“When tax reform is finally discussed, a cash repatriation holiday will be a priority second only to corporate tax cuts” Stephen Guilfoyle writes for TheStreet. “More than $1 trillion is held overseas by the 50 U.S. companies that have hoarded the most cash abroad. Who headlines this list? Only the likes of Apple, Microsoft, Alphabet, Oracle and many others.”
“Tech names all? Well, at least half of all that dough, anyway. To avoid oversized domestic taxes, these firms have left their profits in place where they were earned, and funded capital expenses through the debt markets. That’s where your buybacks and dividends have come from,” Guilfoyle writes. “Taking more than a 30% haircut on profits… and Tim Cook figures it’s more like 40% after state taxes are factored in, just makes no sense. So cash builds, and velocity slows. Remedy this, and these stocks will continue to outperform. You get the gist. The Trump administration has asked for a 10% repatriation holiday. A rate higher than that may just support the status quo.”
“Someday that cash comes home,” Guilfoyle writes. “Someday may seem like a long way off. I want to be long this space on that day, but that’s just me.”
Read more in the full article here.
MacDailyNews Take: As we wrote back in April: “We’ll see where it all ends up (the corporate tax rate won’t end up being 15%, but it may end up being 20-25%, which is certainly better than the stifling 35% it is now). As we’ve been saying for many years now, the U.S. corporate tax rate is way too high. Obviously.”
Under the current U.S. corporate tax system, it would be very expensive to repatriate that cash. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free flow of capital… Apple has always believed in the simple, not the complex. You can see it in our products and the way we conduct ourselves. It is in this spirit that we recommend a dramatic simplification of the corporate tax code. This reform should be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the U.S. We make this recommendation with our eyes wide open, realizing this would likely increase Apple’s U.S. taxes. But we strongly believe such comprehensive reform would be fair to all taxpayers, would keep America globally competitive and would promote U.S. economic growth. – Apple CEO Tim Cook, May 21, 2013
SEE ALSO:
President Trump’s tax reform plan includes deep cuts in corporate taxes – April 26, 2017
Apple could be primed for profit explosion under President Trump’s big tax cut – April 26, 2017
Analyst: Apple could double dividend, buy Netflix with repatriated cash under President Trump’s U.S. corporate tax changes – March 17, 2017
Apple raises $10 billion in debt ahead of President Trump’s repatriation tax plans – February 3, 2017
After Apple’s blowout earnings, the Street looks toward ‘iPhone X’ and President Trump’s tax reforms – February 3, 2017
President-elect Trump’s corporate tax reform expected to have some positive impact on Apple EPS – January 14, 2017
Exploring Apple’s tax situation under U.S. President Donald Trump – November 21, 2016
Morgan Stanley: Apple stands to benefit the most from President Trump’s corporate tax plans – November 11, 2016
Apple and U.S. President-elect Trump: Can a tax cut for overseas cash heal wounds? – November 10, 2016
Donald Trump plan calls for cuts in corporate taxes, personal income tax rates – August 9, 2016
Barring a tax holiday, Apple will need to raise over $50 billion in debt the next 2 years – July 15, 2016
Cramer: Apple’s Tim Cook is ‘patriotic’ on taxes – December 21, 2015
Apple CEO Tim Cook is absolutely right – and wrong – on U.S. corporate tax policy – December 20, 2015
Apple CEO calls corporate tax rap ‘total political crap’ – December 18, 2015
Apple avoids $59.2 billion U.S. tax bill – October 7, 2015
U.S. companies now have $2.1 trillion overseas to avoid corporate taxes – March 4, 2015