Apple CEO Cook’s comments on taxes leave many unanswered questions

“CEO Tim Cook’s comments to an Irish radio station about Apple’s intentions to repatriate billions of dollars next year leave more questions hanging than they answer,” Tony Owusu writes for TheStreet. “‘We paid 400 (million dollars) to Ireland, we paid 400 to the U.S. and we provisioned several billion dollars for the U.S. for payment as soon as we repatriate it, and right now I would forecast that repatriation to occur next year,’ Cook told Irish state broadcaster RTE in an interview Thursday.”

“‘While anything is only speculation for now, Cook could have commented on this to spur some further conversation for tax reform domestically as Apple definitely would rather be taxed in the U.S. as opposed to the EU (especially with the recent ruling) as long as there are some changes here that make it more reasonable to do so,’ AAP senior analyst Scott Berman said in an email today,” Owusu writes. “The seemingly sudden reversal illuminates several questions that the informal setting of the interview did not allow Cook to expand on in his comments. It isn’t clear just how much money the company plans to repatriate or what they plan to do with it.”

Once — or better yet, if — that money makes it to the U.S., there are many options for Apple that could include boosting the dividend, pursuing an acquisition or simply sitting on it until an enticing opportunity comes along. — AAP senior analyst Scott Berman

Read more in the full article here.

MacDailyNews Take: Again, let’s not do another “one-time-only” (smirk) repatriation holiday. Let’s fix the broken U.S. corporate tax code instead. Let us eschew the easy way out, that fixes nothing in the long run, and choose to do the hard work instead (for a change).

SEE ALSO:
Irish government to fight EU on Apple tax – September 2, 2016
Treasury accuses EU of trying to steal U.S. tax revenues with Apple decision – September 1, 2016
Irish residents opposed to EU’s tax demand of Apple – September 1, 2016
Apple Inc. pushes back against EU tax grab – September 1, 2016
Apple may repatriate billions of dollars next year after new U.S. President takes office – September 1, 2016
U.S. tax code allows for dramatic retaliation against EU overreach in Apple case – September 1, 2016
Apple CEO Tim Cook on EU tax demand: ‘No one did anything wrong here and Ireland is being picked on… It is total political crap’ – September 1, 2016
U.S. Treasury: The European Commission’s retroactive tax demands on Apple are unfair – August 30, 2016
EU demands Apple pay massive $14.5 billion in taxes plus interest – August 30, 2016
U.S. government warns EU: Do not hit Apple with a massive back tax bill – or else – August 25, 2016

36 Comments

  1. And the final sentence of that text makes it quite telling why significant lowering of taxes likely won’t happen that soon.

    Last tax holiday was done in 2004. What happened with all the billions of money that came back to the US was quite telling. The IRS helped themselves to their share (which was rather meagre, some 3.5%), but the companies bringing back the money overwhelmingly used it to reward shareholders and the executive suite (rather than spend it in a way that would end up stimulating the economy, such as more R&D, expanding operations or such).

    Large multinationals continue to vocally argue that lowering corporate taxation would allow them to bring that money home, and their main argument is that this would stimulate the US economy. Based on what they did when they got a chance to bring the money back after these one-time tax holidays, it is clear that this argument isn’t truthful.

    That said, allowing this money back at a lower tax rate (or lowering corporate taxes altogether) would boost tax revenue, both from taxing the repatriated money, and, indirectly, by taxing capital gains from sales of stock by shareholders who profited from the repatriated cash distribution (remember, the money almost inevitably all goes back to the shareholders, rather than into the economy). Last time, in 2004, the extra windfall for IRS was around $16B for that one year. The total amount that was brought back (by all American companies) was around $360B.

            1. My title was Chief of Special Projects, Waste Management and I reported directly to Chairman Dick Cheney…my job essentially was stuffing libtärds down the rat hole of a well, fracking it and then cementing it in. My proudest possession is the letter of commendation from President Reagan congratulating me on my achievements.

