Apple Urges Simpler U.S. Tax Code Ahead of Senate Hearing
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Apple Inc. (AAPL), outlining proposals for a simplification of the U.S. corporate-tax system, urged Congress to lower tax rates and implement levies on foreign earnings that will enable “free movement” of capital back to the U.S.
Apple Chief Executive Officer Tim Cook will face questioning tomorrow from a Senate panel investigating how companies use various maneuvers to reduce their tax bills. It’s a rare appearance on Capitol Hill for Apple, which has largely avoided scrutiny.
Cook’s testimony follows a plan unveiled by Apple last month to return $100 billion in cash to shareholders via dividends and buybacks through 2015. Rather than using funds overseas that will be taxed, Apple is borrowing money for the payout, saving as much as $9.2 billion in taxes, according to Moody’s Investment Services. Apple’s tax proposals will stimulate the creation of U.S. jobs, boost domestic investment and promote economic growth, the company said.
“These and other improvements in the U.S. corporate-tax system may increase the company’s taxes,” Cupertino, California-based Apple said in prepared testimony due to be delivered tomorrow. “Apple is not opposed to such a result if it occurs in the context of an overall improvement in efficiency, flexibility and competitiveness.”
The U.S. tax system “has not kept pace with the advent of the digital age and rapidly changing digital economy,” Apple said. The company said the tax code should be simplified in a way that implements a “reasonable tax” on foreign earnings to encourage U.S. companies to repatriate the cash.
“The current system, which applies industrial era concepts to a digital economy, actually undermines U.S. competitiveness,” Apple said in its prepared remarks.
The U.S. corporate-tax rate of 35 percent is too high for companies to pay when bringing money back from overseas, Cook said in press interviews last week.
Apple said it expects to pay $7 billion in U.S. taxes this fiscal year ending in September, up from $6 billion during the prior year. The company said its impact on the U.S. economy also includes supporting about 600,000 jobs, including almost 50,000 at Apple itself and 550,000 in areas such as software engineering and manufacturing.
The company said in the prepared remarks that it doesn’t use “tax gimmicks,” such as moving intellectual property into offshore havens, or hold money on a “Caribbean island” to lower tax bills. Apple said it has a large amount of foreign cash because 61 percent of its sales last year came from outside the U.S.
Apple defended its use of international affiliates in Ireland, which have allowed the company to pay a lower tax rate on foreign profits. The subsidiaries provide a base of operations for activities such as sales, supply chain management and customer support, Apple said.
To contact the editor responsible for this story: Tom Giles at email@example.com