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As Apple holds $138B overseas, US Senate considers one-time tax break for repatriating cash

post #1 of 102
Thread Starter 
While Apple in the past has asked the U.S. government for a so-called "tax holiday" that would allow it to bring its massive cash hoard back to America, the iPhone maker may finally get its wish, as both Democrats and Republicans from the U.S. Senate said they are considering a one-time tax break.




Senators hope that a temporary reduction in taxes for bringing money back to the U.S. will replenish the federal Highway Trust Fund for road construction and repairs. The program is set to run out of funds by the end of August, according to Reuters.

Apple would potentially be the largest beneficiary of a U.S. tax holiday, as the company had $156 billion in cash at the end of its last quarter, with just $18 billion of it held domestically. The company indicated at the time that it has no plans to repatriate the massive $138 billion it holds overseas, saying that the high taxes it would be hit with would not be a valuable decision for shareholders.

The company has lobbied numerous times for a tax holiday that would incentivize bringing that money back to the U.S. Under current tax laws, companies face a 35 percent tax rate on profits generated outside the country.
As of last quarter, Apple held $156 billion in cash, with $138 billion of it overseas.
The last repatriation holiday in the U.S. came in 2004, when corporations were allowed to bring foreign profits at a tax rate of just 5.25 percent. That one-time offer came well before the introduction of Apple's iPhone, which has propelled the company to become one of the most profitable businesses in American history.

While a one-time tax holiday could be advantageous for Apple, the company has urged the U.S. government to enact more comprehensive tax reform that company officials believe could be beneficial for the economy. Last year, Apple urged elected officials to consider corporate tax reform with four key points, saying that any changes should:

  • Be revenue neutral
  • Eliminate all corporate tax expenditures
  • Lower corporate income taxes
  • Implement a reasonable tax on foreign earnings that would allow free movement of capital back to the U.S.


Apple is the largest corporate taxpayer in America, having paid $7 billion to the U.S. Treasury in fiscal 2013. Apple has said its payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year.

Apple and other companies pay a notoriously low international tax rate thanks to the use of corporations in Ireland, where the laws allow for legal tax havens to be established. The U.S. government investigated Apple and found that the company's international tax policies did not break any laws, though the European Commission announced earlier Wednesday that it also plans to investigate Apple for potential tax evasion.

Officials at Apple have adamantly claimed that the company pays all of the taxes that are legally required of it.

"Every single dollar," Chief Executive Tim Cook said last year. "We not only comply with the laws, but we comply with the spirit of the laws."
post #2 of 102
If they do this after the big boom multi product release this fall they're going to need a bigger boat.
post #3 of 102

This seems like a no brainer to get $7.2 B of free money.

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Citing unnamed sources with limited but direct knowledge of the rumoured device - Comedy Insider (Feb 2014)
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post #4 of 102
I think a 10-15% tax rate would be ok to repatriate the cash. I am a shareholder and US citizen.
post #5 of 102
As the world becomes global in economy the tax laws need reforming otherwise this same problem will present itself in another few years.
post #6 of 102
Quote:
Originally Posted by Ireland View Post

This seems like a no brainer to get $7.2 B of free money.

At some point the US gov't will give in again. They certainly need the money more than Apple needs to bring it back to the states so I am expecting between a 5 and 8% rate on the tax holiday.

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post #7 of 102

This is a damn no-brainer. Something like a 5%-10% tax rate would be appropriate. A number in the range would make the effective long-run tax rate for foreign income of US corporations about the same as that for corporations in the other major economies.

 

Otherwise, this nonsense will just continue....

 

Given the estimates I've seen ($1.5T stashed outside), even half of it brought back to US soil would generate $37.5B - $75B for the US government. Not to mention the fact that the money that is brought back will be spent in the US.

post #8 of 102
Good on Rand Paul for spearheading this, which is not mentioned in this story.

This should be permanent and the tax rate should be 5%.

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post #9 of 102
Lol. The tax "break" is nothing but a sham.

The US govt should skip the BS and kill the corporate tax on overseas earnings, which is basically what this achieves anyways.

The reason Apple (and other companies) has been hoarding cash abroad for so many years is precisely because of the previous tax "break".
post #10 of 102
Quote:
Originally Posted by SpamSandwich View Post

Good on Rand Paul for spearheading this, which is not mentioned in this story.

This should be permanent and the tax rate should be 5%.

No way. Corps should not pay less than the middle class tax payer. 10-15% is more appropriate.
post #11 of 102
They should just set the rate between 8-10% and reap the ongoing tax funds.. rather than leaving it at a world wide high of 35% (others, like Canada are under 10% for a standard rate) ..

