EBay to Pay $3 Billion in Taxes to Release $6 Billion for Acquisitions
Published on: 30th Apr 2014
By: Ian Mansfield
USA based ecommerce giant eBay has announced that it will repatriate USD9 billion of cash that it has sitting in overseas bank accounts as it prepares for a wave of acquisitions.
A large number of US firms keep much of their overseas profits in overseas bank accounts as they pay a tax whenever the money is returned to the headoffice in the USA.
eBay said that it expects to pay USD3 billion in tax when it repatriates the money, but that still leaves it with USD6 billion to spend on acquisitions.
The move is contrary to actions at, for example, Apple which has nearly USD160 billion in cash held offshore, but finds it cheaper to raise money in debt for US purposes than to pay tax on pulling back the cash.
However, eBay's CEO said that the company can make better use of the cash by bringing it into the US market than leaving it overseas.
"If you look at our last 15 acquisitions, my guess is ten have been inside the US, maybe 11," John Donahoe said. "Just looking at that versus where our cash is located, you just say, alright it would make more sense to have more cash in the US for mergers and acquisitions."
The company made the announcement as it released its financial results, where it posted a 14 percent rise in revenues, but warned of expected weaker revenues for the current quarter.
It also posted a net loss of USD2.3 billion -- due to the expected US$3 billion tax bill from bringing home the overseas cash. That's a tax loss that it can later use to offset profits though, so the net impact on the company will be lower over time.
Despite the cash war chest for acquisitions, the company's shares fell on the weaker outlook.