Come the morning of May 21 Apple CEO Tim Cook will sit before a U.S. Senate committee where he will likely be asked to defend Apple’s $100 billion cash pile that currently sits in off shore accounts to avoid taxes. This comes on the heels of Apple promising to buy back more of its own shares and paying higher dividends to its shareholders, but borrowing money to do so instead of pulling from its foreign accounts. Even before Cook takes his seat before the committee, he is already defending the company’s tax practices today through an interview with POLITICO. Cook states, “I can tell you unequivocally Apple does not funnel its domestic profits overseas. We don’t do that.”
POLITICO feels this hearing is merely a circus meant to provide senior senators some face time on the news as they go after a big company that grabs headlines. As our earlier report stated, Apple is already one of the largest U.S. Taxpayers in 2012, paying nearly $6 billion in taxes to the U.S. Treasury.
To defend Cook, Google, Microsoft, Disney, Starbucks, or any U.S. based global corporation, this practice is entirely legal. In fact this practice is more a reflection of outdated corporate tax laws than companies acting greedily. Corporations, like Apple, earn profits overseas but find it costly to repatriate funds back to the U.S. because of our archaic corporate tax laws. If any change come out of these hearings it should be less costly tax penalties for companies to bring funds back to the U.S.
Cook went on to further clarify that Apple has spent much of its own resources to contribute to the U.S. economy outside of directly signing checks to the government. Citing 50,000 U.S. employees, paying out $9 billion in royalties to developers and investing $100 million in building new Macs in the U.S.
Surely it would be nice to bill Apple and bite off a chunk of its cash hoard, but doing so would also bring an onslaught of shareholder revolt. Corporate execs have a responsibility to maximize profits for shareholders and for this reason CEOs look to reinvest funds in foreign markets or sit on a pile of cash than recklessly pay huge sums of money to governments. In all likelihood, Cook’s message will be abundantly clear that Apple and companies like it are acting within the law and if anything tax reform needs to happen if Congress is serious about boosting the U.S. economy.