Keeping it at 35% just forces US based companies to leave funds across sea's and not move them until they 'temporarily' lower the rate anyway.
post #12 of 102
Quote:
Originally Posted by Adrayven View Post

They should just set the rate between 8-10% and reap the ongoing tax funds.. rather than leaving it at a world wide high of 35% (others, like Canada are under 10% for a standard rate) ..

Keeping it at 35% just forces US based companies to leave funds across sea's and not move them until they 'temporarily' lower the rate anyway.

This probably makes the most sense. The tax "holiday" is a poor and distortion art way to achieve what is nothing but a tax reduction. Cut the tax rate down to what you suggest permanently.
post #13 of 102
Quote:
Originally Posted by jungmark View Post


No way. Corps should not pay less than the middle class tax payer. 10-15% is more appropriate.

 

That makes no sense.

 

Corps profits are transferred to shareholders.  Those shareholder then pay taxes on dividends and capital gains.  Basically the Corporations tax burden is paid by shareholders.  So why the hell does the Corp need to pay ADDITIONAL TAXES?

post #14 of 102
This is going be a good year for AAPL ....
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post #15 of 102
Basically Apple is telling the government that we have cheated you out of taxes and now want amnesty.Letting Apple bring home this 138B will not create a single job that they where not already planning on creating. Its great for Apple but whats in it for America?
post #16 of 102
Why kill the tax rate? Individuals are getting tax on their worldwide earning. It is bullshit that corporations get a tax holiday. When is the last time that individuals get a tax holiday? I am all for tax reform but it should happen to everybody - individuals and corporations alike. Simplify the tax code to a flat tax on all earnings.
post #17 of 102
Quote:
Originally Posted by sog35 View Post

 

That makes no sense.

 

Corps profits are transferred to shareholders.  Those shareholder then pay taxes on dividends and capital gains.  Basically the Corporations tax burden is paid by shareholders.  So why the hell does the Corp need to pay ADDITIONAL TAXES?

Agreed. Not to mention that most of the corporate taxes are ultimately mostly or wholly passed on to us, the consumer. We simply pay a higher price.

 

This is one area where the Europeans are light years ahead of the tax luddites in the US: value-added tax, low corporate taxes, and a territorial (as opposed to a worldwide) system of taxation of foreign income (i.e., a system where you are presumed to have paid your fair shares of taxes abroad regardless of what the foreign country's tax rate is).

post #18 of 102
Quote:
Originally Posted by Farshad Foroudi View Post

Basically Apple is telling the government that we have cheated you out of taxes and now want amnesty.Letting Apple bring home this 138B will not create a single job that they where not already planning on creating. Its great for Apple but whats in it for America?

Apple isn't cheating. The money was earned outside the US.
Quote:
Originally Posted by quanster View Post

Why kill the tax rate? Individuals are getting tax on their worldwide earning. It is bullshit that corporations get a tax holiday. When is the last time that individuals get a tax holiday? I am all for tax reform but it should happen to everybody - individuals and corporations alike. Simplify the tax code to a flat tax on all earnings.
A few states have sales tax holidays for a day or so on certain items.
post #19 of 102
Quote:
Originally Posted by Farshad Foroudi View Post

Basically Apple is telling the government that we have cheated you out of taxes and now want amnesty.Letting Apple bring home this 138B will not create a single job that they where not already planning on creating. Its great for Apple but whats in it for America?

 

You are crazy.

 

The $138B in cash was earned OUTSIDE of the USA.  No reason to pay taxes on foreign income.

 

Bring back the cash and charging 5% tax rate will give the Fed $7B in additional revenue.  That means $7B of less debt for the governement and $7B less charging individuals taxes.

 

Its a win win for all.

post #20 of 102
Quote:
Originally Posted by Farshad Foroudi View Post

Basically Apple is telling the government that we have cheated you out of taxes and now want amnesty.Letting Apple bring home this 138B will not create a single job that they where not already planning on creating. Its great for Apple but whats in it for America?

