Apple to build new US campus
Apple is planning to build another corporate campus and hire 20,000 workers during the next five years as part of a US$350 billion (NZ$479 billion) commitment to the US that will be partially financed by an upcoming windfall from the country’s new tax law.
The pledge comes less than a month after Congress approved a sweeping overhaul of the US tax code championed by President Donald Trump that will increase corporate profits.
Besides dramatically lowering the standard corporate tax rate, the reforms offer a one-time break on cash being held overseas. Apple plans to take advantage of that provision to bring back about US$252b in offshore cash, generating a tax bill of roughly US$38b.
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 that had been in effect under the previous tax law.
About US$75b of the US$350b in US investments will be paid from money that had been overseas, Apple estimated.
Companies who 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 US corporate profits under the new law.
As a whole, corporate America has an estimated US$2.6 trillion in overseas cash, with most of that concentrated in the technology industry, with Apple sitting at the top of the heap.
Analysts have been predicting that most of the overseas profits coming back to the US would be ploughed into paying shareholder dividends and buying back stock, something that happened the last time a one-time break on offshore profits was offered more than a decade ago.
While Apple is likely to return some of its overseas money to its shareholders, Wednesday’s announcement is designed to be a show of faith in the US – the company’s largest market.
The public show of support to the US also helps the optics of a company that will still continue to make most of its iPhones, iPads and other gadgets in factories located in China and other faraway countries that offer cheaper labour.
Apple, which just spent an estimated US$5b building a Cupertino, California, headquarters that resembles a giant spaceship, plans to announce the location of a second campus devoted to customer support later this year. The company did not say how big the second campus will be, or how many of the additional 20,000 workers that it plans to hire will be based there.
One thing is certain: Cities from across the US will likely be offering Apple tax breaks and other incentives in an attempt to persuade the company to build its second campus in their towns. ❚ AP