffett-on-dividends-2...
  - valuearb 10y ago
    Buffett is running an investment company. The day Berkshire Hathaway can't do a better job of earning long term returns than it's shareholders can, is the day it no longer justifies it's existence. There have certainly been times where Buffett has struggled to find good investments, and in the short run a dividend might have seemed wise. But those times always pass and letting cash pile up until opportunities arise has worked very well for him. Apple isn't an investment company. They are a consumer products company. Their new product ideas should not require large amounts of capital. Even the silly car idea should never get more than $10B or so in funding until it's proven, which is mice nuts in their grand scheme. So they should return excess capital to shareholders. The only limiting test is how much is 'excess'. Tim Cook is likely being very conservative, but in the future if Apple has to ride out some bad years, having a hundred billion or so in the bank might prove the difference between success and failure.
    - melling 10y ago
      no, they shouldn't. That's just your opinion. https://www.forbes.com/sites/baldwin/2012/03/19/steve-jobs-wouldnt-have-paid-a-dividend-3/#44e894416413 https://www.forbes.com/sites/baldwin/2012/03/19/steve-jobs-w...
valuearb 10y ago
They are paying dividends by borrowing money, not from free cash flow. By repatriating they can repay the debt and pay shareholders a large one time dividend with some of the remainder.
drawkbox 10y ago
You are right, really if we want companies to bring money back we just need lower taxes. The games companies play to eek out an additional 5% and overcome taxes is massive. Better to have lower taxes here in the US while our dollar is still valued so high to offset and maybe they will have a reason to repatriate and continue investment here. We need more money moving in our country immediately, the velocity of money[1] and gdp to compensation [2] are horrid right now, worst in history. Our dollar being too high in value is an advantage to wealthy and buying more abroad but harms workers here competitively no matter what they do. It also makes companies with money in other areas able to do more outside of the US, good but also bad. Another thing that would help immensely is companies no longer being allowed to provide benefits, a legacy bug, just salary, enough to get their own services as those are private and companies should not be involved in that. Healthcare would need to be either single payer or private but solely individual and not tied to your employer which is a single point of failure, it may also fix medical pricing one day if more consumer focused. Both lower taxes and companies not having to worry about providing benefits/healthcare would be immense competitive moves. Companies in Canada, UK, Mexico etc etc don't have to worry about providing healthcare benefits and it makes it easier to start a business, change jobs and in general allows more focus on business and products. [1] https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V [2] https://fred.stlouisfed.org/graph/?g=2Xa https://fred.stlouisfed.org/graph/?g=2Xa
- toomuchtodo 10y ago
  We don't have to lower taxes. We just change the tax law to tax that money whether they bring it back to the US or not.
  - vnchr 10y ago
    Technically, that would require taxing a foreign company for foreign business activity. It's out of the US's jurisdiction.
    - Animats 10y ago
      Nah. Apple's "foreign business activity" in Ireland is a tax dodge.
jwilliams 10y ago
This is a component of the current tax reform debate, particularly on the Republican side. Many advocate a "Destination Based Cash Flow Tax"[1], which is a Border Adjustment Tax - i.e. the tax applies on the destination of the product rather than the source. 1. https://en.wikipedia.org/wiki/Destination-based_cash_flow_tax https://en.wikipedia.org/wiki/Destination-based_cash_flow_ta...
- valuearb 10y ago
  This is a terrible idea. Just another overcomplicated system for smarter companies to game. The answer is simple. Eliminate the corporate income tax, and increase personal dividend tax rates to ordinary income rates. Then any profits that are reinvested are not taxed, increasing investment, productivity and wages. Any paid out to shareholders for consumption are taxed at the exact same rates any other income gets taxed on, making our personal tax system more fair and progressive.
  - iamdave 10y ago
    This is a terrible idea. For those of us (like me) who only really understand taxes in the context of individual earnings and income tax (and the ever annoying property taxes), can you explain why?
    - valuearb 10y ago
      "Firms currently pay corporate taxes on their profits. Border-adjustment would change how those profits are calculated. Accountants could no longer deduct imports—say, goods brought in from China—as costs. And their exports would no longer count as revenues. For tax purposes, “profits” would be domestic sales minus domestic costs. Effectively, imports would be taxed, and exports would be subsidised. As a result, retailers, who stock their shelves with imported wares, are lobbying against the change. Exporters, such as the aerospace industry, broadly support it." It's a sneaky form of tariffs. Tariffs are a terrible idea. Free trade benefits all parties. Currently there is a large amount of corporate expenses around conforming to and gaming the corporate income tax code. Eliminating the corporate income tax is a massive simplification that not only makes investment more attractive, but it eliminates those costs that produce nothing, and the spending redistributed to actual productive activities that produce goods and services. Finally, eliminate corporate taxes benefits importers and exporters equally, it's not industrial planning to pick or favor winners and industries, it relies on market forces not political ones.
almostApatriot1 10y ago
stock buybacks
21 10y ago
Even if they needed money inside US they could borrow it from an US bank and guarantee it with the money held outside US. So there is still no need to repatriate it and pay taxes, they would only pay a very low interest rate.
abalone 10y ago
