How Apple will win (and lose) under President Trump’s tax cuts
“The Republican tax bill now awaiting President Trump’s signature has two major pieces of good news for America’s most valuable company, Apple: It cuts the corporate income tax to 21 percent, and creates a cash repatriation holiday, allowing the company to bring tens of billions of dollars stashed overseas back into the U.S. under a lower rate,” Luke Stangel reports for The Silicon Valley Business Journal.
“But a key provision in the tax bill challenges Apple’s longstanding practice of holding intellectual property in foreign subsidiaries, a decision the company has relied on for decades to reduce its overall corporate tax rate,” Stangel reports. “And, it appears Republicans didn’t design an easy way for Apple to transfer that intellectual property back to Cupertino.”
“For years, Apple CEO Tim Cook has lobbied federal lawmakers to reduce taxes across the board, particularly on the more than $250 billion in cash the company holds in its foreign subsidiaries. Under the Republican tax plan, Apple would pay a one-time tax of 15.5 percent to repatriate its cash reserves. After that, companies would pay taxes of at least 10.5 percent on repatriated cash, but would be able to deduct foreign taxes already paid on the money, effectively lowering the repatriation rate to zero,” Stangel reports. “Going forward, reducing the national corporate tax rate from 35 percent to 21 percent will also help Apple’s bottom line.”
MacDailyNews Note:
Apple CEO Tim Cook and U.S. President Donald Trump at tech summit in JuneUnder 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
MacDailyNews Take: There needs to be a way for companies to bring internationally-held patents back into the U.S. without exorbitant taxation, if lawmakers desire to disincentivize companies from holding patents overseas.
