President-elect Trump is said to support a one-time repatriation of off-shore profits to the U.S. at a much-reduced tax rate. If such a plan is proposed and approved next year, companies like Apple, Microsoft, Google, and Cisco could return billions now stored overseas at a 10% tax rate, a far less painful bite than the normal 35% U.S. corporate tax rate.
The issue of offshoring profits to avoid taxes came front and center earlier this year when the European Commission said Ireland was providing illegal state aid to Apple by offering the company a virtually-tax-free shelter. Moody's Investor Service says Apple will likely have $230 billion stored overseas by the end of the year. Microsoft will have $113 billion, Google will have $49 billion. Further, Moody's says the top five largest tech companies will be parking a stunning 86% percent, or $505 billion, overseas by year-end.
Such tax amnesties are nothing new. Obama proposed such a plan in his second term but the idea was shot down by Republicans. And critics like California representative Zoe Lofgren (D) have told me that amnesties are far from a solution to the problem of offshoring. After the amnesty ends, companies quickly return to storing profits overseas. MS