Comment: Taxman’s few crumbs of comfort from Apple

Gareth Mackie
Gareth Mackie
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THERE’S a hilarious passage in Tom Wolfe’s Bonfire of the Vanities in which bond trader and self-proclaimed “master of the universe” Sherman McCoy tries, and fails, to explain to his daughter what he does for a living.

Eventually his wife steps in to help, using the analogy of cake: daddy and his colleagues get to keep some crumbs each time a slice changes hands.

Well, there will be plenty of crumbs on the tables at Deutsche Bank and Goldman Sachs after they led the book-running for Apple’s bumper $17 billion (£10.9bn) bond issue, the largest offering of its kind and one which saw demand far outstrip supply.

But the iPad and iPhone maker is already sitting on a cash pile of $145bn, which is more than enough to fund the $60bn share buy-back programme and 15 per cent dividend hike that it unveiled last week. So why the need to tap into the debt market?

It all comes down to tax. About two-third of Apple’s cash sits in accounts outside the US, and bringing it back home would result in a hefty tax bill. The technological titan is also taking advantage of record low interest rates, which allow it to borrow astronomical sums of money at rates that won’t frighten the investors. And raising the funds through a bond sale brings even more benefits, because interest payments on corporate debts are tax deductible.

A shrewd move indeed, but one that may prompt further questions about the approach to taxation adopted by a company that has grown incredibly rich by convincing western consumers that they really need the latest iteration of a Chinese-made gadget they bought just last year.

Apple’s pre-tax earnings outside the US jumped more than 50 per cent to $36.8bn in the year to 29 September, but its overseas tax rate fell to just 1.9 per cent. That compares with a global average corporation tax rate of more than 24 per cent.

With competition from the likes of Samsung intensifying and a share price about 35 per cent below last September’s $705 peak, Apple’s desire to trim its bills is understandable, but it risks being tarred with the same brush as Google and Starbucks if it keeps passing crumbs to the taxman.

Tablets replace Argos’s iconic little pens

Apple didn’t invent the tablet computer, but the market has been transformed since the launch of the first iPad, which this month celebrates its third anniversary of European sales.

In those few short years the mobile computing market has expanded rapidly, with all manner of rivals hoping to catch Apple’s wave. This growth helped catalogue store Argos deliver a 1.5 per cent increase in sales to £3.9bn last year as customers not only snapped up the devices but used their tablets to shop from home. Now the chain, owned by Home Retail Group, has unveiled plans for a “digital catalogue” to replace the well-thumbed laminated paper ones in its stores.

The company is also trialling in-branch wi-fi so shoppers can place their orders directly from their smartphone or tablet, along with “fast-track” collection points for goods bought over the internet.

Argos was never one for customer interaction, preferring to keep most of its staff hidden from view in the storerooms, but with self-service checkouts becoming ubiquitous in supermarkets – and even in libraries as I discovered when visiting Edinburgh’s central branch for the first time in many years – this could mark the beginning of the end for one of the retail sector’s most iconic items: the little Argos pen.