Apple: borrowing to save 9,2 billion dollars of tax

Rather than repatriate its cash from abroad, Apple has decided to use borrowing to finance the purchase of 55 billion dollars of shares. The tax effect is the main reason.

Moody's Investment Services comes to engage in an interesting calculation on the reasons that led Apple to use the borrowing of 17 billion dollars to participate in the purchase of its own shares up to 55 billion dollars.

According to Gerald Granowsky, vice president of Moody, Apple should pay 308 million per year interest on 17 billion dollars of bonds that Cupertino company has issued.

A highly well received borrowing

Many have questioned why Apple was using this technique as the company does not have a penny of debt and sleeps on a liquid mountain of money (over 145 billion dollars). The reason is simply tax. Indeed, Moody's believes that the return of a portion of the money (more than 100 billion dollars abroad) to finance the redemption of the shares would have cost more than 9,2 billion dollars in taxes to pay the U.S. government. On the contrary, the fact of using borrowing allows him to deduct from income the interest on borrowings is approximately 100 million dollars per year. The result did not expect: the indebtedness were oversubscribed, many times, the quality of Apple's signature being the highest possible. 

Apple is one of the largest U.S. taxpayers

According to one Apple spokesman Steve Dowling, the manufacturer of "iBidules" would have paid 6 billion dollars in taxes for the 2012 tax year, or 1/40 th of taxes on corporate profits collected by the U.S. government. "That makes Apple one of the main contributor to corporation tax in the United States," says Dowling quoted by Bloomberg.