On January 18, 2018 we posted Apple to Pay $38 Billion in Repatriation Taxes where we discussed that Apple would make a one-time tax payment of $38 billion to repatriate overseas cash holdings and also ramp up its spending in the U.S., as it seeks to emphasize its contributions to the U.S. economy after years of taking criticism for outsourcing manufacturing to China.
Now the ICIJ takes a analyzes this decision by Apple
to bring back hundreds of billions of dollars in offshore cash claiming a "responsibility to give back" to the United States.
Prior to the TCJA of 20107 change, many big corporations were achieving astonishingly low worldwide tax rates and amassing mountains of cash offshore. Some estimates suggest as much as $2.8 trillion has been locked in this offshore limbo. And no multinational has been better at the avoidance game than Apple. At last count, the iPhone-maker held offshore cash reserves of $252 billion, equivalent to more than a quarter of its nearly $1 trillion market capitalization. At the previous top corporate rate of 35% on non-qualified dividends, a repatriation of these profits would have resulted in $88.2 Billion of federal tax,, without considering the state tax consequences.
Now pursuant to the New Tax Act
Apple's Tax Bill is Reduced by $47 Billion
to $38 Billion and There Is NO Requirement
for Apple to Invest the $252 Billion in the US!
As it Became Apparent that the One Time Tax on
Offshore Deferred Income was likely to be passed in 2017, the iPhone-Maker Raised the Amount it was
Spending on U.S. Lobbying.
Source: U.S. Senate
The repatriation tax charge, for so long an uncertainty hanging over Apple stock, looks so neat it could have been scripted by Cook himself.
In fact, the company’s latest balance sheet shows the iPhone-maker has already built up $36 billion in accounting provisions for tax it had expected to have to pay on its foreign earnings. Was this just a good estimate on its financial statements?
As a result, the eventual payment of Apple’s record-breaking repatriation tax bill will hardly impact the company’s 2018 earnings per share performance.
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