NEW YORK (WASHINGTON POST, BLOOMBERG) - Apple, the world's most valuable company, said on Wednesday (Jan 17) it will contribute US$350 billion to the US economy and create 20,000 jobs in the United States in the next five years, outlining for the first time how it will respond to the new tax law passed late last year.
President Donald Trump said in a tweet on Wednesday that Apple's decision to bring hundreds of billions of overseas dollars back to the US is a "huge win for American workers and the USA!"
"I promised that my policies would allow companies like Apple to bring massive amounts of money back to the United States," Trump said in the tweet. Great to see Apple follow through as a result of TAX CUTS."
The iPhone maker also told employees that it's issuing stock-based bonuses worth US$2,500 each following the new US tax law, according to people familiar with the matter.
In its December approval of the most extensive tax-code revisions since 1986, Congress scrapped the previous international tax system for corporations - an unusual arrangement that allowed companies to defer U.S. income taxes on foreign earnings until they returned the income to the US. That "deferral" provision led companies to stockpile an estimated US$3.1 trillion offshore and many were criticized for the moves, including Apple.
Apple said on Wednesday that as required by the new tax law, it will pay US$38 billion in taxes from its massive cash holdings overseas. The payment is so far the largest announced from the tax plan changes, experts said.
"On the one hand, this is a record payment. On the other hand, it shows how successful they've been at gaming the system" around the world, said Edward Kleinbard, a law professor at the University of Southern California.
Given the new corporate tax rate of 15.5 per cent, that indicates Apple is returning around US$245 billion in cash to the United States. In its last earnings report, the company reported it held US$252 billion in cash overseas.
Apple has for years faced scrutiny and criticism around the world for its tax policies. The company recently agreed to pay more than US$100 million in taxes to British authorities after an audit.
It has also lobbied for the US to ease tax rates on foreign profits brought back to the US, saying that such changes would allow the company to invest more freely in the U.S. economy.
"We believe deeply in the power of American ingenuity, and we are focusing our investments in areas where we can have a direct impact on job creation and job preparedness," said Apple chief executive Tim Cook in a statement. "We have a deep sense of responsibility to give back to our country and the people who help make our success possible."
That echoes statements Cook made last year, when he told The New York Times that companies have a "moral responsibility" to grow the economy in the United States.
In addition to the tax payment, Apple said over the next few years it will significantly add to the 84,000 employees it currently has in the US. The new jobs will come from hiring at Apple's current locations and from a new campus focused on technical support for customers. Apple will announce its location later this year. It also said it plans to build several new data centres in the US - including previously announced projects in North Carolina and Iowa - and said it broke ground on a new facility Wednesday in Reno, Nevada. Overall, Apple will spend US$10 billion on building data centers, as part of a US$30 billion investment in capital expenditures.
Apple has faced repeated criticism from US lawmakers for not making more of its products, such as the iPhone, the iPad and Mac computers, in the United States. Apple does make some hardware in the US, but most of its products are produced and assembled in China. The company has in recent years focused on building more facilities in the U.S.
It is also increasing the size of a previously announced manufacturing fund to support its network of suppliers for parts that go into its devices. That fund will increase from US$1 billion to US$5 billion. This fund has already bankrolled initiatives in Kentucky and Texas; Apple did not offer further details on where it may invest in US manufacturing in the future.
The company did not say how much of its investments were already planned.