Over Half of Apple’s Cash Locked in Offshore Accounts

| News

On the heels of Apple’s acquisition of Anobit, Seeking Alpha has taken a look at the tech giant’s growing cash hoard, which is impressive at US$82 billion but is hampered by the $54 billion that is held overseas and can’t be repatriated without a 35 percent tax hit.

On top of that, Stephen Rosenman observed, “the off-shore component of cash is growing exponentially, courtesy of milder overseas tax treatment as well as burgeoning foreign markets. In contrast, Apple’s U.S. cash/investments are increasing much more slowly.”

Cash added by Apple, foreign vs. U.S.

That trend could hamstring Apple in the long run, making future acquisitions more difficult. While the company has not offered dividends nor bought back stock in many years, if ever, those two strategies would also be harder to execute with less domestic cash.

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Comments

skipaq

Wouldn’t mind having that problem. smile

Terrin

I am sorry, but Apple benefits much more than regular folks from US foreign operations, which cost billions of dollars a year. Accordingly, it makes sense Apple, and other companies, would pay a significant tax for repatriating the money that they have been able to make because of US foreign policy.

Any tax reductions for companies result in either higher taxes for the rest of us, or a reduction in services for the rest of us.

Dorje Sylas

Hey look at that, it’s the App Store 30%. If you want to develop and sell in the walled garden called America ya gotta cough up the revenue share because running a country where you can heavly abuse patent law “API” aint cheap.

Bosco (Brad Hutchings)

Any tax reductions for companies result in either higher taxes for the rest of us, or a reduction in services for the rest of us.

Actually, that is quite incorrect. You’re assuming that all money has the same value, regardless of who is in possession of it. Yet, I bet you’d also claim that Apple is more innovative and makes better products than any other private enterprise, and presumably, the federal government.

But regardless, it is obviously less expensive for Apple to sit on its overseas capital and wait out corporate rate reform, which will come because the US’s corporate rate is completely non-competitive with the rest of the world, than to eat the tax bill today. It is a better use of money for Apple to invest in plant or development overseas than to repatriate the money and invest here, as Apple can then import the products of that investment with no tax bill.

But the strange irony here is how Apple basically did the same thing with its App Store policies (a 30% tax on content) that spurred development of its current main competition in tablet space, like the Kindle Fire.

Substance

Brad, do you read John’s Particle Debris column?  In his last post he points to an article that details how Apple never makes big acquistitions.  So I doubt that having that money off-shore affects that part of Apple’s operations.

What I would like to hear is why Apple has so much money off-shore (presumably, but not conclusively, to avoid taxes) when it would cost them so much to bring the money back home.  The Seeking Alpha article provides no such insights into those questions, just the type of reactionary analysis that any of us not knowledgeable in the financial sector could induce.

Bosco (Brad Hutchings)

@Substance: Apple sells product overseas, presumably at a profit. I think that’s all you need to know here to understand how they have such large offshore cash assets.

skipaq

Surely, everyone knows that many American based companies have cash held “offshore.” They make a product in country X and sell it in country Y paying all taxes due. Paying an additional tax just to transfer the money to the U.S. can be problematic. A company like Apple (many others as well) makes huge investments overseas. You really need to read about an issue before making some of these comments. The US should be doing things so that companies will want to bring their money here to invest in manufacturing and other things. Otherwise you can forget about the US competing with other countries for these dollars.

mhikl

We have choices: keep feeding the troll or ignore it for humane reasons, i.e.,  it will then have more time to take the pit and ferret for their walks.

Terrin

Terrin said:

Any tax reductions for companies result in either higher taxes for the rest of us, or a reduction in services for the rest of us.

Actually, that is quite incorrect.

You say that, but offer little to support your assertion. With that said, claiming Apple pays 30 percent is over simplifying the issue. Apple likely gets to deduct the US import tax from the taxes it pays abroad much the way americans who make income in different states can use the taxes in one state to offset the taxes paid in another. Moreover, the tax is only on strict profit. Apple gets to deduct foreign expenses.

In addition, it largely isn’t Apple, Inc. making the money overseas. It is Apple’s wholly owned foreign subsidiaries. Subsidiaries are treated as separate entities from the parent.

Finally, I am in the 28 percent bracket. Why is Apple crying about paying two percent more than me? Surely, it is benefiting from American foreign policy that allows it to make those dollars overseas more than I am.

“Taxes are what we pay for civilized society.” Winston Churchill

Bosco (Brad Hutchings)

Terrin: Apple would pay 35% tax straight up on repatriated profits, i.e. the money is has sitting in off-shore accounts. The fact that it has the money there and hasn’t brought it back home is evidence enough of my simple refutation of your claim. You’ve basically booked that 35% as revenue due the United States. In reality, it will simply wait out an adjustment to the corporate tax rate, even if it needs to wait a decade. In the meantime, that capital can build iPad factories in Brazil, etc.

If you want investment in America and jobs in America, don’t tax capital earned abroad that would like to come back in. It’s as simple as that. At the very least, tax it at a competitive rate, which is far below 35%. In the interest of “fairness”, the people who like taxing everything are just screwing all of us equally hard.

ctopher

I don’t think you can assume that Apple would bring it’s overseas cash to the USA if there was not tax burden. Why do they need to? Their growth is overseas, the money was earned overseas (I assume, maybe I shouldn’t?) so that’s where they might invest it.

5 plus billion is enough to build a new spaceship in California, pay the engineers and keep the data center humming. Never mind other business issues like import tariffs (from USA to wherever), labor costs, the decline of engineering education in the USA, the bad economy in the USA and Europe, etc. etc.

I don’t run Apple so I don’t really know where they make all of their money, but in my simple view, keeping their money where they earn it makes perfect sense, regardless of taxes. While I’m certain Apple has people watching tax rates and dictating whether money gets moved from one pot to another based on cost, I bet the big decisions are not made based on tax rates. They are based on the market.

ctopher

I can’t believe I used “it’s” as a possessive.

gnasher729

I am sorry, but Apple benefits much more than regular folks from US foreign operations, which cost billions of dollars a year. Accordingly, it makes sense Apple, and other companies, would pay a significant tax for repatriating the money that they have been able to make because of US foreign policy.

Excuse me, but how does Apple benefit from “US foreign operations which cost billions of dollars a year” when I buy a Mac or an iPhone from my local Apple Store, just outside London? I would think Apple benefits from infrastructure created with British taxpayers’ money, it benefits from the work of British employees, and of course it benefits from British customers. Apple’s subsidiary in the UK has already paid tax on their profits. The US government wants them to pay 35% for moving that money to the USA. So why would Apple do that?

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