Apple, and others, are not cheating the US government out of anything. This money was earned outside the US so why should the US be able to tax it? I used to work for a company in California, moved to Washington state and telecommuted to the CA company. Since I always worked in WA I never had to pay CA state income tax even though my business was in CA. This is the same thing for Apple. They live in CA/USA but their "job" paid them money outside the US, therefore, why should they have to pay US taxes? Once this money is back in the US, Apple will be responsible for paying US taxes on the interest gained from this money but that should be it. Apple pays taxes in the countries that charge them taxes (per Tim Cook). Why should they be double-taxed?

post #21 of 102
Quote:
Originally Posted by quanster View Post

Why kill the tax rate? Individuals are getting tax on their worldwide earning. It is bullshit that corporations get a tax holiday. When is the last time that individuals get a tax holiday? I am all for tax reform but it should happen to everybody - individuals and corporations alike. Simplify the tax code to a flat tax on all earnings.

 

Individuals are taxed on Corporate dividends and capital gains. 

 

With corporate tax you are taxing DOUBLE.  Once for the Corp and second for the individuals who own the corp. 

post #22 of 102
Quote:
Originally Posted by anantksundaram View Post

Quit the political nonsense. It's largely the Democrats that are against the repatriation tax holiday.

You just told him to quit the political nonsense. That's enough. No need to add some of your own.
post #23 of 102

I'd do a simplified two-tier flat tax. I would be carving into regulations with the aim of getting govt. out of the way of capitalism. No complicated VAT or weird mumbo-jumbo that no one understands. No need for accountants. And, bonus, very difficult to politicize. The labyrinth tax code gives rise to political favors and endless tinkering as one party or another shoves benefits to their base of voters (such as this suggested tax holiday).

 

Get politicians out of it. Make it simple. Then, if it needs adjustment, it's a transparent process. Want to move it from 12 to 13%? Then we have that debate. There is no opaque tinkering with various deductions or special treatment.

 

Simplify. Lower the rates. Broaden the tax base. Get out of the way and watch the economy thrive. A 25 T economy will throw about 5 T into the govt. coffers. Let's aim for growth.

post #24 of 102
Originally Posted by Farshad Foroudi View Post
Basically Apple is telling the government that we have cheated you out of taxes and now want amnesty.Letting Apple bring home this 138B will not create a single job that they where not already planning on creating. Its great for Apple but whats in it for America?

 

You don’t have the first clue what you’re talking about. Stop spewing FUD.

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Even if [the 5.5” iPhone exists], it doesn’t deserve to.
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Originally posted by Marvin

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post #25 of 102
Quote:
Originally Posted by Farshad Foroudi View Post

Basically Apple is telling the government that we have cheated you out of taxes and now want amnesty.Letting Apple bring home this 138B will not create a single job that they where not already planning on creating. Its great for Apple but whats in it for America?

While I'm in general opposed to a tax holiday, it is not accurate to say that Apple has cheated the U.S. Government out of taxes.   Apple is following the law as it is today.   The law may be unfair, as is much of U.S. tax regulations, but it is what it is.

 

However, I do believe that the laws are out of date and need to be revised.   A large percentage of Fortune 500 companies do not pay any U.S. income taxes and that's one of the reasons the Government is starved and we don't have money to spend on infrastructure.   Also, it would be near impossible to reduce personal and small business income taxes unless large corporations start paying their fair share.

 

But it's a complex problem.   Even if you lowered the corporate tax rates, if you tax U.S. companies on worldwide income, many would probably incorporate somewhere else (many already have).    Maybe what it really comes down to is that in the modern world, companies should pay taxes on where the money is earned, not where the company is incorporated, with a lower tax rate on capital that is moved from one jurisdiction to another to encourage such movement.   That would end the foolishness of incorporating in tax havens such as Ireland or the Bahamas.   

 

Unfortunately, with our do-nothing Congress, no substantive changes are ever going to get made.   If Republicans win the Senate in November, you might see a reduction in corporate tax rates and a roll-back to the recent increase in the capital gains rates, but that will have the effect of increasing the deficit.   

post #26 of 102
Quote:
Originally Posted by sog35 View Post
 

 

That makes no sense.

 

Corps profits are transferred to shareholders.  Those shareholder then pay taxes on dividends and capital gains.  Basically the Corporations tax burden is paid by shareholders.  So why the hell does the Corp need to pay ADDITIONAL TAXES?

Not to mention the products they make are taxed (at least where I'm from and in at least some states) AND the employees are all taxed on their income.  I'm not necessarily arguing for low corporate taxes per se, but corporations do get taxed at LEAST 3 ways, 4 if you count sales

post #27 of 102
Quote:
Originally Posted by richlo View Post

As the world becomes global in economy the tax laws need reforming otherwise this same problem will present itself in another few years.

Right. That is why they should not consider a tax holiday now. It sets a bad precedent. All the corporations will just wait for the next tax holiday.

