Apple to pay $38 billion in taxes and invest another $30 billion into US operations

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Apple has finally decided to pay taxes in the US. The iPhone and iPad giant will make a one-off tax payment of $38 billion for the repatriation of its profits overseas. 

Until now, Apple had been reluctant to bring back its profits into the US because simply transferring the money could have cost the company much more than $38 billion. This is because the previous tax regime would have required Apple to pay 35 per cent on any money it transfers into the US, so if the amount brought in were $200 billion, it would have had to pay $70 billion, and so on.

The current agreement is probably partly the result of the US President Donald Trump’s administration’s direct lobbying of Apple to not only bring back some of its money into the US, but also, more importantly perhaps, to invest more money in the company’s US manufacturing and operations. To that end, Apple has pledged to invest “more than $30 billion” into its operations in the US, according to the Financial Times.

The new investment would go into Apple’s brand new, spaceship-like campus in Cupertino, California, and its data centres. In total, says the FT, Apple’s investment would represent a “direct contribution” of $350 billion to the US economy. The way this figure is calculated would suggest a general belief that every dollar invested in manufacturing tends to generate ten times the amount of the initial investment in the wider economy, mainly because manufacturing operations tend to be complex and require partnerships with many different suppliers.

Trump quickly claimed credit for Apple’s decision, with the president tweeting: “I promised that my policies would allow companies like Apple to bring massive amounts of money back to the United States. Great to see Apple follow through as a result of TAX CUTS.” Trump was implying that his administration’s new tax policy is responsible for Apple CEO Tim Cook’s decision to repatriate the company’s huge cash mountain. However, speaking to ABC News, Cook said Trump’s new tax regime was only partly responsible for the move. “There are large parts of this that are a result of the tax reform and there’s large parts that we would have done in any situation,” said Cook. Cook added: “I do believe the corporate tax will result in job creation and a faster-growing economy.”

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