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Jun 9, 2013

If it is good for Apple why isn't it Good for your Company

If it is good for China, then, why isn’t it good for your company as well. You might even argue that Apple has billions of dollars and lots of cash and can spend money on high priced lawyers and accountants and you can’t. Well, that is true and they do spend a lot of money on lawyers and accountants, but what is untrue is that you can.

Some of you might remember 2008, just before the economic crisis and shortly after George W. Bush pushed through sweeping changes in the U.S. Bankruptcy laws, Haliburton moved their corporate headquarters out of the U.S. to Dubai.

This didn’t just mean they moved their physical address, which they did, they also changed the jurisdiction of their incorporation. Why did they do this? Simple, Dubai has very low, if any Corporate taxes and Haliburton can be shielded from paying those taxes, from the onerous restrictions of the Foreign Corrupt Practices Act, and from liabilities that they would otherwise be subject to under U.S. law. “Well, that doesn’t sound fair,” you might say. Fair or unfair it is completely legal and companies do it all the time.

I have been promoting Hong Kong as one of the best jurisdictions in the world for protecting your assets and for legally paying less taxes and in fact in the annual Report on Economic Freedom Hong Kong is regularly ranked number 1, well ahead of the U.S.

I often wonder why U.S. individuals and companies that do business in Asia and Europe would not want to incorporate in Hong Kong and invoice out of Hong Kong and instead prefer to generate revenue in a tax system that is wasteful and takes more half of their income. It doesn’t make sense.

So, I thought I would share the below article from Zero Hedge and share it with you and hope it is enlightening. Apple and Taxes Confused why AAPL is opting for the dividend recap route (as we predicted it would in January )?

Simple: as the first chart below reminds us, as of December 31, nearly 70% of the company’s total cash, which has grown to a record $145 billion in the current quarter, was held offshore. This means that if AAPL wanted to repatriate this $100 billion or so in cash, it would have to pay Federal tax on it, amounting to dozens of billions in remittances to Uncle Sam as this is cash which AAPL does not have full access to for US based operations.

Hence: it has opted to raise cash by issuing debt instead of repatriating its cash. Which brings up an interesting point. As we have shown in the past, perhaps the one thing Tim Cook’s company has loathed more than anything in the past, is to pay taxes, which is why it has some of the most convoluted legal tax shelters imaginable. Indeed, in the current quarter, according to the company’s cash flow statement, a tiny $2.4 billion was paid in cash taxes. Putting this number in perspective, the company had an operating profit of $12.4 billion. Or, cumulatively, since December 2008, AAPL has generated a grand total of $149 billion in operating profit, while paying just $21 billion in total taxes. Is it apparent now why some $100 billion in Apple cash is not fully recourse to the company? Unless, of course, AAPL decides to follow Gerard Depardieu’s example, and run away into the tax-amnesty friendly steppes of Russia, where it will be free to do as it wishes with all of its cash…

Read the Article with all the cool graphs.

by Frank Caruso