can’t bring your money home, so you can’t invest it where you want to. what would it do to — if congress effectively hiked the tax rate on the international earns without modernizing the tax code so you could move is a modernized system? very bad, sir. it would not be helpful. that’s essentially what some are advocating here today. would you like to be able to cut your tax and client costs? yes, definitely. with no offense to mr. bullock?
Apple’s Cook: Recommend Dramatic Simplification of Corp. Tax Code
Sen. Kelly Ayotte (R-NH) asks Apple’s CEO Tim Cook about simplifying the tax code and what it would mean for keeping the U.S. competitive in business.
Transcript:
i want to thank the witnesses for being here today. mr. cook, is there any dispute at this hearing that apple has complied with our tax laws? i’ve heard no dispute of that. one of the issues that i heard raised when you were being asked questions by senator mccaskill about the issue of the 102 billion that is present overseas that you have now is this idea of repatriation. you haaid that you would be willing to pay some rate on repatriation. as we look at tax reform, what do you think is is the rate, thinks not only of apple, but of mountain national corporations around the world. let’s say we simplify the code, so deductions are eliminated, we take that and pour that into reducing the rate. what rate do you think we have to be at to be competitive to make sure we have investment here? i think the rate on the u.s. sales, in my judgment, for most of the studies i have seen, would indicate it would need to be in the mid 20s, as all of the expenditures are dropped out. i think in terms of a rate on bringing back foreign earnings, i think to incent a huge number of companies to do that, it would need to be a single digit number. i think by doing that, you wind up in a revenue-neutral kind of situation, which means some companies may pay a bit more. i think we would be one of those. other companies would pay less, but i think more important than all of the tax, it will be great for growth in this country. that’s the reason i feel so adamant about doing this. what would it do — as i understand it, let’s sayou’re building a datacenter here, you’re building a new facility here. right now that money you have parked overseas, you can’t use that to invest in plant facilities here. is that right? that’s correct. we could use our overseas cash to make any investments in the united states. if you were in our position, and thinking about tax policy and making sure that our country remains competite, how important do you think it is that we change the tax code to ensure that this remains a good place for investment? assuming — i understand there are many other advantaging to being here including intellectual property, et cetera, but you’re not the only corporation that you have significant money overseas that we would like to see come back. i think it’s vital to do, i think it’s great for america to do. i think we would have a much stronger economy if we did that. i think it would create jobs and increase investment. so i put my whole weight and force behind it. if we create more jobs and create investment, isn’t that more taxes that can be collected here as well, in terms of thinking about the fiscal state of the country? it is, and i think that’s a very excellent point, that all ships rise with the tide. i wanted to ask you about the issue of a at the torrie rate. how important it is as we go forward, to reform the code, to really create a dynamic, simpler rate for an investment here, that a component of that be a territorial rate. there’s been some discussions around here i think the country is more advanced — i think it would strengthen our economy. i don’t propose zero, i think there has to a reasonable tax on doing so. and some people refer to that as territory, some refer to it as hybrid. i’ve heard different terminology before. that’s how i believe it should work. we think the tax code needs to be — if we create a temporary tax holiday which we have done in the past, don’t we just perpetuate the situation? i think it’s important to be predictable. a permanent changes better than a short-term tax holiday. i have a question on an unrelated topic, and to the tax issue today, but can you tell us, when you think about — you were talking to senator mccaskill, talked about the advantages of being in this country, one i view as the intellectual property protections of this country, which i know are have you significant to you as technology company. can you tell me what those challenges in china are? and thinking about intellectual property protection is certainly an advantage the united states has. how do we address this with our international partners? we face more significant areas in other cunning that is china — the reason i raise china is i’ve heard stories about the knockoff apple stores, but please speak to other countries as well. that has been an issue. i think the u.s. court system is currently structured in such a way that it’s very difficult to get the protection a technology company needs, because our cycles are very fast. when the cycles are very fast and the court system is very long, foreign competitors, or even competitors in the united states can quickly take certain i.p., use it and ship products with it and they’re on to the next product before the court system rules. so i aually that we require much more work on i.p. in this country as well, and i would love to see conversations between countries to try to strengthen ip protection globally. i don’t know how likely that is to occur in the currents environment, but for us, our intellectual property is so important to our company i would love the system to be strengthened in order to protect it. i thank all of you for being here. i appreciate it.
Apple’s Cook: Emphatically Consider Ourselves American Company
Sen. Claire McCaskill (D-MO) asks Apple’s CEO Tim Cook what prevents his company from moving to another country, and Sen. Ron Johnson (R-WI) asks Cook about taxes paid to other countries.
Transcript:
i can describe it on a broad level, senator. the cost of capital today is at an all-time low as you know. and so our weighted average cost for the borrowing that we just did was less than 2%. and we were faced with a decision to go that way or to pay 35% to repatriate. and so as we looked at that analysis, we felt strongly that it was in the best interest of our shareholder for us to secure the debt. okay. let’s assume that we simplify this. ireland gave you a 2% rate which was negotiated for your company, correct? we went to ireland in 1980, and they were very much recruiting, i believe, technology companies at that time. and apple was a business that had no operations in europe. and so as a part of recruiting us, the irish government did give us a tax incentive agreement to enter there. and since then we’ve built up a sizable operation there. nearly 4,000 people continuing to grow. and the skills of our people there are very fundamental for understanding the european market and servicing our customers there from tech support to sales to reseller support, et cetera, and so we have quite a very strong presence there. i guess my
