Apple announced today it will start to repatriate back to America some of the massive profits it accumulated outside the USA – and will use the cash to Make America Great Again.
We’re using the Trump catchphrase because Apple’s action is only possible thanks to the new tax arrangements that the US president campaigned on, namely a one-off discount on repatriating foreign profits.
American companies with offshore operations previously faced the odd situation of having to pay tax in jurisdictions they make their money, then pay US taxes at 35 per cent on those profits too. Rather than pay twice, plenty left their cash offshore.
Uncle Sam's beancounters simply labeled those piles of dosh as “deferred” taxes, however, corporations were happy to defer for ages: Apple accumulated over US$250bn offshore, and showed little interest in bringing it home. Then, the Trump-friendly tax reform bill passed late last year offering a one-off discount rate of 15.5 per cent for repatriated profits.
The iPhone giant said it “anticipates repatriation tax payments of approximately $38 billion as required by recent changes to the tax law,” and claims that is the largest such payment ever.
Apple’s announcement also explained it will use lots of the cash in the USA on things like a new tech support center that will contribute to 20,000 new hires it plans to make in the Land of the Free. It’s also promised to build another campus somewhere in America, given its staff a $2,500 bous and tossed another $4bn into the fund it’s using to help US manufacturers innovate.
Manufacturing jobs are a Trump fetish, and the repatriation discount a pet policy, so it’s no surprise the tweeter-in-chief emitted the following today:
I promised that my policies would allow companies like Apple to bring massive amounts of money back to the United States. Great to see Apple follow through as a result of TAX CUTS. Huge win for American workers and the USA! https://t.co/OwXVUyLOb1— Donald J. Trump (@realDonaldTrump) January 17, 2018
Bringing the cash home may also help Apple to address its reputation as a corporate scoundrel and perhaps avoid future Trump criticism. Before 2016's election, Trump criticized the California giant's practices. The biz will probably also find it easier to share some of the cash with its shareholders, and seeing as that’s the ultimate purpose of a public company any new disbursements will be welcomed.
Nations where Apple has used legal-but-cynical tax minimization tactics will be less pleased, as once the tech goliath's cash is gone, it’ll be harder to recover. ®