Taxing Testimony: 10 Highlights From Apple CEO Tim Cook's Remarks To Congress4:00 PM EST Wed. May. 22, 2013
Apple found itself under the microscope of the U.S. Senate Tuesday when the Permanent Subcommittee on Investigations held a hearing about Apple's tax avoidance practices. The subcommittee criticized Apple for the use of offshore subsidiaries in Ireland to avoid paying corporate income taxes in the U.S. and Ireland. Apple CEO Tim Cook testified before the subcommittee and offered his thoughts on the use of offshore tax shelters, the U.S. corporate tax rate, Apple's international expansion, and its effect on the economy. Here are 10 key quotes from Cook's testimony before the U.S. Senate Tuesday.
"Apple has enjoyed unprecedented success over the last 10 years. The worldwide popularity of our products has soared and our international revenues are now twice as large as our domestic revenues. As a result, I'm often asked if Apple still considers itself an American company. My answer has always been an emphatic yes. We are proud to be an American company, and equally proud of our contributions to the U.S. economy."
"If you've ever used an iPhone or an iPad, then you know mobile apps are one of the hottest things in technology today. Apps have made software development one of the fastest-growing job segments in the U.S. today. We estimate that the App Store has generated nearly 300,000 new jobs in the U.S. App developers have earned over $9 billion from apps sold on the App Store -- half in the last year alone. None of that economic activity was there five years ago. But Apple took a bold step in developing the App Store, and the app economy was born."
"While job growth stagnated across the U.S. over the last decade, Apple's U.S. workforce grew by fivefold. Today we have 50,000 employees, and we have employees in all 50 states. Apple has created hundreds of thousands of jobs at small and large businesses that support us, from people involved in manufacturing to people involved in delivering the products to our customers. Components for iPhone and iPad, for example, are made in Texas, and iPhone glass comes from Kentucky. In total, Apple is responsible for creating or supporting 600,000 new jobs. We've used our earnings growth to invest billions of dollars in the U.S. to create even more American jobs. We're investing $100 million to build a line of Macs in the U.S. later this year. This product will be assembled in Texas, include components from Illinois and Florida, and include equipment produced in Kentucky and Michigan."
"With all this growth an investment, to the best of our knowledge Apple has become the largest corporate income taxpayer in America. Last year, our U.S. federal cash effective tax rate was 30.5 percent and we paid nearly $6 billion in cash to the U.S. Treasury. That's more than $16 million each day. And we expect to pay even more this year."
"We pay all the taxes we owe -- every single dollar. We not only comply with the laws, we comply with the spirit of the laws. We don't depend on tax gimmicks. We don't move intellectual property offshore and use it to sell our products back to the United States to avoid taxes. We don't stash money on some Caribbean island. We don't move our money from our foreign subsidiaries to fund our U.S. business in order to skirt the repatriation tax."
"Our foreign subsidiaries hold 70 percent of our cash because of the very rapid growth of our international business. We use these earnings to fund our foreign operations, such as spending billions of dollars to acquire equipment to make Apple products and to finance construction of Apple retail stores around the world. Under the current U.S. corporate tax system, it would be very expensive to bring that cash back to the United States. Unfortunately, the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors, who don't have such constraints on the free movement of capital."
"We recommend a dramatic simplification of the corporate tax code. This reform should be revenue-neutral, eliminate all corporate tax expenditures, lower corporate income tax rates, and implement a reasonable tax on foreign earnings that allows the free flow of capital back to the United States. We make this recommendation with our eyes wide open, fully recognizing that this would likely result in an increase in Apple's U.S. taxes. But we strongly believe that such comprehensive reform would be fair to all taxpayers, would keep America globally competitive, and would promote U.S. economic growth.
"I think the [tax] rate on U.S. sales, in my judgment and from most of the studies I've seen, indicate it would need to be in the mid-20s as all of the expenditures are dropped out."
"The barrier right now in terms of repatriating cash is that it's repatriated at the 35 percent level. And so our proposal -- and I may be a bit different than my peers here, as I'm not proposing zero -- is that we eliminate all corporate tax expenditures, get to a very simple system, and have a reasonable tax on bringing money back from overseas. And I think if we did that, I think many, many companies would bring back capital to invest in the United States and it would be great for the economy. "Apple does not support a temporary tax holiday. We think the tax code needs to be comprehensively reformed for a long period of time. I think in terms of a rate for bringing back foreign earnings, to incent a huge number of companies it would need to be a single-digit number. And I think by doing that you wind up in a revenue-neutral kind of situation, which means some companies would pay a bit more -- and I think we would be one of those -- and other companies would pay less. But I think more important ... it would be great for growth in this country. And so that's the reason I feel so adamant about doing this."
"We're an American company, and we're proud to be an American company. We do the vast majority of our R&D in California. And so we're there because we love it there, and this is where we can create and make things that people haven't even imagined yet. I have never thought -- it has never entered my mind, honestly -- of moving our California headquarters to another country. It's beyond my imagination -- and I have a pretty wild imagination."
"We can't use our overseas cash to make any investments in the United States. I have no current plan to bring [foreign cash] back at the current tax rate. I don't think that's the same [as saying Apple won't ever bring cash back unless the U.S. lowers its repatriation tax rate]. I'm not projecting what I'm going to do forever, because I have no idea how the world may change."