If Apple had used its overseas cash to fund this return of capital, the funds would have been diminished by the very high corporate US tax rate of 35% (less applicable foreign credits). By contrast, given today's historically low interest rates, issuing debt at a cost of less than 2% is much more advantageous for the Company's shareholders. Because Apple was able to borrow at a cost lower than the cost of its equity, issuing debt lowered Apple's overall cost of capital.
There is nary a bombshell in sight in the company's testimony, to my admittedly layperson's eyes. But perhaps the most interesting point is the final section, in which the company lays out its vision for corporate tax reform, which it describes as stemming from its belief "in the simple, not the complex." As such, it offers four points of reform: first, the system should be revenue neutral; second, it should eliminate corporate tax expenditures; third, it should lower corporate income tax rates; and finally, it should implement a "reasonable" tax to repatriate those foreign earnings.
Apple acknowledges that such an overhaul may mean it pays more, but says that it prefers an "overall improvement in efficiency, flexibility and competitiveness." And, moreover, the company believes that the new system it lays out could bolster the country's economy and help create new jobs.
Apple's CEO will probably face questions from the subcommittee members after his prepared testimony on Tuesday, but don't expect him to diverge substantially from the matter at hand: Even senators attempting to coax out details of Apple's forthcoming products are unlikely to get Cook to stray.
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