Apple boss expects to repatriate billions to the US next year

Thursday 1 September 2016 06.46 EDTLast modified on Thursday 1 September 201614.34 EDT

Apple boss Tim Cook expects the iPhone maker to repatriate huge offshore profits to America next year, paying billions of dollars in deferred taxes to the US Treasury.

In an interview with RTE radio, he gave a summary of the company’s 2014 tax affairs, saying: “We paid $400m [in tax] to Ireland, we paid $400m to the US.

And we provisioned several billion for the US for payment as soon as we repatriated.

“Right now I would forecast that we repatriate next year. So it is not true that we would pay just $400m, or even just $800m, the number is materially larger.”

Like many large US multinationals, Apple has for decades been pooling its non-US profits outside of America. Under loopholes in the tax laws, corporations can defer US taxes continually so long as income is not repatriated to America.

In July, Apple told investors its cash pile held offshore had reached $214.8 billion (£162.2bn). This is the largest of any US company.

Cook’s surprise U-turn on repatriating foreign profits comes days after Apple was accused by competition regulators at the European commission of receiving state aid from Ireland.

Why Apple is facing a €13bn tax bill in Ireland
The commission said billions of income had been allowed to pass through Apple’s Irish-registered companies untaxed. Both Apple and Ireland have insisted they will appeal against the decision.

Meanwhile, some politicians in the US have described it as a political attack.

Until now, Cook had consistently said Apple would not repatriate profits to the US until Washington slashed the US tax rate.

Last December, in an interview for US television programme 60 Minutes, Cook said he would “love to” repatriate Apple’s offshore cash. Asked why he doesn’t, he said: “Because it would cost me 40% to bring it home. And I don’t think that’s a reasonable thing to do.”

He then attacked the US corporate tax regime, saying: “This is a tax code made for the industrial age, not the digital age. It’s backwards, it’s awful for America. It should have been fixed many years ago.

It is past time to get it done.”

In its annual report, Apple does make large provisions for US taxes, which allows it to claim that it has an effective tax rate of 26% – much higher than many other tech firms.

However, behind these accounting provisions Apple has made clear it does not intend to repatriate funds and actually pay the taxes provisioned for while the US maintains its current high tax rate. For that reason, the group’s reported tax rate is regarded by experts as an accounting fiction.

The US has a federal tax rate of 35% on corporate profits – one of the highest in the world– on top of which businesses can end up paying an additional sum of about 5% in local state taxes.

In reality, loopholes in the US tax code allow American multinationals to aggressively defer tax payments so long as any income earned outside the US is kept offshore. That allows many companies, particularly tech firms, to achieve some of the lowest effective tax rates in the world.

https://www.theguardian.com/business...sury-next-year