It feels like when I'm trying to get a loan for a car and they won't give it to me because I haven't had a "steady job" for long enough, despite the fact I could buy it in cash with money for my side gigs, or put the whole thing on credit cards if I wanted to. It's two institutions whose values just don't jive.
Regardless, there's a lot of work in analyzing "risk" that has nothing to do with assets. Pull up a list of the most successful tech companies in the world 30 years ago. How many of them look like "AAA" bets today? Do HP or IBM look like solid borrowers in hindsight? At least (I don't think) they never defaulted on a bond. How about DEC or SGI? Even Apple Computer itself went through some pretty lean years where it looked like a pretty bad loan risk during that period.
The point is that companies aren't like economies that can sustain themselves on scale alone. You just can't tell what market conditions (or just plain mismanagement) lie in Apple's future.
In practice this doesn't happen because large single-item purchases should be denied, especially if they're unusual. If you generally spend $500 of your $10,000 limit on an average of 20 different items, and suddenly try to put one $5,000 item on your credit card without calling your bank ahead of time, it probably won't go through. Source: I worked at a credit card risk department at a major bank.
PNC Bank wouldn't give me a $10,000 loan to refinance my 6% car loan down to 2%. American Express continues to keep my Platinum Card open with over $75K in available credit. I make well into the $200K/year range.
Risk analysis? Hah.
EDIT: I have the $10K sitting in a PNC savings vehicle, and was still denied.
Also, there's some serious caveats and differences here. If it IS a charge card, you'll have to pay it off within 60 days. If you don't, you'll definitely see some adverse action from Amex not to mention a HIGH apr. Even if it is a revolving card like the Amex Skymiles Plat or the MB Plat, if you start revolving a 5-figure balance Amex will most likely investigate and you could get investigated (a request for your 1040's) and/or see some adverse action.
Finally, Amex has a lot more sophisticated risk models than other lenders, because they have to. I can charge as much on my Amex PR Gold card as all of my other credit limits combined -- just about $100k. They aren't as Fico reliant.
Have you seen your Fico scores recently? (There are about a dozen different true Fico scores, and endless knockoffs that are useless). If you've seen your Fico from something like MyFico.com and it's over 700 you could still have a problem with the Auto Enhanced Fico product that many lenders use for auto loans. That scoring model emphasizes installment loan history which it seems is your sore spot.
If I were you I'd head over to CreditBoards.com and learn how to clean up the negative info on your reports and get your auto loan problem fixed up.
Until the US misses a debt payment, it should still have maintained its credit rating.
Part of the problem is that banks often have to build their models off of data that isn't sufficiently granular. For example, most banks don't have the ability to distinguish between someone who misses a utility payment because they're absent-minded vs. someone who misses a payment because they're short on cash. Regulations compound the difficulty to some extent, but it's really primarily a data/technology problem at this point.
How can it be considered "successful tax planning" when 70% of their profits are sitting overseas and basically UNUSABLE?
I get it, they don't want to pay taxes on it. Well, isn't paying your fair share of taxes on it and then getting to use it better than it just sitting overseas not doing anything?
Are they waiting for a tax holiday? Is there some other strategy here that I'm missing? Why are they content with just leaving their money overseas where they can't do anything useful with it?
Some asymco articles on their capital spending (almost all of which is outside of the US):
Apple's problem is that they make so much in profits that anything they do ends up not making much of a dent.
My suspicion is that the current "we will manufacture in the US" has to do something with it (Both Google and Apple have announced plans for this), probably some kind of agreement in Washington about capital expenditures being exempt for taxes.
I don't think this is poor planning. International sales grew fest and they found themselves in this situation. If you ask in any other country (esp. in Europe) they'll probably tell you that that money shouldn't be taxed in the US as it was made by selling products on local markets and siphoned away using financial tactics that are frowned upon (selling straight from Ireland, usually).
Is the only reason they're waiting because they think there will be a tax holiday? Or is there more to it than that?
One of the things I learned working on freemium games is that if you have too many sales, then people will only buy when there is a sale. I hope the US Govt has learned that lesson and never does another Tax Holiday.
About two-thirds of Apple’s cash — about $102 billion — sits overseas in lower-tax jurisdictions. If it returned some of that cash to the United States to reward its investors, the company could have significant tax consequences.
As a private tax payer - the IRS would have no problem calling this a tax-aviodance "scheme" - and hit me with a big tax bill and penalties.
