Apple lobbies for offshore tax holiday to bring cash to US

Posted:
in AAPL Investors edited January 2014
Apple has joined a consortium of companies including Cisco, Duke Energy, Oracle, and Pfizer to lobby the US government for a tax holiday that would allow corporations to bring home an estimated $1 trillion now parked in overseas accounts.



Without the tax holiday, the companies say they won't spend their overseas earnings in the US, given that they face a 35% tax on their profits generated outside the country. Their plan asks for a temporary break that would enable them repatriate their foreign cash by paying only 5% in taxes, during a one year period.



In return, the companies say they could then justify investing in research, hiring and other domestic spending that would boost the economy, according to a report by Fortune.



What to do with Apple's $60,000,000,000?



Apple currently has cash holdings of $59.7 billion, but it earns more than 60 percent of its revenues outside the US.



In the company's Q1 2011 earnings conference call last month, Apple's chief financial officer Peter Oppenheimer stated that Apple's "tax rate for the quarter was 24.6%, below our guidance of 25.5% due to the one-time benefit of the retroactive extension of the R&D tax credit from January 1, 2010. We expect our tax rate for the remaining quarters of fiscal '11 to be about 25.5%."



Apple hasn't given any indication of what exactly it might do with its vast cash reserves were the US to allow it to bring more of that money into the country with a tax break incentive. Some investors and analysts have pleaded with the company to distribute its holdings to shareholders in the form of dividends.



Apple's chief executive Steve Jobs has noted at previous shareholder meetings that such a move would be a shortsighted use of the company's buying power, and would remove a central pillar holding up the company's valuation. By holding onto the cash, Apple can be prepared to jump on new opportunities as they arise.



This all happened before



The report noted that in a previous tax holiday, granted in 2004, companies had similarly argued that repatriating foreign funds at discounted tax rates would enable them to boost the economy through direct domestic investment.



However, even though the Treasury Department attempted to write rules at the time to ensure the money would be invested locally, most of the cash (60 to 92 percent, according to one study cited in the report) was simply returned to shareholders in the form of stock buybacks and dividends.



"A tax holiday would bring a substantial amount of cash back to the United States and paying that out to shareholders is good for the economy," said the study's co-author Kristin Forbes, who Forbes noted is an economics professor at MIT's Sloan School of Management and was a member of President George W. Bush's council of economic advisers. "But if you're a politician claiming this will create a lot of jobs or new investment, it isn't supported by the data."



Private stimulus package getting hard to ignore



An attempt to replay the 2004 tax break in 2009, as part of President Obama's American Recovery and Reinvestment Act stimulus plan, was supported by a bipartisan group of senators led by California Democrat Barbara Boxer and Nevada Republican John Ensign, but it failed to get more than 42 votes.



At the time, opposition to the plan came from senators who were upset by how, as Boxer acknowledged in the report, companies had previously "abused the spirit of the requirements on how the money needed to be spent" under the previous tax holiday.



The "privately financed stimulus" plan is being looked at skeptically by both rural Democrats and by Tea Party-affiliated Republicans who see the measure as a handout to big corporations, while the new influx of relatively moderate Republicans in the House are likely to be more amicable. President Obama has shown little enthusiasm for the corporate tax holiday in the past, but is meeting with tech industry CEOs on a trip to Silicon Valley tomorrow in what the report referred to as "scouting for opportunities to burnish his relationship with big business."



At the same time, the Treasury is stepping up efforts to find individuals with hidden reserves in offshore accounts, offering amnesty programs that require paying a 5 to 25% penalty on top of regular back taxes and interest on any money that is reported to the government, with the threat that money that isn't voluntarily disclosed will be hit with even steeper penalties and the potential for criminal prosecution.
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Comments

  • Reply 1 of 189
    How patriotic.
  • Reply 2 of 189
    hill60hill60 Posts: 6,991member
    I hope that guy who looked a bit like Steve Jobs comes and picks up the bags he stuffed under my bed, here in Australia.



    I'm getting sick of bumping my head on the ceiling.
  • Reply 3 of 189
    Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?
  • Reply 4 of 189
    If they are allowed to lower their taxes, my taxes too should be lowered Yeah, fat chance.
  • Reply 5 of 189
    I wish I had the "problem" of having 60 billion dollars and walking away with only 40 billion! Pay your taxes like everyone else!
  • Reply 6 of 189
    Quote:
    Originally Posted by lamewing View Post


    Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?



