Trump tax reform scores win with Apple

Company to repatriate cash, pay $38B in tax

In a major boost for a new tax code championed by President Donald Trump, Apple said it will bring hundreds of billions of overseas dollars back to the U.S. and pay about US$38 billion in taxes on the money.

The company also said it was committing US$350 billion to the U.S to be spent on domestic jobs, manufacturing and data centres in the coming years.

Apple told employees Wednesday that it was also issuing stock-based bonuses worth US$2,500 each following the new tax law, according to people familiar with the matter.

The pledge comes just weeks after U.S. Republicans dramatically lowered corporate taxes, including an incentive to encourage American companies to bring back profits parked oversees.

“This is truly a case where the results will speak for themselves, starting very soon. Jobs, Jobs, Jobs!” Trump tweeted in late December.

Apple is the first major U.S. technology company to act on the new tax law and it joins others, such as Intel Corp., in responding to criticism by Trump and others that corporations have been ignoring American workers and manufacturing. Job creation was a key pillar of Trump’s election campaign. That means the new positions created by Apple are likely to have a more significant political impact than its US$38 billion tax payment, according to Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

“The thrust here is American jobs, jobs on American soil, build manufacturing here, don’t build everything in China,” Gordon said. “You can’t have an announcement of a million jobs. But you can have companies like Apple saying that we’re going to have 20,000 new jobs here. If other companies say they’re going to have new jobs too, it does add up.”

Besides lowering the standard corporate tax rate, the tax reforms offer a one-time break on cash being held overseas.

Apple plans to take advantage of that provision to bring back most of its roughly US$252 billion in offshore cash, generating a tax bill of about US$38 billion. It’s something that Apple CEO Tim Cook promised the company would do if it could avoid being taxed at the 35 per cent rate under the previous tax law.

Companies that bring back money stashed overseas this year will be taxed at a 15.5 per cent rate, below the new 21 per cent rate for U.S. corporate profits under the new law.