Apple could gain the most if U.S. agrees to one-time cash repatriation holiday

Apple could gain the most if U.S. agrees to one-time cash repatriation holiday

Summary: Senators on both sides of the aisle are trying to drum up funds for a federal transportation project by floating the idea of a offshore profit repatriation holiday for major American businesses.

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TOPICS: Apple
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Apple could be set to gain if a U.S. bipartisan effort to give American companies a tax break holiday in order to repatriate offshore cash and profits goes ahead.

Leading U.S. senators on both sides of the political spectrum believe the proposal could generate enough revenue to fund vital federal projects — not least in the Federal Highway Trust Fund, which is set to run out of funds by the end of August.

According to Reuters, the plan would allow major U.S. companies to take advantage of a one-time reduction in the taxes they would pay on foreign profits, giving them an incentive to bring offshore profits back into the U.S.

But according to Sen. Ron Wyden (D-OR), the chairman of the Senate Finance Committee, "Nothing has been agreed to. Nothing has been ruled out."

It comes just a few weeks after eBay announced it would repatriate some of its foreign earnings back into the U.S., taking a $3 billion non-cash tax charge in the first quarter as a result, in order to help the federal government on much-needed projects.

That hit, however, was taken without a single tax break offered by the federal government, Wyden added. 

Apple previously said it would not repatriate its estimated $132 billion (or 88 percent) off-shore cash reserve — according to its fiscal second-quarter earnings — citing higher taxes and the subsequent detriment to the company's shareholders.

But the politicians on the Hill have to start weighing up Apple's position, considering it remains the U.S. Treasury's largest corporate taxpayer, paying about $1 in every $40 collected by the federal tax office.

Currently, non-U.S. profits that are held overseas do not face the 35 percent corporate income tax until they are brought back onto U.S. soil. And until such a tax break is introduced, American companies can store their offshore profits indefinitely, which can be helpful particularly for investing back in their local businesses and markets where that cash resides.

But for Apple chief executive Tim Cook, who said in testimony to Congress last year, bringing that cash back to the U.S. would cause the company to lose one-third of its cash reserve. At the time, more than 60 percent of Apple's revenue came from international sales.

The last time a repatriation holiday was enacted in 2004, the tax rate was temporarily lowered to 5.25 percent.

(via Reuters)

Topic: Apple

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  • Band-aid

    The law needs to be changed in order to encourage multinationals to repatriate their foreign earnings. A one time holiday would provide a one-time infusion of cash into the economy, which would help, but that's not what is required.
    John L. Ries
    • Remembering...

      ...that corporations have no moral rights; not even the right to exist. Their stockholders, managers, and employees do, but corporations themselves are creatures of the state with only the privileges granted to them by law. This makes the issue of corporate taxation purely an economic one. Neither Apple, Google, nor any other corporations is oppressed by the duty to pay the taxes imposed by law (it's the price of limited liability), but neither is it wrong for them to minimize their tax liabilities (as long as they follow the law). It may be foolish to charge corporations too much (as it would reduce revenue to the state and increase collection costs), but it's not in any way immoral.

      Nobody has to incorporate and governments are under no moral obligation to issue corporate charters or to license foreign corporations (it's a business deal, pure and simple). The legal obligations of corporations have to be seen in that light.
      John L. Ries
      • Don't forget that...

        These companies employ thousands of people and pay them salaries, which is then taxed.

        It's not like the US isn'ten getting any tax revenue benefit from these companies existing.

        Also keep in mind that if you receive a retirement account as part of your employment (this includes Unions)....many of your retirement dollars are invested in the stock market and most likely into many of these blue chip companies.

        If the invested company has profits and in turn the stock price rises...then your retirement fund increases in value. .

        Too many people overlook the "Six Degrees of Kevin Bacon" factor of themselves and these companies.
        GotThumbs
        • They do...

          ...but that has nothing whatever to do with the propriety of taxing corporations. Corporations get the advantage of limited liability, which also gives large business an added competitive advantage over small ones (both in terms of ability to attract investments and risk). They should be required to pay whatever the market will bear for the privilege.

          Partnerships and sole proprietorships employ people too. And there was a time before general purpose corporations when even large firms were almost always partnerships.
          John L. Ries
          • Half a dozen of one, half a dozen of the other

            give a company too much incentive to keep their wealth overseas, and that's exactly what they will do.

