As a part of his new budget, U.S. President Barack Obama has proposed a one-time 14 percent levy on earnings held by U.S. companies overseas. Those funds would be allocated to a $478 billion public works plan, and would be followed up by an ongoing 19 percent tax on foreign profits.
Obama’s new taxes would offer “no loopholes or opportunities for deferral,” according to the White House’s proposal. At the same time, corporate tax rates would be reduced from 35 percent to 28 percent, while companies which manufacture goods in the U.S. would benefit from a lower 25 percent rate.
Such a tax could cost Apple as much as $20 billion up front. (At last count, the company has a $140 billion cash pile sitting overseas.)
Apple is part of a group of companies pushing for a temporary tax holiday which would allow repatriating foreign earnings at a much lower rate than the current 35 percent rate. The idea has support on both side of the aisle in congress, and a bill is set to be introduced by Sen. Barbara Boxer and Sen. Rand Paul. The bill would lower the repatriation rate to 6.5 percent for a limited time.
President Obama is opposed to that bill, instead pushing for the 19 percent taxation rate that would apply even if companies leave their money overseas.
Apple, and companies like it, make a large amount of their income from sales outside of the U.S. Around $44 billion of the $75 billion in revenue Apple reported for their just completed December quarter came from sales outside of the U.S.
Due to opposition by business groups against Obama’s proposal, the plan is unlikely to gain much traction in the the Republican-controlled congress.