Apple banks on tax break to build 2nd campus, hire 20,000

Apple has earmarked about $75 billion of the money currently overseas to finance $350 billion in spending during the next five years. The spree will include the new campus, new data centres and other investments.

But most of the $350 billion reflects money that Apple planned to spend with its suppliers and manufacturers in the U.S. anyway, even if corporate taxes had remained at the old 35 per cent rate.

Analysts have also predicted that most of those overseas profits will flow into stock buybacks and dividend payments. That’s what happened the last time a one-time break on offshore profits was offered more than a decade ago.

The new law lowers the corporate tax rate to 21 per cent on U.S. profits while providing a sharper discount on overseas cash this year.

Apple CEO Tim Cook is now delivering on a longtime promised to bring back most of the company’s overseas cash if the taxes on the money were slashed.

Other U.S. companies, including American Airlines, AT&T and Comcast, have handed out $1,000 bonuses to all their workers to share the wealth they will gain from the lower rate on their domestic earnings.

Excluding banks and other financial services companies, Moody’s Investors Service estimates corporate America has an estimated $1.6 trillion in overseas cash. Most of that is in the technology industry, with Apple at the top of the heap.

Trump and lawmakers are hoping companies use the money to raise wages, expand payrolls, open more offices and invest in new equipment.

After plowing nearly $46 billion into dividends and stock repurchases in its last fiscal year, Apple is likely to funnel a big chunk of overseas money to its shareholders. But Wednesday’s announcement was clearly designed to be a sign of its allegiance to the U.S., Apple’s most lucrative market.

The public show of support also helps the optics of a company that will still make most of its iPhones, iPads and other gadgets in factories located in China and other faraway countries that offer cheaper labour — a practice that Trump and others have criticized.

“Apple is a success that could only have happened in America, and we always felt a very big sense of responsibility to give back to our country and the people who have made our success possible,” Cook said during a ceremony Wednesday celebrating a new warehouse being built in Reno, Nevada.

The White House applauded Apple’s commitment.

“Just as the president promised, making our businesses more competitive internationally is translating directly into benefits for the American worker, through increased wages, better benefits, and new jobs,” White House spokeswoman Lindsay Walters said.

Apple Inc., which just spent an estimated $5 billion building a Cupertino, California, headquarters that resembles a giant spaceship, plans to announce the location of a second campus devoted to customer support later this year.

The company didn’t say how big the second campus will be, or how many of the additional 20,000 workers that it plans to hire will be based there. About 84,000 of Apple’s 123,000 workers currently are in the U.S.

One thing seems certain: Cities from across the U.S. will likely be offering Apple tax breaks and other incentives in an attempt to persuade the company to build its second campus in their towns.

That’s what happened last year after Amazon announced it would build a second headquarters in North America to expand beyond its current Seattle home. The online retailer received 238 proposals from cities and regions in the U.S., Canada and Mexico. Amazon is expected to announce the winning bid later this year.

Unlike Amazon, Apple isn’t openly soliciting bids from cities interested in its new campus.

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AP writers Scott Sonner in Reno, Nevada, and Josh Boak in Washington, D.C., contributed to this report.

Michael Liedtke, The Associated Press

by Canadian Press

Apple banks on tax break to build 2nd campus, hire 20,000

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