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> This has led Apple, along with other Silicon Valley firms, to keep foreign cash offshore as it is the financially prudent thing to do for shareholders. The k

• garmaine 9y ago
  Or keep it offshore and use it to finance foreign investments.
  • seanmcdirmid 9y ago
    Ya, they can always open up a few R&D centers in say china, or finance a non-American acquisition using overseas money. Microsoft has done this well (MS china, as well as a Skype and Nokia).
    • bobsman123 9y ago
      Have you worked with Microsoft China? There’s a serious quality and copyright issue with everything they produce.
  • hawkice 9y ago
    So, it's actually largely kept, denominated in USDs, in US banks -- quite a lot of it in US Treasury bonds. So they can finance investment in US companies with it pretty easily right now. https://www.bloomberg.com/graphics/2016-apple-profits/ https://www.bloomberg.com/graphics/2016-apple-profits/ Offshore has to do with ownership, not custody, currency, and obviously not control.
    • westiseast 9y ago
      Yeah this is the bit nobody seems to realise - the money isn’t outside the US at all. There’s an in-house ‘hedge fund’ managing it all in Delaware. Edit: Reno
    • electic 9y ago
      Most of them said they are not going to hire more and they are not going to invest in new companies. They will be using the money for dividends.
      • briandear 9y ago
        Great! Shareholders can use those gains to invest in other things. And, dividends get taxed y’know.
      • deleted 9y ago
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      • jonknee 9y ago
        Dividends are less likely than share buybacks as it's a one time windfall and makes everything easier for management.
        • jldugger 9y ago
          Apple's already paying out dividends. I'm not a securities expert, but depending on how options contracts are worded, a stock buyback might increase the value of options awarded to executives, whereas a dividend is more or less a net negative.
          • jonknee 9y ago
            Apple also already does stock buybacks [1]... $150+ billion worth since 2012 and plans for tons more in the future. Investors like consistent (and increasing!) dividends, a one time windfall from overseas cash coming back won't let you raise the dividend forever. They could do a one time special dividend, but that's still less efficient than a buyback from management's perspective. Dividends are taxable and you can't choose when to pay that tax, capital gains are only taxed when you sell which lets investors put off having to pay tax. The idea being buying back shares and retiring them will make the remaining shares more valuable. You mentioned it might make options more valuable... Well that's a feature not a bug, at least if you're the one getting the options (which the people who decide what to do certainly are!). All the more reason for a buyback. [1] https://www.fool.com/investing/2017/05/31/are-apples-stock-buybacks-still-working-for-invest.aspx https://www.fool.com/investing/2017/05/31/are-apples-stock-b...
    • kgwgk 9y ago
      The cash is not directly owned by Apple Inc. the US corporation. Probably is not so easy for an Apple foreign subsidiary to invest in US companies (investing as in M&A, of course, not buying stocks as financial investment).
  • guelo 9y ago
    As the article explains they want to use the money to pay out profits to shareholders, preferably via buybacks. They need to repatriate it to do that. Another foreign factory doesn't get them the cash in hand that they want.
  • marcoperaza 9y ago
    It seems to me that the American tax system should, if it is to encourage anything, encourage investment in America.
  • austenallred 9y ago
    The spending doesn't even need to be foreign. Apple can easily take out loans at interest rates near 0% as secured by overseas cash. The overseas cash is almost as good as cash in the US.
• deleted 9y ago
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• Shivetya 9y ago
  the US levels of taxation are higher than the vast majority of other countries. it even goes further in taxing profits made overseas than other countries. how can we honestly hold that against these companies?
  • tasty_freeze 9y ago
    The highest tax bracket is high, but tax laws also have many, many deductions and loopholes. As a result, US corporations as a whole pay about 18% in tax, which is somewhat lower than most western countries. If these laws were changed to make a flat 20% tax with no deductions, it would be revenue neutral or even slightly positive, but then the companies would all complain about the loss of deductions.
    • valuearb 9y ago
      You are ignoring state taxes and tax deferral from not repatriating. Once repatriation taxes are paid the US rate increases substantially, even with a lower repatriation rate. Apple pays nearly 40% in the US combined with state corporate income taxes. On foreign earnings it pays about 10% to foreign governments. Combined it works out to 23%, but when the repatriated earnings are taxed it will shoot up.
      • 1_2__4 9y ago
        Citation needed. That’s a lot of very specific numbers.
        • valuearb 9y ago
          It’s actually 24.6%. https://www.apple.com/newsroom/2017/11/the-facts-about-apple-tax-payments/ https://www.apple.com/newsroom/2017/11/the-facts-about-apple...
  • walls 9y ago
    If it wasn't worth it, they wouldn't be doing business there.
• marcoperaza 9y ago
  Why should American corporations pay both foreign and US corporate tax on income made overseas? Almost no other country requires this of their companies and it's a major competitive disadvantage for American businesses. ------------------------------------------------ Edit: I'm rate-limited, but in response to below I'll reproduce what I've posted in prior discussions about this: We’re really better off eliminating the corporate tax altogether. It’s a pretty small portion of tax revenue and the only reason it exists is to be a plank for politicians who want to tax the "greedy corporations." All corporate income is either paid as dividends, paid as salaries, or reinvested. When it is paid as dividends, it is taxed as capital gains. When it is paid as salaries, it is taxed as income. When it is reinvested, it is either lost, or eventually becomes income and capital gains. There is no need to have another layer of taxation that just makes a giant accounting mess and creates all sorts of ridiculous incentives to use tax shelters.
  • ubernostrum 9y ago
    Remember that the point of these exercises, for the company, is not to avoid double taxation, but to avoid even so much as single taxation, by ensuring that the only country in which they legally make profit is one which won't tax them for turning a profit. The actual sales which eventually (after many twists and turns of international finance) resulted in those profits may have happened anywhere, and it's meant to be difficult to untangle exactly where (since if you could easily do that you could tax it). A better solution, of course, would be a tax on the value of goods sold, at the location where the sale occurs, since it's hard to argue that an Apple Store in the US whose customer was standing in front of the register was somehow actually in a Caribbean tax haven.
    • valuearb 9y ago
      Except that Apple pays massive amounts of taxes, more than any company in the history of the world. I shudder to imagine how much you think they should pay.
      • ubernostrum 9y ago
• ringaroundthetx 9y ago
  > The kept the cash offshore with the belief that they would eventually be able to bring it back without paying taxes. Remember to commend them for that spot on analysis. Standing ovation on my end I'm extremely excited for the territorial system and those implications for US world-citizens.
  • rtpg 9y ago
    It'd be fine if this were actually a territorial system. Dropbox develops its software in the US, markets from the US, does basically everything in the US. Yet for some reason service payments goes to Dropbox Ireland. It's not representative of reality, and neither is Apple profits not going back to the US headquarters. The work was done in the US, the profit is going to be handed back to the shareholders. The R&D is in the US. The only thing Apple Japan (for example) is doing is reselling Apple US stuff. There's no real reason for the local subsidiary to book the entire profit. There's a reason people find this problematic. It's because it's a tax game not representative of what's happening in the real world.
• austenallred 9y ago
  > The kept the cash offshore with the belief that they would eventually be able to bring it back without paying taxes. They started a multi-year political lobbying campaign to change the tax system. So far as I can tell Apple is getting absolutely hammered under the terms of this new tax bill, so I'm not sure this is the case https://www.bloomberg.com/news/articles/2017-11-03/multinationals-may-take-a-hit-from-trio-of-taxes-in-house-bill https://www.bloomberg.com/news/articles/2017-11-03/multinati...
  • deleted 9y ago
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