> They are already paying a dividend with free cash flow from their US business ... Actually they are selling bonds to fund this as well as share buybacks.[1] So yeah, they would like to repatriate at some point, but there's no rush. [1]"The Cupertino, California-based company has been tapping credit markets... to reward shareholders instead of repatriating that overseas cash because it would be taxed by the U.S." https://www.bloomberg.com/news/articles/2016-07-28/apple-said-to-plan-dollar-bond-offering-to-fund-share-buybacks https://www.bloomberg.com/news/articles/2016-07-28/apple-sai...
refurb 10y ago
They don't manufacture anything in the us It's always a gamble trying to create certain incentives, but could the gov't give a tax holiday assuming the repatriated cash is invested within the US? It's an interesting idea, but I'm not holding my breath as usually the implementation is difficult and what ends up happening is companies game the system and get the cash back in the US without having to do anything.
barrkel 10y ago
The cash pile is a tool to influence US government policy. The IRS would like a slice of that cake, and as long as they keep it out of reach, it's a tasty carrot cake.
jbigelow76 10y ago
Big ticket acquisitions like something in the Netflix realm, overseas money could buy 4 Netflixes at their current market cap or maybe they would have made a play for Time Warner if the money had been available domestically. Those are both just "for instances" of course.
return0 10y ago
Do they even want to repatriate? Have they done lobbying to that purpose?
- breatheoften 10y ago
  I also wonder if they want to repatriate. It seems to me like this giant pile of cash represents a pretty compelling strategic advantage ... the argument for repatriating tends to be along the lines that repatriating will allow a large one time dividend or stock buyback -- a nice short term money grab for shareholders. The only thing standing between the shareholders and this giant pile of money is the repatriation tax. Seems like Apple is better off with the tax status quo - it provides a good excuse to combat the short term investor demands for return of the cash pile and allows the accrual of what could prove to be a very serious long term advantage ... I wonder how often the mere (ominous/encouraging) existence of the cash pile proves useful during supply chain development/negotiations ...
whack 10y ago
> "vs the many far more productive things they could conceivably do by spending that money outside the us ..." If there was something productive they could do with that money, they would have done it already. The money is currently just sitting in a "bank" somewhere, collecting extremely low interest rates. The money would be far more productive if Apple simply returned it back to its shareholders, who can then invest it in other ventures of their choosing [1]. The only rational reason for Apple to hoard the cash, is in anticipation of a tax holiday. And given the nature of the Trump administration, I wouldn't be surprised at all if Apple manages to buy one. [1]: http://time.com/money/3484599/icahn-letter-apple-cash/ http://time.com/money/3484599/icahn-letter-apple-cash/
- krashidov 10y ago
  I don't know much about finance. Why would Apple return money back to its shareholders? Doesn't it already do that by paying a dividend?
  - CapitalistCartr 10y ago
    That's what the parent is talking about. Sometimes companies pay out a large, one-time dividend. The other way to pay out to shareholders is to buy back shares on the market. Each approach has its strengths.
  - cavisne 10y ago
    Their corporate responsibility is the maximize return to shareholders. If they cant do anything with the money (and seems they cant) they should be returning it with larger dividends, buy backs etc. If they did do something with the money, i wonder if automation is at the stage where they could invest in local supply chains and bring iphone manufacturing to the US. Chinese labour is not as cheap as it used to be, all the parts are still in china for now though.
  - justin66 10y ago
    > Why would Apple return money back to its shareholders? They're obligated to obey the wishes of the shareholders, who are the owners of the company. If the shareholders want it, the shareholders get it. (That's assuming the shareholders haven't been suckered into buying shares without voting rights, etc.)
spangry 10y ago
I wonder if Apple perceive some kind of systemic global risk (either economic and/or strategic). Maybe this is a 'flight to safety'. Or maybe they think the next 'industrial revolution' is near, so they're positioning their money to buy up (or create) highly productive US capital.
JKCalhoun 10y ago
Buy a U.S. company?
mmanfrin 10y ago
It never really occurred to me that that money would be more useful paying for things outside the US. In my mind I thought 'tax free but useless vs taxed and useful'. So this essentially means that building anything outside the US (factories, research, whatever) comes at a 30%~ discount, since doing the same thing in the US would result in a tax payment. So tax loopholes like this, Double Dutch, etc, are explicitly putting a premium on further production/investment in the US (and other areas whose taxes are being avoided). That there exists a certain political lean in the US that explicitly is against fixing these tax loopholes is absurd to me.
anigbrowl 10y ago
There are many far more productive things they could be doing, but in the meantime they're not doing any of those, are they? Also, how do you know their (hypothetically) productive investments would pay off more than those made by shareholders who received the cash as a dividend and invested it elsewhere? Are you really arguing that Apple has the highest imaginable ROI of all available options? Some people's veneration for corporations seems based more on religious than economic thinking.
kaisen99 10y ago
It's fascinating that Apple simply stashes this cash and effectively sits on it. They generally never do large acquisitions over 500M nor do they invest in new areas as heavily as Google as Amazon. Perhaps it stems from the companies near death experience in the 90's that is still embedded in it's DNA - so they just save the cash just in case.
tn135 10y ago
Apple is probably waiting for a tax holiday. I really hope they get it.

