Apple is going to repatriate offshore profits to the US in 2017 through paying billions of dollars in deferred taxes to the US Treasury. Tom Cook provided a summary of Apple’s 2014 tax affairs, citing the Irish and US taxes as $400M each. He provisioned several billion for the US for payment as soon as Apple repatriated. However, this revelation came as a surprise due to Apple’s previous refusal to countenance such a move.
Apple is no different from many US multinationals, who have for decades been pooling their non-US profits outside of the US. Exploiting loopholes in the tax laws, tech giants can defer US taxes continually so long as income is not repatriated to the US. Apple’s cash held offshore is $214.8bn, which is the largest of any American company.
Apple was recently accused by the European Commission of receiving state aid from Ireland, and immediately took a decision to repatriate foreign profits. The European regulators claimed that Apple’s Irish-registered companies were allowed to pass billions of income untaxed. However, both Apple and Ireland have denied any wrongdoing and promised to appeal against the decision. In response, some American politicians called it a political attack.
Previously, Tim Cook had consistently said he would not repatriate Apple profits to the United States until it decreases the US tax rate, because today it would cost him 40% to bring it home, which is clearly not a reasonable thing. The matter is that Apple makes large provisions for US taxes in its annual report, which allows the company to claim that it has an effective tax rate of 26% – this is much higher than many other tech firms.
However, behind these accounting provisions Apple has made clear it is not going to repatriate profits and really pay these taxes while the current tax rate is maintained that high. In other words, its reported tax rate is just an accounting fiction.
A federal tax rate in the United States is 35% on corporate profits and is regarded one of the highest in the world. Moreover, businesses can also end up paying an additional 5% in local state taxes on top of it. In reality, loopholes in the country’s tax code allow US tech giants to aggressively defer tax payments until any income earned outside the country is kept offshore. This is how many multinationals achieve some of the lowest effective tax rates ever.
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| Apple Plans to Repatriate Billions to the United States |
Apple was recently accused by the European Commission of receiving state aid from Ireland, and immediately took a decision to repatriate foreign profits. The European regulators claimed that Apple’s Irish-registered companies were allowed to pass billions of income untaxed. However, both Apple and Ireland have denied any wrongdoing and promised to appeal against the decision. In response, some American politicians called it a political attack.
Previously, Tim Cook had consistently said he would not repatriate Apple profits to the United States until it decreases the US tax rate, because today it would cost him 40% to bring it home, which is clearly not a reasonable thing. The matter is that Apple makes large provisions for US taxes in its annual report, which allows the company to claim that it has an effective tax rate of 26% – this is much higher than many other tech firms.
However, behind these accounting provisions Apple has made clear it is not going to repatriate profits and really pay these taxes while the current tax rate is maintained that high. In other words, its reported tax rate is just an accounting fiction.
A federal tax rate in the United States is 35% on corporate profits and is regarded one of the highest in the world. Moreover, businesses can also end up paying an additional 5% in local state taxes on top of it. In reality, loopholes in the country’s tax code allow US tech giants to aggressively defer tax payments until any income earned outside the country is kept offshore. This is how many multinationals achieve some of the lowest effective tax rates ever.
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