Firm re­sists bring­ing money back to US due to tax dis­in­cen­tives

New Straits Times - - Business -


IT is a sign of Ap­ple’s suc­cess but also a thorny prob­lem: its cash stock­pile has hit a stag­ger­ing US$256.8 bil­lion (RM1.11 tril­lion), spark­ing de­bate on what do with such mas­sive re­serves.

Ap­ple’s quar­terly re­port on Tues­day showed its cash hold­ings — the vast ma­jor­ity held over­seas — jumped to a sum that topped the en­tire eco­nomic out­put of Chile.

The tech gi­ant has re­sisted the idea of bring­ing the cash home, be­cause of dis­in­cen­tives in the United States tax code — it al­lows multi­na­tional firms to de­fer prof­its while they are held over­seas, but taxes in­come at up to 35 per cent when repa­tri­ated.

Pro­pos­als by Pres­i­dent Don­ald Trump and law­mak­ers could lower the tax rate for repa­tri­ated earn­ings, an in­cen­tive for Ap­ple and oth­ers to put the money to work in the US.

“There’s some­thing not quite healthy about it (the cash hoard),” said Roger Kay, End­point Tech­nolo­gies As­so­ci­ates’ an­a­lyst. “Nor­mally, you would ex­pect cash to fund in­vest­ment op­por­tu­ni­ties, but ob­vi­ously Ap­ple doesn’t have any use for that much cash.”

Ap­ple has be­come the most valu­able and prof­itable firm of the cur­rent era. But the unique chal­lenges it faces be­cause its earn­ings come mostly from the iPhone, which faces in­creas­ingly tough com­pe­ti­tion.

Ap­ple faces pe­ri­odic pres­sure to return more cash to share­hold­ers with higher div­i­dends and more share buy­backs, and has al­ready spent some US$200 bil­lion do­ing this.

On Tues­day, Ap­ple re­ported a rise in quar­terly profit but its shares took a hit from weaker iPhone sales ahead of a 10-year­an­niver­sary model on the hori­zon. Profit climbed 4.9 per cent to slightly more than US$11 bil­lion on rev­enue ris­ing 4.6 per cent to US$52.9 bil­lion.

Its shares were down nearly two per cent to US$144.94 in af­ter­mar­ket trades that fol­lowed re­lease of the earn­ings fig­ures. Agen­cies


Ap­ple’s quar­terly re­port shows its cash hold­ings have jumped to a sum that tops the en­tire eco­nomic out­put of Chile.

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