Apple will pay $50 billion in foreign cash taxes

21 January, 2018, 11:42 | Author: Sammy Rose
  • Reno Mayor Hillary Schieve Apple CEO Tim Cook and Nevada Gov. Brian Sandoval attend a groundbreaking ceremony on Wednesday

The company has been under increasing pressure to make USA investments since the 2016 presidential campaign, when Trump targeted the iPhone maker for making products in Asian factories.

(Apple) Apple will spend an estimated $55 billion with U.S. suppliers and manufacturers in 2018. The $38 billion tax payment from the Silicon Valley giant is set to be among the biggest payouts from the tax bill, and Apple said it would put some of the money it brought back towards 20,000 new jobs, a new domestic campus and other spending.

A provision allows for a one-time repatriation of corporate cash held overseas at a lower tax rate than what would have been paid under the previous tax plan.

Apple CEO Tim Cook said Wednesday that the company's newly announced investments came in part thanks to Republicans' tax reform.

"Apple is a success story that could only have happened in America, and we are proud to build on our long history of support for the USA economy", Tim Cook, Apple's CEO said. Apple is also increasing the size of its Advanced Manufacturing Fund from $1 billion to $5 billion.

Tim Cook is a liberal who probably doesn't like taking a step that makes President Trump look good.

The Cupertino giant further added that $10 billion of its upcoming capital expenditures would be spent in the data centres, it's now breaking ground on a building in downtown Reno, Nevada. President Trump is trying to keep more investment as tax dollars "at home".

The location of Apple's new facility will be revealed later this year.

Cook told ABC that "large parts of [the return to the US] are a result of the tax reform".

Late past year, Apple opened a new Northern California headquarters, a circular layout that resembles a giant spaceship. About 84,000 of Apple's 123,000 workers work in the US. It also pledged to create 20,000 jobs and invest $30 billion in US facilities over the next five years. While that is a lot of money, how does it compare to the money Apple will be bringing back from overseas at a significantly discounted tax rate?

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Apple is by far the top holder of overseas cash, followed by Microsoft Corp.

Apple also informed employees worldwide on Wednesday that they would receive a $2,500 stock bonus in response to the new US tax code, according to a source familiar with the matter.

To avoid the US' high statutory tax rate and its taxation of foreign profits once brought onshore in the US, American companies have used various ways to move as much of their income outside the US as possible.

The $30 billion investment in the company's facilities across the United States will include a new campus in a yet-to-be-disclosed location.

The US taxes its companies on their global profits, unlike the rest of the world, which taxes domestic profits only.

Analysts have been predicting that most of the overseas profits coming back to the US would be plowed into paying shareholder dividends and buying back stock, something that happened the last time a one-time break on offshore profits was offered more than a decade ago. According to correspondence between the Department of Finance and the Oireachtas Public Accounts Committee, a special account for holding the Apple money due to Ireland will be in place by the end of March with payment commencing shortly afterwards.

Last October, the European Union ordered Amazon to pay €250 million (S$404 million) in back taxes to Luxembourg. Apple owed Ireland €13 billion plus interest and penalties as a result, the commission concluded.

The mayor pointed to obstacles fast-growing companies such as Apple and Amazon have faced as they've outgrown their corporate homes, including sky-high housing costs, and touted Chicago's strengths.

Expect to hear about lots more USA companies following suit, and expect the boost this trend gives to the US economy to be a lot bigger than most had anticipated.

The tax bill requires companies to pay a one-time 15.5 per cent tax on foreign-held earnings whether they intend to bring them back to the United States or not.

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