Tim Cook, Apple’s CEO, recently made a surprise announcement. The CEO said that the company will be repatriating its offshore profits by next year, in an attempt to pay a part of the deferred taxes towards the US Treasury. The announcement comes as a surprise because Cook said in December 2015 that he isn’t considering repatriating Apple’s offshore profits due to the excessively large corporate taxes enforced in the United States.
Apple is not the only US company that doesn’t repatriate its offshore taxes. A large number of multinationals use several loopholes in the US tax laws, in order to defer their taxes. According to an interview held in July, Cook reports that Apple has approximately $215 billion in offshore profits. This is currently the largest offshore profit of any US company.
According to several sources, Cook’s latest decision comes after Apple has been accused by the European Commission’s competition regulatory body for receiving state aid from Ireland, According to the European Commission, several billion dollars of Apple’s profits have remained untaxed in the Irish system. Although Apple’s official response was that the company will appeal the decision, apparently Tim Cook decided to reconsider his position regarding the repatriation of profits.
Cook’s initial statement from December 2015 was aimed at the world-high corporate tax rates applied in the United States. The current corporate tax in the US is 35%. However, depending on each state, companies may pay an additional 5% in local taxes.
Although, in theory, Apple currently reports a 26% tax rate, in reality, experts consider this to be an “accounting fiction” due to the fact that Apple repeatedly reported that it does not intend to repatriate its offshore profits if the corporate taxes aren’t lowered.