      1. I believe the more accurate metaphor is:
        “Tinkle down economics”,
        as in the rich taking a tinkle on the poor below. The alternative expresses the bad attitude of those involved in this economic theory toward those less fortunate than themselves, a form of sociopathy.

        Alternate names were:
        ‘Voodoo Economics’ – GHW Bush
        ‘Reaganomics’ – ?
        ‘Free-Market Economics’ – ?
        and
        ‘Supply-Side Economics’ – Arthur B. Laffer & others

        And no, you don’t have to be a dire liberal/socialist to recognize bad capitalism when you see it. Parasitism benefits no one but the parasites.

    1. 1. “… overwhelmingly used it … … rather than”
      It’s no business of yours what they do with their own money. If you got to keep more of yours, would you want someone (anyone) to tell you what you should do with it?

      2. “… goes back to the shareholders, rather than into the economy.”
      Shareholders are the economy.

      The Marxist mindset is that they are entitled to most of other peoples money and then tell them what they have to do with the rest of it.

      1. Are you a real idiot or do you just pretend to be one??

        Nobody is telling anyone what to do with their money. My argument, and you apparently completely missed (blinded by your political mindset) is that these corporations want a tax break, in order to bring the money back, so that the money can stimulate economy and create jobs. And when they do get that tax break, they don’t bother doing what they argued; instead, they reward themselves and their owners.

        And no, giving money to the shareholders is NOT investing it into the economy. It does NOT create more jobs, nor does it create more commerce. It only increases wealth of those rich enough to own shares of APPL.

    2. I understand the political perception issue with companies repatriating profits and using it reward already wealthy company shareholders and executives. But the money doesn’t just disappear into a hole when distributed to these people. It goes into the banking and financial system bringing greater liquidity and availability of credit, which does help the economy. And keep in mind that the recipient shareholders and executives will also pay taxes on the additional income.

      1. Yes, that’s the “trickle-down” theory that seems to keep coming back as an argument, and it simply doesn’t hold water.

        Shareholders of AAPL are, on average, quite wealthy. When wealthy person catches some financial windfall (increased dividend or any other way), they tend to simply pile up that wealth. Yes, they do pay whatever minimum taxes they have to on that, which goes back to the government, but the level of economic activity that windfall generates is significantly lesser than when a middle-class person receives an unexpected income. People of moderate means will usually spend whatever is left after the taxation, which obviously goes right back into commerce.

        Nobody is telling these corporations what to do with their money, but they really need to stop promising that they would generate jobs and stimulate the economy with the repatriated money, and then when it happens, turn around and simply reward themselves (owners, management, board) with that money. That sounds dishonest.

        1. “Trickle down” has become a label of disparagement as of late implying a broken but somewhat nebulous promise. That doesn’t mean the concept behind it has become any less true. This is basic math and logic.

          I don’t know what corporate executives arguing for a tax holiday have been saying so I’ll take it at face value that they have made promises that have not been fulfilled in the spirit they were conveyed. We know they’re in it for the money. But unless we are of the redistributionist persuasion why should we care? Unless that money gets stuffed into a mattress it is going to flow into the capital markets. And that is a very good thing for the economy as a whole.

  2. The one-time-only repatriation deal reminds me of the fat, rich woman who sponsors a lavish Thanksgiving dinner for the homeless and all the news bimbos and all her touchy-feely toadies heap mountains of praise upon her great philanthropy and humanity to “the less fortunate.”

    Which is all good and wonderful if people only ate once a year.

  3. Right now the issue at hand is the EU trying to pull a fast one with false claims of some kind of tax deal which never happened. They want 14 billion dollars for taxes which were already paid fairly since 1980. If Ireland has no issue with Apple’s taxes then the EU should stop this non-sense. They are headed down a dangerous road for there economy if they keep trying this non-sense on all companies.

    1. Whether or not the EU is successful, the revelation that the worlds biggest technology corporation has traded in Europe whilst paying only about 1% on its profits as taxation, is so appallingly disgusting that all activities of this kind will be severely curtailed. Public opinion will demand it ceases.

