After being hit with a whopper of a tax bill by the EU this week, Apple CEO Tim Cook was none too pleased. He had a few choice words, calling it “total political crap.”
Cook now says the company will bring billions in profits to the US. But don’t expect the company to abandon its tax sheltering ways just yet says Bill Gale, Co-Director of the Urban Institute-Brookings Tax Policy Center.
“I’m virtually certain that Apple is not going to pay 35 percent on all of its profits going forward,” Gale said.
If Apple does end up paying $14.5 billion in back taxes to the EU, that amounts to $14.5 billion in taxes they don’t have to pay on future profits in the US. So, with that, they can repatriate some profits without incurring new tax.
In the future, Gale thinks Apple might find some new way to lower its tax bill. For example, maybe waiting for another corporate tax holiday, like the one Congress passed back in 2004, when companies got a one-time rate of 5.25 percent.
A move Hunter Blair, from the left-leaning Economic Policy Institute, said only exacerbates the problem
“As soon as they see a tax holiday, where they’re able to only pay five percent, instead of the full 35 percent that they owe, in the future they think about that and they say ‘hey, we should put more of our profits offshore’”, said Blair.
At the heart of the issue, notes Blair, is a federal policy that allows multi-national corporations to defer paying taxes in the first place.
“So a fix looks like, you want to close the deferral loophole that allows them to stash these profits offshore,” Blair said.
Apple CEO Tim Cook says the company plans an appeal, and that he disputes Brussels math on the $14.5 billion tax bill, a move that is sure to prolong the political standoff.
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