“Given current speculation on tax reform in the U.S., analysts predict that with all other factors unchanged Apple will see a negative impact on its cash hoard because of a repatriation tax, and an increase on taxes paid to import manufactured goods from China, but an overall slight uptick on earnings per share as a result of all factors,” Mike Wuerthele reports for AppleInsider.
“Apple’s expected overall tax rate is expected to fall to 20% versus the current 35% as a result of the ‘blueprint’ [see link below],” Wuerthele reports. “So, after reform, If the phone were manufactured in the US, the taxable income remains the same at $280, but the lower effective tax rate drops the owed taxes to $56. If the iPhone continues to be manufactured in China, the entire $700 is taxable, but at the lower 20%, ending up in an effective tax on the phone of $140.”
“A proposed repatriation tax of 8.75 percent will cause a slight hit on cash on hand on the books,” Wuerthele reports. “However, the positive impact on earnings per share based on deferred tax liability on the overseas cash no longer making as much of an impact on Apple’s earnings is expected to drive Apple’s earnings per share up, offsetting the complex import tax situation.”
“The tax reform proposal, entitled ‘A Better Way‘ was published at the height of the election process on June 24, 2016,” Wuerthele reports. “It promises simplification of the tax code, and a broadening of the taxable base, alongside a reduction in effective tax rates overall.”
Read more in the full article here.
MacDailyNews Note: “A Better Way” is a proposal from Paul Ryan, the Speaker of the U.S. House of Representatives, and covers: Poverty, National Security, The Economy, The Constitution, Health Care, and Tax Reform. As Wuerthele explains, “Specific figures and any benefits spelled out by the plan are expected to change.”