“Apple will see as much as $47 billion slashed from its expected tax liability if Republicans push through their current tax plan, making it the biggest beneficiary of the legislation now working its way through Congress,” Richard Waters and Tom Braithwaite report for Financial Times. “The massive scale of the tax cut, based on calculations by tax experts and the Financial Times, has come into focus in recent days as the Senate and House bills have converged over their treatment of the estimated $1.3tn of cash American companies hold offshore. The details of the tax legislation have yet to be finalised.”
“Like many US companies, Apple has opted to leave the bulk of its overseas earnings abroad rather than pay the 35 per cent corporate tax rate that would apply if the money were brought home under the current regime,” Waters and Braithwaite report. “The Republican proposals call for taxing that money at rates of no more than 14.5 per cent, whether or not it is returned home.”
“Apple has $252bn in foreign cash and investments, about a fifth of the total overseas holdings for all US companies, according to rating agency Moody’s,” Waters and Braithwaite report. “It estimates that it would have to pay $78.6bn in taxes if it brought the money back under the current regime. Under the Senate version of the tax bill, Apple would immediately have to pay an estimated $31.4bn on its past overseas earnings, according to Richard Harvey, a tax professor at Villanova University who has testified before the Senate on Apple’s tax affairs. That number would drop to $29.3bn if the company were to lose its fight with the European Commission over a €13bn claim of back taxes in Ireland.”
“The difference between the two numbers is at least $47bn, a figure that exceeds the annual profits of any other US company,” Waters and Braithwaite report. “Unlike most other US multinationals, Apple has already taken billions of dollars of charges in past years to reflect its potential taxes. It has set aside $36.4bn for those bills — more than the tax charge it is now likely to face — and would likely record the difference as a one-off profit.”
Read more in the full article here.
MacDailyNews Take: Again, we’ll have to wait for the final bill and see the actual rates and details. It would certainly be an excellent development, and long overdue, if the U.S. can modernize/simplify U.S. corporate and personal taxation and come up with a workable solution that benefits the country, U.S. companies and their many millions of employees.
As we’ve been saying for many years now, the U.S. corporate tax rate is obviously way too high and exceedingly anachronistic.
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
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