sparkzilla 10y ago

If they don't need it, they should return it to their shareholders.

arrrg 10y ago
The argument here was about not needing the money in the US (but possibly investing it elsewhere on the planet), not not needing it in general.
melling 10y ago
That's not what Warren Buffett would do: http://www.businessinsider.com/warren-buffett-on-dividends-2013-3 http://www.businessinsider.com/warren-buffett-on-dividends-2...
- valuearb 10y ago
  Buffett is running an investment company. The day Berkshire Hathaway can't do a better job of earning long term returns than it's shareholders can, is the day it no longer justifies it's existence. There have certainly been times where Buffett has struggled to find good investments, and in the short run a dividend might have seemed wise. But those times always pass and letting cash pile up until opportunities arise has worked very well for him. Apple isn't an investment company. They are a consumer products company. Their new product ideas should not require large amounts of capital. Even the silly car idea should never get more than $10B or so in funding until it's proven, which is mice nuts in their grand scheme. So they should return excess capital to shareholders. The only limiting test is how much is 'excess'. Tim Cook is likely being very conservative, but in the future if Apple has to ride out some bad years, having a hundred billion or so in the bank might prove the difference between success and failure.
  - melling 10y ago
    no, they shouldn't. That's just your opinion. https://www.forbes.com/sites/baldwin/2012/03/19/steve-jobs-wouldnt-have-paid-a-dividend-3/#44e894416413 https://www.forbes.com/sites/baldwin/2012/03/19/steve-jobs-w...

valuearb 10y ago

They are paying dividends by borrowing money, not from free cash flow. By repatriating they can repay the debt and pay shareholders a large one time dividend with some of the remainder.

