Apple to bring profits back: what’s the tax bill?

Adam Allington Sep 1, 2016
HTML EMBED:
COPY
EU Competition Commissioner Margrethe Vestager talks as she gives a press conference to order Apple to pay 13 billion euros in back taxes, in Brussels on August 30, 2016. The European Union on August 30, 2016, ordered Apple to pay a record 13 billion euros in back taxes in Ireland, saying deals allowing the US tech giant to pay almost no tax were illegal.    JOHN THYS/AFP/Getty Images

Apple to bring profits back: what’s the tax bill?

Adam Allington Sep 1, 2016
EU Competition Commissioner Margrethe Vestager talks as she gives a press conference to order Apple to pay 13 billion euros in back taxes, in Brussels on August 30, 2016. The European Union on August 30, 2016, ordered Apple to pay a record 13 billion euros in back taxes in Ireland, saying deals allowing the US tech giant to pay almost no tax were illegal.    JOHN THYS/AFP/Getty Images
HTML EMBED:
COPY

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.

Infographic: Where Apple Holds Its Cash | Statista

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.

As a nonprofit news organization, our future depends on listeners like you who believe in the power of public service journalism.

Your investment in Marketplace helps us remain paywall-free and ensures everyone has access to trustworthy, unbiased news and information, regardless of their ability to pay.

Donate today — in any amount — to become a Marketplace Investor. Now more than ever, your commitment makes a difference.

Raise a glass to Marketplace!

Just $7/month gets you a limited edition KaiPA pint glass. Plus bragging rights that you support independent journalism.
Donate today to get yours!