 

If the US wants a steady stream of tax revenue they can just lower the regular tax rate sufficiently to encourage corporations to bring their foreign profits back to the US. Not a once in a while tax holiday.

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post #28 of 102
Quote:
Originally Posted by sog35 View Post
 

 

Individuals are taxed on Corporate dividends and capital gains. 

 

With corporate tax you are taxing DOUBLE.  Once for the Corp and second for the individuals who own the corp. 

This is because corporations are considered a separate entity from the shareholders.  It's not just corporations that have to run into these double taxations.  Your income is tax and when you turn around and spend it, you have to pay sale tax.  And the person who have earned your money pays income tax on that money.  It goes on and on.  The supreme court reaffirmed that corporations are individuals so they have to pay taxes on their profits.  In turn, they have numerous benefits and one big one is political contribution.  So don't buy the bullshit how corporations have it tough.  

post #29 of 102

Can't believe anyone would think this short-termism is a good idea.  Fix the code to be effective, don't grant "holidays" just to get a one-off spike in revenue.  Terrible state of administration if this is being welcomed.

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post #30 of 102
Quote:
Originally Posted by sog35 View Post

 

With corporate tax you are taxing DOUBLE.  Once for the Corp and second for the individuals who own the corp. 

 

That depends on whether the corp is profitable, pays a dividend and whether the stock prices goes up or down. It's a better strategy to take a little out at each stage otherwise some creative accounting could result in zero tax being paid.

post #31 of 102
Quote:
Originally Posted by richlo View Post

As the world becomes global in economy the tax laws need reforming otherwise this same problem will present itself in another few years.

I would like a tax holiday too. Since that is unlikely there is no reason why corps should get one. Simple solution levy the tax regardless of whether they repatriate the earnings. That is about the only way we can unilaterally eliminate the incentive to leave earnings overseas.
post #32 of 102
Quote:
Originally Posted by sog35 View Post
 

 

Individuals are taxed on Corporate dividends and capital gains. 

 

With corporate tax you are taxing DOUBLE.  Once for the Corp and second for the individuals who own the corp. 

That assumes the rather simplistic notion that all taxes are equal, so being taxed once is better than being taxed twice.  Taxes are not equal, I pay far more in income tax than I do in National Insurance (roughly akin to Social Security in the US).  I'd rather pay three lots of National Insurance than one of Income tax.  Likewise with capital gains, the rate on that is much, much lower than on regular employment income.

 

So DOUBLE (caps yours) tax isn't a big deal, since SINGLE (caps mine) could be even greater, it's the specifics of the taxes that matter.  The government weights the taxes to achieve specific things, which is why there are multiple streams of taxation at different points.

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post #33 of 102
Quote:
Originally Posted by quanster View Post

Why kill the tax rate? Individuals are getting tax on their worldwide earning. It is bullshit that corporations get a tax holiday. When is the last time that individuals get a tax holiday? I am all for tax reform but it should happen to everybody - individuals and corporations alike. Simplify the tax code to a flat tax on all earnings.

The income tax needs to go away. Look at www.FairTax.org

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post #34 of 102
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Originally Posted by bugsnw View Post
 

I'd do a simplified two-tier flat tax. I would be carving into regulations with the aim of getting govt. out of the way of capitalism. No complicated VAT or weird mumbo-jumbo that no one understands. No need for accountants. And, bonus, very difficult to politicize. The labyrinth tax code gives rise to political favors and endless tinkering as one party or another shoves benefits to their base of voters (such as this suggested tax holiday).

 

Get politicians out of it. Make it simple. Then, if it needs adjustment, it's a transparent process. Want to move it from 12 to 13%? Then we have that debate. There is no opaque tinkering with various deductions or special treatment.

 

Simplify. Lower the rates. Broaden the tax base. Get out of the way and watch the economy thrive. A 25 T economy will throw about 5 T into the govt. coffers. Let's aim for growth.

If you're talking about personal taxes, you can have a simplified tax system but still have progressive rates.   Those who propose a flat tax or two rates, as you have, usually have in mind having poorer people pay much higher taxes.   That's inherently unfair as poorer people spend much more of their income (frequently 98% of their income) on the basic necessities of life:  shelter, food, clothing, medical and transportation to school or work.  

 

In ZoetWorld, you would have a one- or two-page tax form, eliminating all schedules.   You take your gross income from all sources (including dividends, capital gains, interest, pensions, etc.).   You eliminate all deductions except medical, education and pre-tax 401Ks.   Social Security income would only be taxed when it exceeds what you put in.   You still have five rates.    (In fact, with proper electronic reporting from the income sources as well as medical and education expenses, you wouldn't even need to file.   The IRS could collect this information, subtract how much you paid whether in payroll taxes or quarterlies, and either refund the overage or send you a bill.)  

