Apple (AAPL) Could Owe $28B on Foreign Cash Holdings

By Jan 8, 2013, 8:28 AM Author's Blog  

Apple (AAPL) has come under a lot of fire in recent months for keeping a considerable portion of its $121 billion cash and securities horde overseas. But it seems the tech giant has a good reason for doing so.

According to tax professionals who talked to Wired, Apple’s tax bill could top $28 billion if Cupertino attempted to repatriate its offshore funds which have grown from $34 billion in Sept. 2009 to $121.3 billion three months ago, and estimated to reach more than $155 billion by September 2013.

“As you can see from Apple’s numbers, every year it grows and grows and grows, and it’s getting to be a very unwieldy situation,” Martin Sullivan, a former Treasury Department economist told Wired in reference to Apple’s tax liabilities which will keep growing as the company keeps profits on overseas sales in overseas accounts.

Apple, as one of many major multinational corporations, has been hoping that by lobbying the US government for a repatriation tax break, will be able to free up its overseas assets. According to Bloomberg, a coalition led by the iPhone-maker, Google (GOOG), and Cisco Systems (CSCO) hired more than 160 lobbyists in 2011 to push for a one-year window tax break in which the repatriated cash tax rate would drop to 5.25 percent, instead of the normal 35 percent.

In 2004, Congress enacted a one-year repatriation tax, called “tax holiday” for overseas earnings, that allowed multinationals to bring home offshore earnings at a low tax rate of 5.25 percent. Apple and Co. are hoping for a repeat of that.

Critics of the plan however, argue that a repeat won’t result in new investments or have a positive effect on the US economy, instead it will only create, just as id did in 2004, an increase in shareholder payouts of between 60 and 92 cents for every dollar repatriated.

According to reports, U.S. multinational companies have accumulated more than $1.375 trillion in profits overseas on which they have paid no federal income tax.

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