If Congress delivers on a proposed tax holiday, Apple could soon join a slew of American companies with large dollar amounts of offshore money eager to repatriate their earnings without being subject to the current corporate tax rate. News of the tax holiday being discussed comes via a report from Reuters:
Top Senate Democrats and Republicans on Tuesday said they were considering offering American companies a one-time tax break if they repatriate profits stashed abroad.
The senators anticipate the proposal would generate a windfall in revenue that would be used to fund federal transportation projects.
U.S. Senate Minority Leader Mitch McConnell told reporters in the Capitol that Republicans had discussed a corporate tax repatriation “holiday” idea and “it enjoys a good deal of support in our conference.”
In the past, Apple has made no secret that it does not favor the current corporate income tax rate. With current policy, Apple’s repatriated funds would be subject to the 35% corporate income tax meaning it could really only keep 65% of its earnings…
Tim Cook voluntarily testified before a senate committee last year speaking to Apple’s tax practices and assuring that Apple does not funnel funds offshore to avoid taxes. During that same time, Cook told The Washington Post in an interview that he believes the 35% corporate income tax rate is too high and should be reasonable:
“If you look at it today, to repatriate cash to the U.S., you need to pay 35 percent of that cash. And that is a very high number,” Cook said in an interview Thursday. “We are not proposing that it be zero. I know many of our peers believe that. But I don’t view that. But I think it has to be reasonable.”
News of the proposed tax holiday comes just one day after a report broke that the European Union plans to launch an investigation into Apple’s tax practices in Ireland which Cook has assured are longstanding and not gimmicky.
The last tax holiday passed by Congress in 2004 allowed corporations to repatriate offshore cash at a tax rate of 5.25%, Reuters notes, dramatically lower than the current 35% tax rate.
While the report points out that the proposed repatriation holiday is still at a very early stage and not at all a guarantee, it notes that the federal Highway Trust Fund is set to run out of funding before September and the revenue earned from repatriated funds could be used as leverage to fund that.
(Image via Getty)