Apple (NASDAQ:AAPL) Chief Executive Officer Tim Cook is to appear before the U.S. Senate to testify on the company’s foreign tax practices.
The Senate is investigating the $100 billion in cash that Apple has stored overseas, and how keeping that money offshore affects U.S. taxes. In the testimony, which is available in full on Apple’s website, Cook argued that Apple is the largest corporate income tax payer in the U.S. and so there is no need for Apple to repatriate its overseas cash. Apple plans to pay $7 billion in taxes to the U.S. Treasury this year. Cook also made it clear that Apple does not use “tax gimmicks” like keeping money in the Caribbean or moving its intellectual property offshore to get out of paying U.S. taxes.
Apple has been on the offensive facing this scrutiny, and Cook has done several interviews in the past week arguing that Apple pays what it owes the U.S. government. Cook justified Apple’s huge amount of foreign cash by saying that the majority of Apple’s products are sold overseas. Last quarter alone Apple’s international operations accounted for two thirds of its revenue. Cook also highlighted that Apple has created or supported the creation of 600,000 jobs in the U.S.
Cook will appear in Washington before the Senate Permanent Subcommittee on Investigations, which has also investigated Hewlett-Packard Co. (NYSE:HPQ) and Microsoft Corp. (NASDAQ:MSFT) over their tax policies. The committee was created to address tax loopholes that allow companies to avoid paying what they rightfully owe the U.S. Treasury. Cook is expected to fire back with proposed changes to the corporate tax code, which he believes “has not kept pace with the advent of the digital age and the rapidly changing global economy.” Cook believes the government should lower corporate tax rates and tax on cash earned overseas.
Both Cook and Apple Chief Financial Officer Peter Oppenheimer have expressed a need for lawmakers to change the tax code so that some of the company’s foreign cash could be repatriated at a lower rate, citing a need for change in policy in the face of a changing global economy. Apple recently sold a record-breaking $17 billion in bonds last month in a move that helped save the company $9.2 billion in reparation taxes.
Whether the Senate committee investigating the tech giant decides to listen to Cook’s arguments about policy change remains to be seen, but if they do it could be a positive for Apple investors and other multinational corporations as well.