            The government will have to decide for themselves if that money is better put to good use hiding in the Caymans, or being injected into domestic economies. I wouldn't think it too difficult a choice, personally.
            Mac_PC_FenceSitter
          • I agree

            The very fact that multinationals prefer to keep their money overseas, rather than bringing it home is an indication that the corporate tax rate for foreign earnings is too high and the proper thing do is to lower the rate (either overall, or just for foreign earnings). I don't know enough about the rules relating to the US corporate income tax to know exactly what needs to be done, but a one time tax holiday isn't it (hence my initial post).

            But the issue is a purely economic one, not a moral one (it is not in any way, shape, or form immoral to tax corporate incomes). Corporate taxes should be set to whatever rates seem most likely to maximize profit. Firms that don't want to pay corporate taxes don't have to incorporate (limited liability is not a moral right). But, as Arthur Laffer pointed out back in the 1970s, setting the rates too high reduces revenue instead of increasing it. That appears to be the current state of the US corporate income tax.

            In any case, I categorically reject the claims of Tea Partiers and others that our natural aristocracy are being oppressed by the riffraff (that is really what the usual talking points amount to).
            John L. Ries
          • When we're talking about tax policy...

            ...profit is revenue minus collection costs (to the government imposing the tax).
            John L. Ries
    • 10%

      of billions is much better than 35% of nothing... Over the long term the Treasury would still win if they set the rate to a reasonable amount. After all that money has already been taxed at source.
      wright_is
      • Why..

        should corporations pay a lower tax than me? Most of them pay nowhere close to 35% and many pay 0% on billions in profits and we give them breaks than sometimes net them a negative tax rate. Over the past couple of decades the percentage of tax revenues collected for corporate taxes has been going down, Why?
        Teako
    • Double Taxation!!

      Just to add, there are two problems with the present tax laws.

      1. Corporations have already paid tax in the countries where they earned the money.
      2. Stockholders are also taxed on dividends, that come from the corporations, after tax profits

      In both cases this is is called double taxation!
      redave
      • If you don't want to be double taxed...

        ...don't buy corporate stock and don't incorporate your business. Limited liability should cost plenty.
        John L. Ries
  • No money not made in the US should be taxed for anybody

    government is just greedy and has a never ending hunger.
    everss02
    • See my previous post

      Corporations are creatures of the state with only the privileges granted to them by law. It may or may not be wise to tax the foreign earnings of multinationals, but it's not wrong.

      If the stockholders think the price of incorporation is too high, they can always return the corporate charter and do business in their own names.
      John L. Ries
      • Some pretty fine semantics

        unwise and wrong are things not so far apart as they might seem. Government may not have a duty to keep business free of excessive government imposed operating costs.... but it would be pretty damn fool to.
        Mac_PC_FenceSitter
        • That would be an economic calculation

          It has nothing whatever to do with morality.
          John L. Ries
    • Keep in mind.

      That starting this coming year, even Americans living overseas and for foreign companies are taxed 30% by the US.

      Foreign Account Tax Compliance Act (FATCA), passed into law in March 2010 which requires foreign banks to report oversea account details to the IRS.

      http://www.irs.gov/Businesses/Corporations/Foreign-Account-Tax-Compliance-Act-FATCA

      "U.S. financial institutions and other U.S withholding agents must both withhold 30% on certain payments to foreign entities that do not document their FATCA status and report information about certain non-financial foreign entities"

      http://www.irs.gov/pub/irs-pdf/f8938.pdf

      This is why there were so many Americans living overseas that renounced their US Citizenship in recent years. Tina Turner is one example.

      The US is pretty much following in the footsteps of King John and over taxation of his people.
      GotThumbs
      • That's true

        I'll even argue that that particular law is misguided. But again, that has nothing whatever to do with taxing corporations.
        John L. Ries
  • Doesn't matter

    The U.S. national debt has surpassed $17 trillion U.S. Whatever monies that get collected from these corporations will be but a drop of water in the ocean ... it won't even come close to paying off what's owed to China.
    Rabid Howler Monkey
    • But every little bit helps

      Encouraging domestic corporations to repatriate their foreign earnings is a completely legitimate way to both raise revenue and to inject some money into the economy (which would be spent here, rather than in Europe or Asia). That it wouldn't be nearly enough to pay off the national debt (which hasn't been zero since James Madison was President, I believe), is pretty much irrelevant.
      John L. Ries
      • There's nothing irrelevant about the U.S. national debt today

        http://seekingalpha.com/article/2261633-the-government-debt-ponzi

        Not only the U.S., but globally. There are two options going forward: default or selective defaults.

        P.S. Japan and Spain are also highlighted in the linked article.

        P.P.S. Party like its 1999.
        Rabid Howler Monkey