Apple today has published its testimony proposing corporate tax reform and detailing the company’s tax practices ahead of CEO Tim Cook’s appearance at a Senate hearing on offshore tax practices scheduled for tomorrow.
In the testimony, Apple proposed what it called comprehensive corporate tax reform that should: Be revenue neutral, eliminate all corporate tax expenditures, lower corporate income tax rates; and implement a reasonable tax on foreign earnings that allows free movement of capital back to the US.
While some Subcommittee members may have differing views on these tax policy matters, Apple hopes the Subcommittee will see that these recommendations aim to create meaningful change and go well beyond what most US companies propose. As both a pioneer and participant in the American innovation economy, Apple looks forward to working with the Subcommittee on its efforts to encourage comprehensive reform of the US corporate tax system. Apple appreciates the opportunity to appear before the Subcommittee to contribute constructively to this important debate.
Apple also detailed the company’s current tax practices and noted it “made income tax payments to the US Treasury totaling nearly $6 billion – or $16 million per day.” Apple points out that, at a rate of 30.5%, that accounts for around “$1 out of every $40 of corporate income taxes collected by the US Treasury last year.”
Apple continued by commenting on its recent decision to borrow $17 billion in debt instead of repatriating offshore funds to help fund its shareholder return:
If Apple had used its overseas cash to fund this return of capital, the funds would have been diminished by the very high corporate US tax rate of 35% (less applicable foreign credits). By contrast, given today’s historically low interest rates, issuing debt at a cost of less than 2% is much more advantageous for the Company’sshareholders. Because Apple was able to borrow at a cost lower than the cost of its equity, issuing debt lowered Apple’s overall cost of capital. Additionally, issuing debt served the interests of Apple’s shareholders because the debt’s interest
Apple CEO Tim Cook, along with other Apple executives, is expected to testify before the U.S Senate Permanent Subcommittee on Investigation tomorrow morning in a hearing on “Offshore Profit Shifting and the U.S. Tax Code.”