YOUR MONEY

Apple – is this madness?

The market buzz all week has been Apple’s announcement that it will ‘borrow’ US $17 billion dollars by offering bonds.

The news has been greeted with glee by stock market analysts and brokerages as:

1. it is the largest bond offering in history (so its very positive news in bad times)

2. it will generate all kinds of brokerage firm PROFITS as they act for ‘clients’ or – as has already happened – tried to ‘corner the market’ by buying huge chunks of the bond offer – to ‘resell’ to clients at a higher rate (See G&M, May 2, 2013, B11 “The Apple of Wall St.’s eye: firms load up on bonds”).

 

Question:

Why does Apple need to ‘borrow money’ and pay out on its 10 year bonds 2.415% interest if it has, as reported by the company, US $145 billion dollars in cash?

Forbes has also asked this question and gives the following answer, one that analysts have also stated on radio 680News.

Under the US corporate tax code the profits of a company are of course taxed. That’s the corporate income tax. However, profits made outside the US are, if the company declares that they’re going to stay outside the US, then free from that corporate income tax. Of Apple’s $145 billion cash pile some $100 billion of it has been earned outside the US. And it’s being held outside the US and thus doesn’t, currently, have to pay the corporate income tax.

One of the things you cannot do with money offshore in this manner is either buy back the company’s stock or use it to pay a dividend. To do either of those you have to bring the money back onshore and by doing so you’ll have to pay the tax. That tax is, the headline rate, 35% currently. And Apple’s offshore profits have paid very little tax so far. So they would have to pay a substantial percentage of that tax if they were used to pay the increased dividend or to finance the announced share buy backs.

http://www.forbes.com/sites/timworstall/2013/04/30/with-all-of-apples-cash-why-is-it-issuing-bonds/

 

Now let me see:

 Apple has over US$100 billion dollars in profits that are ‘sheltered’ from US tax collection at the nominal 35% rate as the funds are ‘overseas’.

But:

As Apple profits are roughly 50% from US sales and %0% from the rest of the world, how is it that Apple’s $100 billion is all ‘outside’ the US if its total cash is $145 billion including the US?

 

                      http://lowendmac.com/ed/fox/11ff/more-international.html

 

And  where, exactly, is this money kept?  

Is it in some numbered account in Switzerland or the Caribbean such as the Cook Islands?

 

The IRS and US Congress have been aggressively passing laws and making new initiative to ‘recover’ monies rightfully due US taxes but sheltered outside the country by individuals and companies.

Canadian residents with US passports are now being threatened for failing to submit annual US tax returns and paying US tax rates on their income made in Canada.  The same is being applied around the world – on threat of criminal conviction!

Swiss banks are being forced to reveal their numbered accounts to the IRS or face being barred from doing business in or with US citizens and companies.   So they are caving in and revealing sheltered – i.e., secretly hidden funds to US taxation.

 

So how come Apple, until recently the US’s most valuable company, has been able to squirrel away a massive cash fortune without being challenged by the IRS or US Congress?

Is there one set of rules for Apple and another for everyone else?

 

PS:   And why, on April 24, 2013, did CEO Tom Cook announce the company would pay out to shareholders US $100 billion dollars by 2015?  As per the Forbes reasoning, that overseas money would be taxable in the US and shrink to just $65 billion – if nothing else.

So does Apple have more than $100 billion overseas as the above tax hit would require for a $100 billion payout?

Is Mr. Cook panicking and jumping from one plan to another to prop up the freefalling share price of Apple?

Does no one on the Board of Directors at Apple read the companies announcements and realize 2+2 does not equal 5 or 5050 or 145 billion?

Is Wall Street closing its eyes to this nonsense – again -- to make a quick buck?