drawkbox 10y ago

You are right, really if we want companies to bring money back we just need lower taxes. The games companies play to eek out an additional 5% and overcome taxes is massive. Better to have lower taxes here in the US while our dollar is still valued so high to offset and maybe they will have a reason to repatriate and continue investment here. We need more money moving in our country immediately, the velocity of money[1] and gdp to compensation [2] are horrid right now, worst in history. Our dollar being too high in value is an advantage to wealthy and buying more abroad but harms workers here competitively no matter what they do. It also makes companies with money in other areas able to do more outside of the US, good but also bad. Another thing that would help immensely is companies no longer being allowed to provide benefits, a legacy bug, just salary, enough to get their own services as those are private and companies should not be involved in that. Healthcare would need to be either single payer or private but solely individual and not tied to your employer which is a single point of failure, it may also fix medical pricing one day if more consumer focused. Both lower taxes and companies not having to worry about providing benefits/healthcare would be immense competitive moves. Companies in Canada, UK, Mexico etc etc don't have to worry about providing healthcare benefits and it makes it easier to start a business, change jobs and in general allows more focus on business and products. [1] https://fred.stlouisfed.org/series/M2V https://fred.stlouisfed.org/series/M2V [2] https://fred.stlouisfed.org/graph/?g=2Xa https://fred.stlouisfed.org/graph/?g=2Xa

toomuchtodo 10y ago
We don't have to lower taxes. We just change the tax law to tax that money whether they bring it back to the US or not.
- vnchr 10y ago
  Technically, that would require taxing a foreign company for foreign business activity. It's out of the US's jurisdiction.
  - Animats 10y ago
    Nah. Apple's "foreign business activity" in Ireland is a tax dodge.

jwilliams 10y ago

This is a component of the current tax reform debate, particularly on the Republican side. Many advocate a "Destination Based Cash Flow Tax"[1], which is a Border Adjustment Tax - i.e. the tax applies on the destination of the product rather than the source. 1. https://en.wikipedia.org/wiki/Destination-based_cash_flow_tax https://en.wikipedia.org/wiki/Destination-based_cash_flow_ta...

valuearb 10y ago
This is a terrible idea. Just another overcomplicated system for smarter companies to game. The answer is simple. Eliminate the corporate income tax, and increase personal dividend tax rates to ordinary income rates. Then any profits that are reinvested are not taxed, increasing investment, productivity and wages. Any paid out to shareholders for consumption are taxed at the exact same rates any other income gets taxed on, making our personal tax system more fair and progressive.
- iamdave 10y ago
  This is a terrible idea. For those of us (like me) who only really understand taxes in the context of individual earnings and income tax (and the ever annoying property taxes), can you explain why?
  - valuearb 10y ago
    "Firms currently pay corporate taxes on their profits. Border-adjustment would change how those profits are calculated. Accountants could no longer deduct imports—say, goods brought in from China—as costs. And their exports would no longer count as revenues. For tax purposes, “profits” would be domestic sales minus domestic costs. Effectively, imports would be taxed, and exports would be subsidised. As a result, retailers, who stock their shelves with imported wares, are lobbying against the change. Exporters, such as the aerospace industry, broadly support it." It's a sneaky form of tariffs. Tariffs are a terrible idea. Free trade benefits all parties. Currently there is a large amount of corporate expenses around conforming to and gaming the corporate income tax code. Eliminating the corporate income tax is a massive simplification that not only makes investment more attractive, but it eliminates those costs that produce nothing, and the spending redistributed to actual productive activities that produce goods and services. Finally, eliminate corporate taxes benefits importers and exporters equally, it's not industrial planning to pick or favor winners and industries, it relies on market forces not political ones.

almostApatriot1 10y ago

stock buybacks

21 10y ago

Even if they needed money inside US they could borrow it from an US bank and guarantee it with the money held outside US. So there is still no need to repatriate it and pay taxes, they would only pay a very low interest rate.

abalone 10y ago

> They are already paying a dividend with free cash flow from their US business ... Actually they are selling bonds to fund this as well as share buybacks.[1] So yeah, they would like to repatriate at some point, but there's no rush. [1]"The Cupertino, California-based company has been tapping credit markets... to reward shareholders instead of repatriating that overseas cash because it would be taxed by the U.S." https://www.bloomberg.com/news/articles/2016-07-28/apple-said-to-plan-dollar-bond-offering-to-fund-share-buybacks https://www.bloomberg.com/news/articles/2016-07-28/apple-sai...

refurb 10y ago

They don't manufacture anything in the us It's always a gamble trying to create certain incentives, but could the gov't give a tax holiday assuming the repatriated cash is invested within the US? It's an interesting idea, but I'm not holding my breath as usually the implementation is difficult and what ends up happening is companies game the system and get the cash back in the US without having to do anything.

barrkel 10y ago

The cash pile is a tool to influence US government policy. The IRS would like a slice of that cake, and as long as they keep it out of reach, it's a tasty carrot cake.

