What Apple CEO Tim Cook Really Thinks About Corporate Taxes

Apple is now awaiting a European Union ruling on whether you owe billions in back taxes, and corporate tax reform is a big election-year issue. Does either a Trump or a Clinton campaign give you or the company any hope that there could be corporate tax reform anytime soon?

I think it’s in the best interest of the U.S. to have corporate tax reform, regardless of which political party is in charge of the White House. Because if you look at it, the U.S. rules today are that international companies like us and many others can keep their earnings that they earn overseas overseas, and then when they bring them back it triggers the tax liability.

What I’ve always felt should happen is that every dollar should be taxed immediately with no deferral. But as a consequence of doing that, you should have free flow of capital. What would happen is if a system like that were put in place, it should have more investment going into the United States. We’re the only major country in the world that has a system like this. It’s not good for the U.S., it’s not good for the economy, it’s not good for jobs, it’s not good for investments.

I think there’s wide agreement to that in both parties, by the way. There’s a difference of view with different people about how to fix it, but I think everybody agrees the current system isn’t working. So I’m optimistic that, in 2017, there will be some sort of corporate tax reform. The U.S. needs to invest more in infrastructure — so what would be great is, if they take the tax proceeds of a corporate tax reform and invest it in infrastructure and roads and bridges and airports.

What do you say in response to Nobel economist Joseph Stiglitz’s comments on Bloomberg [television], where he called Apple’s profit reporting in Ireland a “fraud”?

I didn’t hear it. But if anybody said that, they don’t know what they’re talking about. Let me explain what goes on with our international taxes. The money that’s in Ireland that he’s probably referring to is money that is subject to U.S. taxes. The tax law right now says we can keep that in Ireland or we can bring it back. And when we bring it back, we will pay 35 percent federal tax and then a weighted average across the states that we’re in, which is about 5 percent, so think of it as 40 percent. We’ve said at 40 percent, we’re not going to bring it back until there’s a fair rate. There’s no debate about it. Is that legal to do or not legal to do? It is legal to do. It is the current tax law. It’s not a matter of being patriotic or not patriotic. It doesn’t go that the more you pay, the more patriotic you are.

And so what we’ve said — we think it’s fine for us to pay more, because right now we’re paying nothing on that and we leave it over there. But we — like many, many other companies do — wait for the money to come back.

In the meantime, it’s important to look at what we do pay. Our marginal rate, our effective rate in the U.S. is over 30 percent. We are the largest taxpayer in the United States. And so we’re not a tax dodger. We pay our share and then some. We don’t have these big loopholes that other people talk about. The only kind of major tax credit that we get is the R&D tax credit, which is available to all companies in the United States. That’s important to know. The second thing I would point out is we have money internationally because we have two-thirds of our business there. So we earn money internationally. We didn’t look for a tax haven or something to put it somewhere. We sell a lot of product everywhere. And we want to bring it back, and we’ve been very honest and straightforward about that.

How long are you willing to keep unrepatriated income overseas?

Honestly, I believe the legislature and the administration will agree that it’s in the best interest of the country and the economy to have tax reform. So I don’t think I have to make that decision. I’m optimistic that it will take place next year.