Last night on 60 Minutes, Apple CEO Tim Cook was asked how he felt “when he goes before Congress and they say you are a tax avoider.” Cook’s response was straightforward. Characterizing the condemnation as “political crap,” he said it’s time for corporate tax law to catch up with the real world.
Where are we going? To Apple’s real world.
A Multinational Snapshot
Imagining the money that accompanies Apple’s iPhone, we could start with a fingerprint sensor that was conceived in Florida and made by a Taiwanese firm’s factories in Asia. We could add an Apple motion co-processor developed by a company based in the Netherlands that has a Thai manufacturing operation.
In addition to looping through Florida, Taiwan, the Netherlands and Thailand, Apple’s supply chain includes nations like Germany, Japan and Israel. Reaching the U.S., Apple’s supply chain connects our components makers to China for the phone’s final assembly.
Meanwhile on the sales side iPhone 6 models are sold in 130 countries.
We can assume that Apple owes taxes wherever it does business. Those taxes relate to profits, labor and production. Below you can see the immense variety in corporate tax rates and their composition among EU and EFTA nations. My arrow points to Ireland’s 25.9 percent total tax rate because it has been cited as an Apple corporate tax haven:
Our Bottom Line: Corporate Taxes
On the surface it sounds rather simple. Congress seems to be saying to Tim Cook that he should bring Apple’s revenue home–two-thirds of its business–so it would pay the 35 percent corporate tax rate. Responding on 60 Minutes, Tim Cook said, “It would cost me 40 percent to bring it home and I don’t think that’s a reasonable thing to do.”
Not only does he have a responsibility to his shareholders but also he emphasized that the tax code, “…was made for the industrial age, …not the digital age.”
So yes, for so many reasons, our corporate tax code needs to catch up with the real world.
*Please note that our September 1, 2016 post on the taxes Apple paid to Ireland indicate a real rate that was less than 4%.