U.S. lawmakers called it an unprecedented exploitation of the American tax system. Wall Street didn’t seem to care.
Apple (NASDAQ: AAPL) CEO Tim Cook took the stand on Capitol Hill yesterday, defending his company’s knack for finding holes in the U.S. tax system. Apple has subsidiaries around the globe – some of which have no actual employees – in an effort to avoid paying the high U.S. tax rates.
From 2009-2012, the company shifted an estimated $74 billion overseas. One subsidiary in Ireland, called Apple Operations International, hasn’t paid taxes in five years. It generated $30 billion in revenue over the last four years.
Congress is outraged by Apple’s “tax avoidance.” John McCain labeled them “among America’s largest tax avoiders.” But Apple hasn’t broken any laws.
So while the average America may share Congress’ outrage, the average investor hasn’t seemed to care.
Apple shares were down only slightly yesterday as Cook testified before a Senate subcommittee on investigations. Today the stock has vaulted 2% higher.
If anything, investors are likely impressed with Apple’s creativity in finding tax loopholes and holding to its cash.
Some investors had accused Apple of being stingy with its shareholders by hanging on to so much of its $145 billion cash stockpile. But the company recently vowed to return $100 billion to shareholders over the next three years in the form of dividends and share buybacks.
However, they won’t do so by bringing their overseas money back to the States and subjecting it to America’s 40% corporate tax rate. Instead, the company took on $17 billion in debt – thus saving themselves another $23 billion.
Slippery? Yes. Unethical? Perhaps. Smart and perfectly legal? Absolutely.
Wall Street has never been accused of being a bastion of morality. That’s why investors don’t seem to care that the largest company in the world is a “tax avoider.”