That's not actually true. If you could figure out a way to make your salary accrue overseas, you could shift it to a low-tax jurisdiction too. The IRS is actually very anal-retentive about following the letter of the law, and doesn't just capriciously decide to treat the same situation differently depending on who is on the other side of the table.
The difference is not that the law is designed to benefit big corporations, or that big corporations don't follow the law, it's that big corporations with international presences have a more complex tax situation than you do, which they can leverage to minimize their tax liability (in the face of tax haven jurisdictions).
There is pretty much no doubt that everything you earn as a salaried employee in California ought to be taxed by California and the U.S. But if you're a multi-national corporation, why should the U.S. collect taxes on all of your income when part of it may be due to, say, a product made in China being sold to someone living in the UK?
As an individual US resident, however, you are taxed globally. The equivalent action to Apple here would be having your corporation take a loan out to pay your salary for work performed (products sold) in Germany (for example). The profits stay in Germany; the corp avoids taxes (hopefully more than the loan interest), but you still pay your individual rate.
(IANAL, just my experience as a consultant with a few foreign corps)
Now, Apple's cash takes quite a (currently legal) trip around the world, but the basic principal is the same.
You can receive a credit for foreign taxes paid but its not always 100%. US There is an exemption if you actually reside overseas for a period (aka. Foreign Earned Income Credit) but the cap is small, maybe $100k or so.
Apple is dealing with a different area, that of foreign subsidiary corporate profits. Repatriating that money to the parent means the parent is recognizing the earnings of the foreign subsidiary for tax purposes.
The worry recently (as the IRS has been cracking down as of late) is any re-entry to the US with a US passport would lead to a massive tax bill for all foreign income over the past 40 years. Or for Canadians living in Florida who never declared their Canadian retirement funds. Fortunately the IRS offered amnesty in 2008-2010 to most to "come clean and get no penalties".
You paid more tax than Facebook this year!
Unfortunately, the obligations of a corporation are such that they have to maximize profits. Avoiding taxes in those ways is not illegal, so big corporations are obligated to do it.
Couldn't the shareholders dismiss the Board of Directors if they deem they are making decisions that are not in the best interest of the share price?
Let's be honest, if Facebook decided to give back their $430 million tax credit and pay 40% on their $1.1 billion of profit, their share price would take a major dive.
Do you think the board would not be dismissed?
(Same goes for Apple, Google, etc. etc.)
The maximize profit argument is not an absolute imperative, and is often used to justify bad behaviour.
What happens when you don't sold your product in the US? Why does the profit of Apple selling an iPad in UK have to result in them paying taxes in US instead on UK?
Why does Apple Operating Europe (Cork, Ireland, 100% owned by Apple Inc. but not operated in the US) has to pay them?
I really understand and adhere to the basic idea you are trying to defend but it's just not so simple with multinationals (Apple or any other), especially if the regulatory system leaves enough holes for them to make structures like this.
Well I just read the article and I was pretty sure that's exactly what it said. Maybe I'm misunderstanding what you're saying?
EDIT: For reference, straight from the article:
"By raising cheap debt for the shareholder payouts, Apple will also avoid a potentially big tax hit. About two-thirds of Apple’s cash — about $102 billion — sits overseas in lower-tax jurisdictions. If it returned some of that cash to the United States to reward its investors, the company could have significant tax consequences."
“By raising cheap debt for the shareholder payouts, Apple will also avoid a potentially big tax hit. About two-thirds of Apple’s cash — about $102 billion — sits overseas in lower-tax jurisdictions. If it returned some of that cash to the United States to reward its investors, the company could have significant tax consequences.”
Is this the start of a decline? Apple loosing profit margins instead of focusing on high-margin products?
Is this the start of a decline? Apple too busy with domestic consumers instead of focusing on the pro market?
Is this the start of a decline? Apple too busy with iPad instead of focusing on the iPhone, his best seller?
Is this the start of a decline? Apple too busy on hardware instead of focusing on services?
etc, etc, etc...
I don't get the doom and gloom surrounding Apple lately. As much as I find John Gruber irritating lately I find myself agreeing with this observation: No matter what Apple does, it seems wrong and it's setting the course of its own demise.
And after that rant... Why is this a hint of the company being more interested in the finance games than in products? Seems to me that its just a decision made by the CFO, that, as usual, is being given too much attention because the company behind it.
However, Tim Cook hinted at the introduction of a new product category in the coming year. http://allthingsd.com/20130424/apple-has-amazing-stuff-comin...
In all serious, no it is not. It's a tax efficient method of getting value to the shareholders whilst still maintaining a massive cash hoard, that's all.