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The US Intervenes in the Apple Tax Case

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The US intervenes in the Apple tax case

In April 2017, the US filed an application in the Luxembourg-based General Court against the European Commission (or EC). The EC demanded more than $15.0 billion in unpaid taxes from Apple (AAPL) to be paid to Ireland’s government.

According to Reuters, the Obama administration criticized the European Union’s decision, as the move would lead to Apple paying a hefty tax obligation to Ireland that would have otherwise gone to the US government.

However, the US government could not prove that it had a direct interest in the Apple tax case. The issue was actually between Ireland, which comes under the European Union’s jurisdiction, and Apple, which was operating in Ireland.

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Apple to win from Republican tax plan

Like many multinational companies, Apple keeps a majority of its holdings abroad due to the current US corporate tax rate of 35.0%. According to a calculation by the Financial Times, Apple would have to pay around $78.1 billion in taxes if it repatriates its overseas cash of ~$252.0 billion under the current tax structure.

Software giant Microsoft (MSFT) also holds ~$132.0 billion overseas. Cisco Systems (CSCO) also keeps more than $50.0 billion overseas.

However, under the proposed tax reform by Senate, corporate profits generated in the US would be taxed at a rate not to exceed 20.0%. Offshore profits repatriated by US companies would be taxed at a rate no higher than 14.5%.

As a result, Apple would pay an estimated $31.4 billion on its overseas earnings, according to new tax reforms, saving more than $47.0 billion in tax liabilities on repatriated cash.

Apple could pay less in US taxes

According to calculations by the Financial Times, if Apple is required to pay $15.0 billion in taxes that the EU is demanding, its US tax liability could fall to $29.3 billion under the revised tax plan on repatriated cash. The previously tax liability was estimated to reach $31.4 billion.

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