Apple Avoided $9.2 Billion in Taxes By Taking on Debt
Apple avoided paying about $9.2 billion in taxes by taking on debt to finance its $55 billion stock buyback, reports Moody’s Investment Services via Bloomberg.
If the Apple would have financed the buyback via offshore cash, it would have had to pay tax to repatriate the money. Instead it offered $17 billion worth of bonds and will pay about $308 million a year in interest on those bonds.
Gerald Granovsky, a senior vice president at Moody’s, said "From a pure corporate-finance theory perspective, this was a no-brainer."
If the funds had come from Apple’s offshore cash pile of about $100 billion, the Cupertino, California-based iPhone maker would have had to pay a 35 percent tax to repatriate the money, Granovsky said. That means Apple avoided about $9.2 billion in taxes. And since interest payments are tax-deductible, that’s another $100 million a year, Granovsky said.
Apple paid around $6 billion in federal corporate income tax last year, accounting for about 2.5% of the corporate income tax collected by the U.S. government, according to company spokesperson Steve Dowling.
“That makes Apple one of the top corporate income tax payers in the country, if not the largest,” he said.