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What is the point of having 102 billion dollars in overseas bank accounts? How can it be considered "successful tax planning" when 70% of their profits are sit

What is the point of having 102 billion dollars in overseas bank accounts? How can it be considered "successful tax planning" when 70% of their profits are sitting overseas and basically UNUSABLE? I get it, they don't want to pay taxes on it. Well, isn't paying your fair share of taxes on it and then getting to use it better than it just sitting overseas not doing anything? Are they waiting for a tax holiday? Is there some other strategy here that I'm missing? Why are they content with just leaving their money overseas where they can't do anything useful with it?

tolmasky 13y ago
If the interest on the loan amounts to less than what they'd pay in taxes then its worth it to take the loan and wait for said tax holiday. This is common advice for people too - take a loan if you can get more value out of your cash on hand than paying the interest on said loan. The article cites historically low interest rates -- that means it makes sense to take a loan even ignoring the foreign assets situation, if you feel you can use the money to generate more money than the interest.
- socialist_coder 13y ago
  I get that it's still beneficial to take the loan. I was more asking about the situation in general, not in relation to this specific loan. Is the only reason they're waiting because they think there will be a tax holiday? Or is there more to it than that? One of the things I learned working on freemium games is that if you have too many sales, then people will only buy when there is a sale. I hope the US Govt has learned that lesson and never does another Tax Holiday.
  - tolmasky 13y ago
    I'm not sure how foreign assets work, but it may be the case that Apple is free to use those assets as it sees fit in those other countries. In that case, it may never make sense to bring the money back without a tax holiday. I know you think you are sticking it to them by never granting them another tax holiday, but in reality all you may be doing is accelerating the pace at which they realize that they aren't an American company so much as a global company. Its already the case that the products are assembled in China, and someday its quite possible most of their phones will be sold in China as well, and they certainly pay taxes for that stuff in China (as well as every other country they sell products in). Why do you think taxes on profits in other countries "belong" to America? I think China has as much a claim that Apple should pay THEM taxes on the work they do America. In a world where more and more of their profits happen overseas, then penalizing them when they try to bring the money to the US may just make them realize someday that hey, they should just do everything overseas and then America won't benefit from Apple at all (except for the few sales that happen on US soil).
    - socialist_coder 13y ago
      That is a good argument. You definitely made me think.
wklauss 13y ago
That's basically it. They are trying to get some tax exemption. And its not only Apple (Google or Amazon are in the exact same position). My suspicion is that the current "we will manufacture in the US" has to do something with it (Both Google and Apple have announced plans for this), probably some kind of agreement in Washington about capital expenditures being exempt for taxes. I don't think this is poor planning. International sales grew fest and they found themselves in this situation. If you ask in any other country (esp. in Europe) they'll probably tell you that that money shouldn't be taxed in the US as it was made by selling products on local markets and siphoned away using financial tactics that are frowned upon (selling straight from Ireland, usually).
samstave 13y ago
I am not sure it is unusable. THey do most mfg in China - are they not paying for these operations through the funds held outside the US?
rogerbinns 13y ago
Note that they do spend billions of that money. For example unlike most companies, Apple buys the manufacturing equipment at Foxconn used to make their products. This means Foxconn doesn't have to take capital risks, and also that the equipment is not available to Foxconn's other customers. (The CNC machining for making unibody macbooks is one example.) There are also rumours of having spent large sums to prop up Sharp. Some asymco articles on their capital spending (almost all of which is outside of the US): http://www.asymco.com/2012/12/11/the-new-age-of-capital-intensity/ http://www.asymco.com/2012/12/11/the-new-age-of-capital-inte... http://www.asymco.com/2012/10/31/hey-big-spender/ http://www.asymco.com/2012/10/31/hey-big-spender/ http://www.asymco.com/2012/11/07/recapex-the-curious-case-of-apples-2012-and-2013-capital-expenditures/ http://www.asymco.com/2012/11/07/recapex-the-curious-case-of... Apple's problem is that they make so much in profits that anything they do ends up not making much of a dent.

tolmasky 13y ago

If the interest on the loan amounts to less than what they'd pay in taxes then its worth it to take the loan and wait for said tax holiday. This is common advice for people too - take a loan if you can get more value out of your cash on hand than paying the interest on said loan. The article cites historically low interest rates -- that means it makes sense to take a loan even ignoring the foreign assets situation, if you feel you can use the money to generate more money than the interest.

socialist_coder 13y ago
I get that it's still beneficial to take the loan. I was more asking about the situation in general, not in relation to this specific loan. Is the only reason they're waiting because they think there will be a tax holiday? Or is there more to it than that? One of the things I learned working on freemium games is that if you have too many sales, then people will only buy when there is a sale. I hope the US Govt has learned that lesson and never does another Tax Holiday.
- tolmasky 13y ago
  I'm not sure how foreign assets work, but it may be the case that Apple is free to use those assets as it sees fit in those other countries. In that case, it may never make sense to bring the money back without a tax holiday. I know you think you are sticking it to them by never granting them another tax holiday, but in reality all you may be doing is accelerating the pace at which they realize that they aren't an American company so much as a global company. Its already the case that the products are assembled in China, and someday its quite possible most of their phones will be sold in China as well, and they certainly pay taxes for that stuff in China (as well as every other country they sell products in). Why do you think taxes on profits in other countries "belong" to America? I think China has as much a claim that Apple should pay THEM taxes on the work they do America. In a world where more and more of their profits happen overseas, then penalizing them when they try to bring the money to the US may just make them realize someday that hey, they should just do everything overseas and then America won't benefit from Apple at all (except for the few sales that happen on US soil).
  - socialist_coder 13y ago
    That is a good argument. You definitely made me think.

wklauss 13y ago

That's basically it. They are trying to get some tax exemption. And its not only Apple (Google or Amazon are in the exact same position). My suspicion is that the current "we will manufacture in the US" has to do something with it (Both Google and Apple have announced plans for this), probably some kind of agreement in Washington about capital expenditures being exempt for taxes. I don't think this is poor planning. International sales grew fest and they found themselves in this situation. If you ask in any other country (esp. in Europe) they'll probably tell you that that money shouldn't be taxed in the US as it was made by selling products on local markets and siphoned away using financial tactics that are frowned upon (selling straight from Ireland, usually).

samstave 13y ago

I am not sure it is unusable. THey do most mfg in China - are they not paying for these operations through the funds held outside the US?

rogerbinns 13y ago

Note that they do spend billions of that money. For example unlike most companies, Apple buys the manufacturing equipment at Foxconn used to make their products. This means Foxconn doesn't have to take capital risks, and also that the equipment is not available to Foxconn's other customers. (The CNC machining for making unibody macbooks is one example.) There are also rumours of having spent large sums to prop up Sharp. Some asymco articles on their capital spending (almost all of which is outside of the US): http://www.asymco.com/2012/12/11/the-new-age-of-capital-intensity/ http://www.asymco.com/2012/12/11/the-new-age-of-capital-inte... http://www.asymco.com/2012/10/31/hey-big-spender/ http://www.asymco.com/2012/10/31/hey-big-spender/ http://www.asymco.com/2012/11/07/recapex-the-curious-case-of-apples-2012-and-2013-capital-expenditures/ http://www.asymco.com/2012/11/07/recapex-the-curious-case-of... Apple's problem is that they make so much in profits that anything they do ends up not making much of a dent.