 

Small business taxes should be simplified as well, but since it could never be as simple as personal taxes, personal taxes should be tackled first.  

 

But it will never happen.   Everyone is too hung up on the deductions that they take, even if their new tax bill would be the same or lower than it is today (and at the very least you'd save either accountant or software fees).   So homeowners would fight to keep the mortgage interest deduction.   Families would keep to fight dependent deductions.   Investors would fight to keep the lower rates on capital gains.   The accountants lobby would fight to kill any simplification at all as they have a vested interest in a very complex tax system.   Etc.  

post #35 of 102
Quote:
Originally Posted by mstone View Post

Right. That is why they should not consider a tax holiday now. It sets a bad precedent. All the corporations will just wait for the next tax holiday.

If the US wants a steady stream of tax revenue they can just lower the regular tax rate sufficiently to encourage corporations to bring their foreign profits back to the US. Not a once in a while tax holiday.

That's right. Make it permanent and make it 5%. Businesses will return to the US and all Americans will end up benefitting.

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post #36 of 102
Quote:
Originally Posted by sog35 View Post
 
Once for the Corp and second for the individuals who own the corp. 

Individuals do not own a publicly traded corporation. They own shares which is the same as corporate debt. Just like when you go to the bank to get financing for your business, the bank does not own your business unless your business goes bankrupt. Then the bank can force the liquidation of your assets to recoup some of their investment. Same thing is true of a company that has an IPO. The shares are sold to finance the corporation, but the shareholders do not own the company unless the corporation goes bankrupt. Then they are entitled to their 'share' of the liquidated assists, which rarely amounts to much after all the principle creditors are paid, such as payments due to suppliers, loans and pensions, etc.

 

If a corporation repatriates some foreign profits, they may decide to use the cash to increase the dividend paid to the shareholders thus causing the share price to rise, but other than that, the shareholders do not directly benefit from the repatriated cash. It could, however, be good for the US economy if the corporation decides to use the cash to expand their business in the US as that might create new jobs.

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post #37 of 102
Quote:
Originally Posted by SpamSandwich View Post
 
That's right. Make it permanent and make it 5%. Businesses will return to the US and all Americans will end up benefitting.

Lowering corporate income taxes alone will not significantly change the offshore manufacturing trend. As long as there is such a huge difference in cost of labor, pensions, social security, real estate, environmental regulations and other taxes, there will still be sufficient incentive for corporations to keep the manufacturing abroad.

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post #38 of 102
Quote:
Originally Posted by sog35 View Post

That makes no sense.

Corps profits are transferred to shareholders.  Those shareholder then pay taxes on dividends and capital gains.  Basically the Corporations tax burden is paid by shareholders.  So why the hell does the Corp need to pay ADDITIONAL TAXES?

Unless I've missed something your tax obligation on dividends and capital gains derived from Apple stock ownership have little to no connection to Apple's corporate profits. If the two were even substantially connected then by extension Amazon stockholders would owe basically nothing on their stock profits. Nice try tho.
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post #39 of 102
Quote:
Originally Posted by mstone View Post

Lowering corporate income taxes alone will not significantly change the offshore manufacturing trend. As long as there is such a huge difference in cost of labor, pensions, social security, real estate, environmental regulations and other taxes, there will still be sufficient incentive for corporations to keep the manufacturing abroad.

Yes, it is not a magic ticket to Willy Wonka's factory, but it would make the US more competitive.

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post #40 of 102
Quote:
Originally Posted by addicted44 View Post

Lol. The tax "break" is nothing but a sham.

The US govt should skip the BS and kill the corporate tax on overseas earnings, which is basically what this achieves anyways.

The reason Apple (and other companies) has been hoarding cash abroad for so many years is precisely because of the previous tax "break".

 

They hoard it overseas to not pay the taxes on bringing it back and not to just wait for a holiday. If the holiday never comes, they will keep spending this money outside of the US as all of these companies have been. There are many reasons why US companies are expanding outside of the US. One large part is because that is where their money is. They would all expand more in the US if they had enough money here to do so. The latest problem is that they all started borrowing money in the US to fund dividends and buy-backs. Which further cripples their ability to expand in the US due to these stateside bonds they must pay for. The tax policy is Anti-US expansion and it is getting absurd.

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