“Apple currently has an estimated $215 billion in cash held outside the borders of the United States. For years, this cash has been building up due to the company’s massive success in global sales,” Kumquat Research writes for Seeking Alpha. “However, U.S. tax law states that profits American-based corporations earn beyond the country’s borders are to be taxed at the U.S. corporate tax rate of 35% when those profits are brought back to the states, or repatriated.”
“Many companies think this is a unfair tax policy and so it has become common practice for large corporations to keep cash earned overseas ‘indefinitely reinvested’ to avoid paying the 35% tax. Apple’s cash pile accounts for close to 10% of the more than $2 trillion in profits U.S. corporations currently hold offshore, so repatriation tax reform that allows Apple to bring its cash home should be seen as a huge positive catalyst for AAPL shares should reform actually come to pass,” Kumquat Research writes. “Is this likely to happen anytime soon? I think it will.”
“Both presidential candidates Hillary Clinton and Donald Trump have proposed massive infrastructure spending on a scale that candidates haven’t proposed in a long while. Infrastructure has never been sexy, but now it has come into the spotlight as the crumbling nature of America’s roads, bridges, tunnels and other structures have become abundantly clear,” Kumquat Research writes. “Clinton has proposed $275 billion in infrastructure spending and Trump has proposed more than double that. How do they propose to pay for this spending? Trump has explicitly mentioned repatriation while Clinton has discussed business tax reform, likely an implicit reference to repatriation.”
It is the best interest of “both Democrats and Republicans in Congress, to get repatriation reform done as quickly as possible so that other countries cannot make claims to the overseas cash of corporations that would pay U.S. taxes if they weren’t so high,” Kumquat Research writes. “With this catalyst and the need for funds to spend on infrastructure, repatriation reform seems imminent. Once it happens, the influx of cash for Apple will be a huge boon for the company and stock as well.”
Read more in the full article here.
MacDailyNews Take: Again, if the EU demands so-called “back taxes” from Apple, it’ll be based invisible legal grounds since the company simply followed the law when paying their taxes:
There was no special deal that we cut with Ireland. We simply followed the laws in the country over the 35 years that we have been in Ireland. If the question is, was there ever a ‘quid pro quo’ that we were trying to strike with the Irish government – that was never the case. We’ve always been very transparent with the Irish government that we wanted to be a good corporate citizen… If countries change the tax laws, we will abide by the new laws and we will pay taxes according to those laws. – Apple CFO Luca Maestri
As we wrote back in April: Apple has repeatedly and confidently stated that they didn’t do anything that was against the law. Therefore, unless the EC tries to change the law retroactively, if that’s even possible, or tries to collect taxes retroactively in some other fashion, Apple is in the clear.
U.S. government warns EU: Do not hit Apple with a massive back tax bill – or else – August 25, 2016
European Commission denies anti-U.S. bias after U.S. Treasury intervention over Apple, Amazon tax probes – August 25, 2016