Tuesday, April 29, 2014

Why No Outrage Over Apple's Big Bond Deal?

If you borrow the money to buy back your stock and to pay dividends and bonuses it is tax deductible.  If  you sell product and make profits and then buy back stock and pay dividends, it is taxable.  Which would you do?

From Bloomberg:

 The interest payments on the bonds will be tax-deductible. All of
this works out nicely for Apple shareholders. Ordinary Americans can
only dream of being able to enjoy such wondrous tax efficiency.

As Floyd Norris of the New York Times wrote in a column
about a year ago: "Isn't that nice of the government? Borrow money to
avoid paying taxes, and reduce your tax bill even further." He also
posed this question: "Could this become the incident that brings on
public outrage over our inequitable corporate tax system?"Considering that Apple is about to do another $17 billion bond deal of this sort, it would seem we have an answer: No.


Why No Outrage Over Apple's Big Bond Deal? - Bloomberg View


  1. what a shame when big shots like apple get away without paying billion dollars of corporate income tax as a strategy to maximize profit. in either case, apple should borrow money in their own right but also pay all taxes associated with their income.

  2. I agree it's a shame, but I don't think it'd be fair to blame Apple or any other major corporation that takes advantage of loopholes like these in the tax system. Apple is maximizing shareholder value by pursuing these strategies, and that is one of the fundamental purposes of a company according to traditional theory. The problem in my opinion is why these loopholes exist at all. Outrage against Apple, I think would be misdirected. Outrage about the loopholes, however, is more appropriate in my opinion.

  3. Sanjay you beat me to it, I agree with everything you just posted. Apple is acting exactly as they should be expected to. The problem is with the tax structure.

  4. I agree with both Sanjay and Joe. I would have probably done the same thing if I was in such situation. The weak tax structure is only giving incentive to the big corporation to act in a similar way as apple did over here. The focus should be on strengthening the loopholes rather than pointing out who is taking advantage of such loopholes.