jbigelow76 10y ago

Big ticket acquisitions like something in the Netflix realm, overseas money could buy 4 Netflixes at their current market cap or maybe they would have made a play for Time Warner if the money had been available domestically. Those are both just "for instances" of course.

return0 10y ago

Do they even want to repatriate? Have they done lobbying to that purpose?

breatheoften 10y ago
I also wonder if they want to repatriate. It seems to me like this giant pile of cash represents a pretty compelling strategic advantage ... the argument for repatriating tends to be along the lines that repatriating will allow a large one time dividend or stock buyback -- a nice short term money grab for shareholders. The only thing standing between the shareholders and this giant pile of money is the repatriation tax. Seems like Apple is better off with the tax status quo - it provides a good excuse to combat the short term investor demands for return of the cash pile and allows the accrual of what could prove to be a very serious long term advantage ... I wonder how often the mere (ominous/encouraging) existence of the cash pile proves useful during supply chain development/negotiations ...

whack 10y ago

> "vs the many far more productive things they could conceivably do by spending that money outside the us ..." If there was something productive they could do with that money, they would have done it already. The money is currently just sitting in a "bank" somewhere, collecting extremely low interest rates. The money would be far more productive if Apple simply returned it back to its shareholders, who can then invest it in other ventures of their choosing [1]. The only rational reason for Apple to hoard the cash, is in anticipation of a tax holiday. And given the nature of the Trump administration, I wouldn't be surprised at all if Apple manages to buy one. [1]: http://time.com/money/3484599/icahn-letter-apple-cash/ http://time.com/money/3484599/icahn-letter-apple-cash/

krashidov 10y ago
I don't know much about finance. Why would Apple return money back to its shareholders? Doesn't it already do that by paying a dividend?
- CapitalistCartr 10y ago
  That's what the parent is talking about. Sometimes companies pay out a large, one-time dividend. The other way to pay out to shareholders is to buy back shares on the market. Each approach has its strengths.
- cavisne 10y ago
  Their corporate responsibility is the maximize return to shareholders. If they cant do anything with the money (and seems they cant) they should be returning it with larger dividends, buy backs etc. If they did do something with the money, i wonder if automation is at the stage where they could invest in local supply chains and bring iphone manufacturing to the US. Chinese labour is not as cheap as it used to be, all the parts are still in china for now though.
- justin66 10y ago
  > Why would Apple return money back to its shareholders? They're obligated to obey the wishes of the shareholders, who are the owners of the company. If the shareholders want it, the shareholders get it. (That's assuming the shareholders haven't been suckered into buying shares without voting rights, etc.)

spangry 10y ago

I wonder if Apple perceive some kind of systemic global risk (either economic and/or strategic). Maybe this is a 'flight to safety'. Or maybe they think the next 'industrial revolution' is near, so they're positioning their money to buy up (or create) highly productive US capital.

JKCalhoun 10y ago

Buy a U.S. company?

mmanfrin 10y ago

It never really occurred to me that that money would be more useful paying for things outside the US. In my mind I thought 'tax free but useless vs taxed and useful'. So this essentially means that building anything outside the US (factories, research, whatever) comes at a 30%~ discount, since doing the same thing in the US would result in a tax payment. So tax loopholes like this, Double Dutch, etc, are explicitly putting a premium on further production/investment in the US (and other areas whose taxes are being avoided). That there exists a certain political lean in the US that explicitly is against fixing these tax loopholes is absurd to me.

anigbrowl 10y ago

There are many far more productive things they could be doing, but in the meantime they're not doing any of those, are they? Also, how do you know their (hypothetically) productive investments would pay off more than those made by shareholders who received the cash as a dividend and invested it elsewhere? Are you really arguing that Apple has the highest imaginable ROI of all available options? Some people's veneration for corporations seems based more on religious than economic thinking.

kaisen99 10y ago

It's fascinating that Apple simply stashes this cash and effectively sits on it. They generally never do large acquisitions over 500M nor do they invest in new areas as heavily as Google as Amazon. Perhaps it stems from the companies near death experience in the 90's that is still embedded in it's DNA - so they just save the cash just in case.

tn135 10y ago

Apple is probably waiting for a tax holiday. I really hope they get it.