Apple Saves $9.2 Billion By Going Into Debt For $55 Billion



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.

Source: Bloomberg

  • MrsCleaver

    Ahhh. So it turns out that Apple actually made a correct move that armchair business quarterbacks hadn’t imagined : borrowing instead of spending their cash could actually make more sense for Apple.

    Good thing the Apple critics don’t actually make their decisions. Otherwise, the company could have some problems.

  • Geucey

    Uhh, someone is not a math whiz here. How does a 35% tax on $100B equal $9.2B!?! Shouldn’t it be $35B? If I was a patriotic CFO I would push the board to repatriate the $100B and only pay a $9.2 tax bill, it’s peanuts for Apple… I mean Apple makes a ton of money off the US government’s tax financed infrastructure in this country, they should pay their fair share of taxes…