I keep hearing this argument that companies won't repatriate offshore cash until they can do so at an arbitrarily low tax rate. What I don't understand is why they wouldn't continue to do what they have been doing:
- borrow in the US, potentially by issuing low-rate bonds
- use the cash to fund dividends or acquisitions
- OR using stock to fund acquisitions
It seems this gameplan would hold up until effective interest rates on blue-chip corporate debt are higher than the proposed repatriation tax. Apple offered 3.25% on its most recent bond issue, so it would seem that a 10% tax on repatriation would not be attractive.
- borrow in the US, potentially by issuing low-rate bonds - use the cash to fund dividends or acquisitions - OR using stock to fund acquisitions
It seems this gameplan would hold up until effective interest rates on blue-chip corporate debt are higher than the proposed repatriation tax. Apple offered 3.25% on its most recent bond issue, so it would seem that a 10% tax on repatriation would not be attractive.
What am I missing?