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Apple CEO Tim Cook says tax reform should’ve been done a long time ago

Published Nov 2nd, 2017 8:00PM EDT
Apple CEO Tim Cook and tax reform

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Tax reform is the one lifejacket of normality that the Trump administration is still clinging to during its present storm. Stock market values have been slowly climbing over the course of 2017, almost entirely due to priced-in anticipation of a tax cut. Republicans in Congress have just released the first draft of the planned tax bill, but things still aren’t moving fast enough for Apple CEO Tim Cook.

In a sit-down with NBC News’ Lester Holt, Cook explained why he thinks the current taxation system is unfair, and what he wants to see happen.

In the interview, Cook says that companies are already taxed on income earned overseas by the country it’s earned in. To bring that money back to the US, companies are again taxed at the full 40% rate. “[T]his isn’t good for the U.S. There’s no tax receipts there,” Cook said. “And it’s not good for investment in the U.S. And so this needs to be fixed. In my view, it should have been fixed years ago. But let’s get it done now.”

The reality for Apple is a little different. The company does pay tax on its overseas earnings, but it often uses complex multi-country systems to pay incredibly low effective rates. In Europe, for example, Apple used two companies, Apple Sales International and Apple Operations Europe, which were two Irish-registered companies that hold the intellectual property to Apple products and brands outside of North and South America.

Using legal tax mechanisms, all sales of Apple products in Europe went to these companies, so the bulk of all profits made in Europe ended up in Ireland. Using transfer pricing like this to funnel profits into a particular country is a legal and well-used (if ethically dubious) practice.

The real problem is how profits were taxed once they got to Ireland. Apple and Ireland agreed on a system that channeled “most profits…away from Ireland to a ‘head office’ within Apple Sales International,” according to the EC. The Commission’s investigation showed that Apple had been given a tax rate as low as 0.005 percent at some points, far lower than the already-low Irish corporation tax rate of 12.5 percent.

Cook claims that making it cheaper to repatriate cash would create jobs in the US, but that’s also in question. Analysts generally expect most of Apple’s repatriated cash to go towards dividends for shareholders, not new investment that would create jobs.

Chris Mills
Chris Mills News Editor

Chris Mills has been a news editor and writer for over 15 years, starting at Future Publishing, Gawker Media, and then BGR. He studied at McGill University in Quebec, Canada.