  4. This could have something to do with the Clinton fund raiser he hosted, and her comments about having a solution to repatriating cash.

    Cook assumes Clinton will become President, and maybe he’s worked a tentative deal with her already. $100k per plate dinners in SillyCone Valley buys a lot of facetime, and in the shadows, behind the scenes, that’s Clinton’s preferred way of working… Like Don Corleone.

  5. The reason a “one time” tax holiday or cash repatriation doesn’t work, is there is no ongoing incentive. Why should Apple or any other company move cash back “once”, they won’t move a large enough amount about to make any serious difference because it will just get taxed later in some other fashion.

    If Clinton wins, any, and I mean “any” promise she made to anyone is not worth the spit it came out on.

    1. Leaving aside your final comment, I would have thought maybe notions of national pride and patriotism might have come into play. Apple has funds a plenty and could set up an investment corporation to help out new startups in the Rust Belt for example. Or is everything decided in Wall Street nowadays?

  6. Well, hm?

    Here is what should take place. Companies should pay taxes on the money they make in a country to that country. If they want to move money to another country they should pay taxes on the money they move to the country where the money is going.

    What is funny to me is how many people argue for the companies as if the companies’ money is their personal bank account. There should be a cost with doing business all over the world other than just shipping. Just think how many jobs this would create in the private sector. (every kid in business school could find a job, no problem)

    And yeah, every country should be free to set it’s own tax rate, from 0 to 100%. All the company needs to do is figure out if they should be in that country.

    Apple, for example, should pay taxes in china on the profits made in china. If Apple wants to bring the remainder of the money to the US, Apple should pay taxes on the money they bring into the US. As for paying shareholders, the checks could be written from an overseas bank, paying taxes on that money is now on the shareholder. All shareholders care about is does the check clear. There is no value to the shareholder unless they are receiving dividends. That the money sits in a big warehouse, that Apple owns or controls (so to write think bank account then), and does not make the shareholder any richer, so why would the shareholder care what happens to that money? (To too many of us think it’s about the share price, suckers, us all. Why have a business and not get any money out of it? Man! That just un-American! Let others enjoy the high life, what’s wrong with this picture?)

    Why does everybody want free passes?
    There is no free lunch. It’s fair, because every company has to do it and has do it the same way. It’s as constant as the Northern Star. Just one more thing. Why do you care? There is nothing in it for you. You can’t use the jet.

    1. Well, that’s not exactly how it works. US law requires every US citizen or legal resident to pay taxes on income, regardless in which country (or on which planet) it was earned. When American astronauts flew on Russian space rockets to the Russian space station, they still had to pay taxes for the money earned on that space station… The point is, if you are American (person or company), you pay taxes.

      Now, if you (American person or company) earn money in a foreign country, and that country taxes you (in accordance with their own laws) on that income, you can deduct the amount you paid to the foreign government from the amount you owe to the IRS, but you still have to pay taxes to the IRS (unless the amount you paid to your host country is greater than what you owe to the IRS).

      None of the above apply to this case. Apple Distribution International is the name of a company headquartered in Cork, Ireland. This company is responsible for Apple’s commerce throughout the EU and a few other countries. It is an Irish company, and it pays taxes to Ireland on revenue reported in Ireland. The company operates not just in Ireland, but, as I said, in the rest of EU, and some other countries, and it reports all foreign revenue in Ireland. It doesn’t report ANY revenue to the American IRS (nor to Canadian Revenue Service, nor UK, nor Germany, nor South Africa, or any other country). While the company may be a subsidiary of Apple Inc. (from Cupertino, USA), until any of that money crosses US border, it cannot be taxed by the IRS.

      As for shareholders’ cheques, I don’t quite understand how can they be written from an overseas bank, if the shares are traded on an American stock market, and the dividend is paid out from Apple’s capital in America? Writing checks from an overseas bank (presumably, one that holds all those profits reported by the Irish subsidiary) would mean that Apple is repatriating that money, which further means that they would need to pay US taxes of any of the money that comes in through those cheques.

