Apple just sidestepped a $9.2 billion tax bill by financing part of a $55 billion stock buyback with debt rather than using its offshore cash. The sneaky trick means the U.S. government is unable to bill the Cupertino company for tax on the deal, which is said to be the “the biggest corporate offering on record,” according to Bloomberg.
Apple will pay interest of just $308 million a year on the $17 billion bond offering, said Gerald Granovsky, a senior vice president at Moody’s — which will turn out to be significantly cheaper than paying the tax.
“From a pure corporate-finance theory perspective, this was a no-brainer,” Granovsky said.
If Apple has used money from its ever increasing offshore cash pile, which currently stands at about $100 billion, then it would have had to pay a 35% tax that would have totaled about $9.2 billion. What’s more, because interest payments are tax-deductible, the company will save another $100 million a year, Bloomberg reports.
Apple paid just $6 billion in income taxes in 2012, which is $1 out of every $40 collected by the U.S. government. That’s a pretty small sum for a company of its stature, which saw quarterly revenue of $43.6 billion and quarterly net profit of $9.5 billion during the second quarter of 2013 alone.
Nevertheless, Apple is one of the country’s top corporate income tax payers, if not the largest, according to company spokesman Steve Dowling.