"The Irish statutory tax rate, however, is 12.5 percent. If that rate were to be applied to Apple's foreign pretax earnings, Reitzes estimates that the company's earnings would come down by about 7 percent."
I would love to see the math, because I don't think Apple's earnings will change much at all.
It doesn't really matter what Ireland's tax rate is as the US corporate tax rate will fill the balance.
For example, if Apple paid 4% on their foreign earned income in Ireland, they'd still owe 31% to the US Treasury, on that same foreign-earned income. Now, if in the future Apple paid 12.5% on their foreign earned income in Ireland, then they'd now owe 22.5% to the US Treasury. In both cases, Apple's total tax bill would be approx. 35% on that foreign-earned income, so the question isn't how much Apple pays, but to whom it pays.
Now, of course, Apple doesn't pay 35% in taxes, its net effective tax rate is between 25 and 26%, which is above the US corporate average of about 20%. A large part of that is due to the fact that Apple is only accounting for US taxes on about 2/3rds of its foreign-earned income, as they expect to keep about 1/3rd of that amount permanently overseas for foreign working capital. Still, changing Ireland's rate from 4% to 12.5% will have little effect upon Apple's earnings. I doubt they'd come down "by about 7percent".
Comments
"The Irish statutory tax rate, however, is 12.5 percent. If that rate were to be applied to Apple's foreign pretax earnings, Reitzes estimates that the company's earnings would come down by about 7 percent."
I would love to see the math, because I don't think Apple's earnings will change much at all.
It doesn't really matter what Ireland's tax rate is as the US corporate tax rate will fill the balance.
For example, if Apple paid 4% on their foreign earned income in Ireland, they'd still owe 31% to the US Treasury, on that same foreign-earned income. Now, if in the future Apple paid 12.5% on their foreign earned income in Ireland, then they'd now owe 22.5% to the US Treasury. In both cases, Apple's total tax bill would be approx. 35% on that foreign-earned income, so the question isn't how much Apple pays, but to whom it pays.
Now, of course, Apple doesn't pay 35% in taxes, its net effective tax rate is between 25 and 26%, which is above the US corporate average of about 20%. A large part of that is due to the fact that Apple is only accounting for US taxes on about 2/3rds of its foreign-earned income, as they expect to keep about 1/3rd of that amount permanently overseas for foreign working capital. Still, changing Ireland's rate from 4% to 12.5% will have little effect upon Apple's earnings. I doubt they'd come down "by about 7percent".