      As for what shareholder cares, of course they do, precisely because Apple seems to be hoarding money, instead of improving value for the shareholders. They want Apple to either buy back more shares (with all that money), or increase dividends, or both. In other words, they want that money to make them richer (remember, that’s the reason they bought shares — to increase their own wealth).

      As for why we care, everyone has their own reasons, but most here own at least some of AAPL, and any money that is just sitting there in a pile is money that’s not working to increase the value of those shares.

      1. “Now, if you (American person or company) earn money in a foreign country, and that country taxes you (in accordance with their own laws) on that income, you can deduct the amount you paid to the foreign government from the amount you owe to the IRS, but you still have to pay taxes to the IRS (unless the amount you paid to your host country is greater than what you owe to the IRS).”

        I’m curious, does that work the same way in the reverse case where you as a German citizen (I’m guessing) lived and worked in the U.S. and paid taxes to the IRS, would those taxes (including State and County if any) offset the taxes you pay to Germany as an expatriate on that income?

          1. I don’t think so. As TxUser below said, there are very few countries in the world who tax their citizens on monies earned abroad even if they reside abroad.

            German citizen living in the US (or any other country outside the EU) doesn’t have to pay any taxes to the German tax authority. The only taxes they pay are to their host country, if required.

        1. Actually, the US is one of very few countries who charge their expatriate citizens income taxes on offshore income. When my wife (then a British subject) worked in Dubai for a decade, she paid the minimal UAE taxes but owed nothing to Great Britain.

          1. And this makes complete sense. You may be a citizen of a country, but if you live, work and pay taxes somewhere else, it makes no sense to have to also pay tax to a country from which the only benefit you are getting at that point is the fact that they issued you a passport.

            The US treats the benefit of its citizenship as this high and extremely valuable privilege for which anyone and everyone who is entitled to it has to pay. The rest of the developed world is much more realistic (and fair).

  7. No, not double taxation. Taxation.

    They don’t ever have to bring those profits to the US. Ever!
    But they should pay tax to whatever country they do business in and derive a profit from or not. It’s up to that country. The US should not care what the company makes in another country. Only the money they bring into the US.
    2,000,000,000,000,.00 overseas if at the full 35% rate, which they would never pay, that’s enough money to cover the deficit with 200 billion leftover. The president of the United States said he would be happy with a 25% rate no loopholes. That’s more than fair, way more than fair. And, it’s simple to do. How much money the company wants to bring in times 0.25. Make the check out to the US Treasury Department. Done! But oh no, the company needs a deduction for the CEO and his or her dog to fly over and get the money. Or, a deduction, for the palace purchased in France. Oh, they must have that deduction for the 200 foot yacht in Greece. Oh, then they want to deduct the salaries of those that crew, or cleaners, or cooks, or people standing on the beach, or swimming in the ocean, or …

    Yes, that difference should be tax by the US if they bring it to the US. Why? Well there is a reason they want to bring it here and I bet you it’s the services, protections, and administration of the American government, via Constitutional structure or opportunities. Or, just to be rich in the US. Whether they are taxed at all by any other country for the profits they make in that country is up to that country. Best the US only concern itself with what is coming in. ( you want to keep government small don’t you )

    It’s a true waste of money with share buybacks. Pay 80% of the profits to all shareholders, the share price will find Planet X. So we get a 2 for 1, find a new planet and save the money not looking for it.

    Oh, yeah, the EU thing, forget the EU, as far taxes are concern cause countries are only going to cheat or figure out a loophole to attract companies to move. So forget about it.

    And leodavinci1, with all that rushing to the bottom, 0 tax rate, in order to get a company to come into their country, American Companies will never pay a dime of tax overseas.

    Predrag : “Here is what should take place.” ” should ” being the key word here. But it’s fine. It was a great read. Oh, people in the US can cash checks drawn on banks from overseas. Are you up for an experiment? ( a real bank with real money now, we can test it ) 🙂

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.