Apple announced that it would take hundreds of billions of dollars in offshore cash – largely profits recorded outside of America, accumulated over the past 12 years – back to the United States, where the company would pay a record-breaking $38 billion in tax as a result.
Apple’s big move comes after the Tax Cuts and Jobs Act, was signed by President Donald Trump last month.
For years, multinationals’ foreign profits – profits that would have be taxed at 35 percent if they were taken home to the United– were instead stashed abroad. By storing up these earnings in foreign subsidiaries, multinationals have been able to defer U.S. taxes due on such profits.
And, as American multinationals also grew increasingly skillful at avoiding taxes in overseas markets, the benefits of parking profits outside America produced even larger savings.
Many big corporations were achieving astonishingly low worldwide tax rates and amassing mountains of cash offshore. Some estimates suggest as much as $2.8 trillion has been locked offshore. And no multinational has been better at the avoidance game than Apple.
At last count, the iPhone-maker held offshore cash reserves of $252 billion – equivalent to more than a quarter of its nearly $1 trillion market capitalization.