    They're not trying to avoid taxes altogether, they're trying to bring their money from foreign banks into U.S. banks without being penalized; otherwise, it would be more profitable to keep the money where it is.
  • Reply 7 of 189
    So Apple needs a 30% cut app developers hard work, but wants to only pay 5% tax for a whole year? I would bet anything that these corporations once again get their way, and that this gets extended for more than a year. I would also like a "Tax Holiday" for next year, and I promise to buy Apple products with the extra cash in my pocket. No seriously I Promise.
  • Reply 8 of 189
    ihxoihxo Posts: 562member
    at least Apple's not sending all the money to tax haven... like Google.



    http://www.businessweek.com/magazine...1043146825.htm



    5% is still way more than 2.4% Google's paying.
  • Reply 9 of 189
    malaxmalax Posts: 1,598member
    They aren't asking for a hand-out, they are just stating facts: the tax code currently provides disincentives for them to bring that money back to the US. If the disincentives are removed (temporarily), they will behave rationally and take advantage of it by bring it "ashore" and paying US taxes that they would otherwise avoid.
  • Reply 10 of 189
    Quote:
    Originally Posted by lamewing View Post


    Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?



    Corporations don't "feel", they act in the best interests of their shareholders. If they didn't they would be sued. They act in this way because our tax laws are so out of whack that they must go elsewhere to make the returns that are expected. It's economics.
  • Reply 11 of 189
    I really don't see a problem with this. I would rather the money go back to the shareholders so they can spend it on fast women, the best booze, expensive cars, cuban cigars and big yachts instead of wasting it on taxes. Becuse we all see what happens when you give it to the government.
  • Reply 12 of 189
    Lowering it would be actually a wise idea, cuz it would allow companies who make lots of their money outside the USA to have lover investment coasts in the USA.



    On paper, for every project they have to bring in money from elsewhere, the coast for the project goes up quite a bit.
  • Reply 12 of 189
    Quote:
    Originally Posted by malax View Post


    They aren't asking for a hand-out, they are just stating facts: the tax code currently provides disincentives for them to bring that money back to the US. If the disincentives are removed (temporarily), they will behave rationally and take advantage of it by bring it "ashore" and paying US taxes that they would otherwise avoid.



    Precisely. A tax holiday for the entire country, in addition to a complete government shut down is in order. It's amazing what we can do if we're not saddled with regulations and taxes.
  • Reply 14 of 189
    Quote:
    Originally Posted by eswinson View Post


    I really don't see a problem with this. I would rather the money go back to the shareholders so they can spend it on fast women, the best booze, expensive cars, cuban cigars and big yachts instead of wasting it on taxes. Becuse we all see what happens when you give it to the government.



    The government could use the money to improve public education and scholarship opportunities so Apple has a better domestic talent pool to hire from.
  • Reply 15 of 189
    Sure, why not let Apple and others bring in a trillion dollars tax free. Obama's raising my taxes and local, state and federal agencies are raising fees I pay on everything. We the people can easily afford to pay our own taxes and fees plus Apple's. Let the rich corporations have a holiday. I'll just get a third job so that Steve Jobs can rebuild his Palo Alto home in true style.
  • Reply 16 of 189
    Quote:
    Originally Posted by lamewing View Post


    Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?



    Because those profits were realized overseas and and taxed at local jurisdiction's rates already. To bring them in, they have to pay additional taxes on top of what they already paid to local jurisdictions. If they don't bring them in, they dont have to pay (which is what they are doing now).



    Also, I pay well over 40% of my income to taxes, is it fair that I pay 45% while you pay 26%?
  • Reply 17 of 189
    Quote:
    Originally Posted by ihxo View Post


    at least Apple's not sending all the money to tax haven... like Google.



    http://www.businessweek.com/magazine...1043146825.htm



    5% is still way more than 2.4% Google's paying.



    This is why I like Obama's idea of getting rid of all of the corporate tax loopholes and lowering the corporate tax rate.



    And I'm a pretty hardcore conservative (fiscally, on social matters, I'm in the I don't give a crap camp).
  • Reply 18 of 189
    Quote:
    Originally Posted by marokero View Post


    If they are allowed to lower their taxes, my taxes too should be lowered Yeah, fat chance.



    You have overseas profits you?d like to bring into the US but are choosing not to due to the high rate or have misunderstood the article?
  • Reply 18 of 189
    Quote:
    Originally Posted by lamewing View Post


    Typical Corporate Greed.. Corporations feel the deserve special treatment. My wife and I pay about 26% of our income to taxes. How is it that these corporations feel they deserve to avoid paying the same in taxes?



    Try being less of a poor hobo?

    I mean, everyone else, Steve Ballmer, for example, pay WAY less than 25% of their revenue in tax.... only poor people do such ridiculous things.

    And it answers your question: corporations ' money is very rich people's money, not "some unknown and faceless entity"'s money. Those people pay very low tax on their income, why should corporations which pay them dividends pay huge taxes, which means less dividends?
  • Reply 20 of 189
    These corporations aren't trying to bring this money home for our benefit or to be nice to America. They obviously need it here for their benefit. Keep your damn money oversees like you do with your manufacturing jobs. We don't want your 5%.
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