Transcript:
we appreciate the breaking news. let’s get back to capitol hill, apple’s ceo tim cook is being questioned by senators, basically talking about reforming the tax code. let’s go to eamon javers on capitol hill. he’s been monitoring the discussion. eamon? we expected some tough questions here for tim cook, as they talks to the senate in the wake of this release, which reveals apple created three companies that in fact are stateless there, not registered for tax purposes in any country anywhere around the world. what we doesn’t expect is much of the fireworks would happen over before tim cook sought done to take a listen to rand paul just now. frankly i’m offended by the tone and tenure. i’m offended by a $4 trillion government, bullies, berating and badgering one of the america’s greats success stories. if anyone should be on trial here, it should be congress. i frankly think the committee should apologize for apple. i think that congress should be on trial here for creating a bizarre and byzantine tax code. senator paul you’re free to apologize if you wish, apologize to anyone you want, this subcommittee will not apologize to apple. we did not drag them in front of this subcommittee. so obviously there, guys, you can see nor levin in no mood to hear it from senator paul this morning, and then senator john mccain, a republican, jumping immediately to the defense of senator levin, the democrat who chairs the committee. listen to senator mccain. implgts senator, i’ve the honor of serving with us for more than a quarter of a century. no one has every accused of you bullying or harassing in the thousands of hearings, and frankly it’s offensive to hear you accused of that behavior. reporter: so mccain suggesting he’s offended by what rand paul did. and guys, you’ve got to tell you that when you’re apple, you come up for a high-profile hearing like this, you expect to be grilled. the squabbling is probably good news, in the sense it reveals real fissions in the committee. not necessarily a focus grilling down. that probably work works to apple’s benefit. eamon, thank you very much. well, it is one of the
Apple’s Cook on Tax Reform
Sen. Rob Portman (R-OH) says we have to reform the tax code, and asks Apple CEO Tim Cook about how much money Apple spends on tax compliance efforts.
Transcript:
thank you very much. thank you, senator ayotte. senator portman? i appreciate the opportunity, having just left the finance committee on the irs to talk about tax reform, not just tax administration. this hearing is important, because it’s talking about a specific provision of our international tax rules allowing companies to effectively takes ip rights created here in the u.s. to foreign jurisdictions, some by means of cost-sharing, some of it by other agreements. i agree with you, mr. chairs, that we need to address this issue. i totally disagree that we ought to do it through picking out specific loopholes or preferences. we’ve got to reform this code. if we don’t do that, our companies will continue to be uncompetitive. you think about it, we have an uncompetitive tax system now. it may make us feel better about — so that’s why we’ve got to do tax reform. we have to do it now when the rate was lowered to 34%, now 35%, so we are — we’re looking at several decades now of tax policy that really is antiquated and doesn’t keep up with the times. so i — i have a proposal to do that. it’s been scored by the committee, revenue-neutral with a territorial system. there are other ideas out there. the president has talked about it. his has said in his february 2012 white paper he believes the rate oughting to lowered and reinvested. so there’s a lot of commonalty where senator baucus is, senator hatch is, and where congressman camp and the ways and means committee are working together on this. a could strategy is by tapping into that. it’s also where our enter national tax code puts or companies at a disadvantage, because when you’re operating overseas, you pay the tax rate of the company you’re operating in, plus you pay the residual u.s. tax. the other is a tax credit. some jurisdictions, like ireland, the tax is so low you don’t get much of a credit, but it’s also entirely complicated. so it puts us in a noncompetitive position, almost all of our industrial competitors, by the way, have shifted to a territorial type of system, including the uk and france. it includes germany, japan, in fact, when you look at the oecd, now 26 of our 35 fellow countries have moved to this dividend exemption system, congressman camp has talked about that. i think that’s the right way to go. essentially they don’t tax active business income earned beyond their borders, and they’re much more competitive internationally. the u.s. penalty for repatriating earns has resulted in between 1.5 and 2 trillion overjae. that means that money is starting to be deployed. for putting factories overseas that otherwise could be here. so i think we have to move and move very quickly. no other nation in the world imposes such a high barriers to bringing foreign earnings home. they have all been reformed. our rate, as you know, is the highest in the world, but they reformed the code. we have to do this. i think our guide been principle is how to win — and as my plan would do, is important to do. i know mr. open hyper — i think i just heard 65% of your revees are overseas. is that accurate? yes, sit’s accurate. in total we have created or support 600,000 u.s. jobs. it’s difficult to allocate a certainly percentage, but i would say it’s significant. it will be tens of thousands because of your sales overseas, right? i would such you come up with that number. i know it’s not easy, but — and we want you to sell stuff overseas, because it — would it be fair to say your biggest mpetitor globally is samsung? certainly one of them, yes. psalm sung is — korean company. 39.5%, which is our combined state and federal? so they have a lower tax rate there. my staff tells me that they pay about the same global tax effect raise. samsung olympics global tax payments were about $4 billion in pretax earnings, a rate of about 14%, same for both companies. mr. bullock, is that consistent? senator, yes, that was apple’s global cash tax rate last year. we believe it would be a few point higher this year. so it sounds like all the tax planning discussed at the hearing today, ultimately resulting in nothing more than as your main foreign competitor. is that accurate? senator, yes, with one difference. i’m getting to that. so i would say the answer is it’s worse for apple, because they can’t bring their money home. it’s partly the rate, but partly the — their investment options are more limited, aren’t they? how much money do they spent? i don’t have the exact figure, but it’s a lot. again, i would suggest you get that number. i think a the american people would — i’m a recovering lawyer myself, but you don’t need more tax lawyers. you need more engineers, more innovators, you need more people to keep america on the cutting edge. your products are great already, but could be even greater if you had more how big is your tax department? approximately three dozen around the world. a couple dozens resources, singapore. we do have some personnel in shanghai and brazil. a lot more than three dozen. there’s a load of inside help — senator, i would add — we want to reform the tax code so you don’t have to mess with all this stuff. go ahead. sorry. i would add that the tax return i sign even year in the united states is two feet tall or greater, and we are under continuous examination, and much of the efforts that phil spoke about, both internally and particularly with our outside advisers, deals with the continuous examination. we would very much support a simplified code that would lead to a smaller tax return. so high-tax compliance cost, you
