Apple Has Eight Years to Pay $38 Billion Tax Bill

Apple Has Eight Years to Pay $38 Billion Tax Bill
Depositphotos

The eye-popping $38 billion tax bill that Apple said it plans to pay on its mammoth pile of accumulated foreign earnings will probably hit federal coffers in an eight-year trickle, not a one-time torrent, according to Bloomberg.

The special, cut-rate “repatriation“ tax that Congress imposed on multinationals like Apple gives them as long as eight years to pay the new levy with no interest or penalties. That drawn-out schedule puts the biggest bills off until later years, meaning Apple’s first repatriation payment would probably be much closer to $3 billion, according to tax experts.

The installment plan is just one of the lesser-known aspects of the new repatriation tax and it shows how and why the U.S. Treasury’s general fund won’t receive a tsunami of revenue all at once to help underwrite the sweeping tax cuts. This year, the repatriation levy is projected to raise $78.6 billion overall, but that’s not enough to wipe out the estimated first-year cost of the bill’s tax cuts for businesses and individuals overall. Taken as a whole, the bill is expected to reduce federal revenue by $135.7 billion this year, before accounting for any economic growth or other macroeconomic changes that might result.

The law gives multinational companies like Apple the option to pay what they owe over eight years,- just 8 percent of the total in each of the first five years starting in 2018, followed by 15 percent in 2023, 20 percent in 2024 and 25 percent in 2025. Going forward under the new tax system, companies will generally only be taxed on their domestic profits, not dividends from their foreign subsidiaries, though the bill included safety nets intended to capture certain foreign income and payments pegged to subsidiaries in low-tax countries like Ireland and no-tax countries like Bermuda.