After announcing record-breaking results in the last quarter of 2014, Apple is proceeding with bond lending (and for the first time in euros, with Deutsche Bank and Goldman Sachs involved), primarily to cover the needs of the share buyback program and dividend distribution.
The seemingly oxymoron of the matter, apart from the given ease and the very favorable terms on which a company with Apple (it exceeds 691 billion dollars) can borrow, is due, on the one hand, to the necessary financial leverage, and, on the other hand, to the fact that most of the enormous cash reserves of 178 billion are located in tax havens.
Repatriation to the US of part of these funds, in order to cover current needs, naturally requires taxation that reaches 35%, which Apple systematically avoids, despite the negative publicity it occasionally receives on the matter.
The same strategy is also followed by many other multinational companies, as well as other tech giants, with thriving economic sizes.
According to Bloomberg, two American senators, Republican Rand Paul and Democrat Barbara Boxer, proposed a plan for a drastic tax cut to 6.5% in the event that companies like Apple wish to repatriate capital from abroad. They also propose that the money that could be raised from taxation be allocated exclusively for infrastructure development.
However, even if such a plan were to proceed, Apple and any other American companies would not be able to use these funds for share buybacks and dividend payouts. According to the plan, the money would be allowed to be allocated to Research and Development or acquisitions, with the aim of boosting the American economy. It is clarified, however, that under no circumstances would the minimally taxed funds be permitted to be spent on covering benefits for executives and the payment of bonuses.
In any case, this plan is not expected to have much luck, as a study by American federal tax authorities reveals that in the past, when similar tax incentive programs for the repatriation of capital were implemented again, many of the companies that used them did not avoid job cuts and the reduction of investment in Research and Development.
Source: Proto Thema
