Sunday 25 February 2018

Apple's Cook backs US tax on overseas profits

Apple CEO Tim Cook says the tax should boost infrastructure
Apple CEO Tim Cook says the tax should boost infrastructure

Nico Grant and Emily Chang

The CEO of Ireland's biggest taxpayer, Apple, has said any new US tax on companies' overseas earnings should be mandatory with proceeds spent on upgrading US infrastructure.

Apple has $257bn (€228bn) in cash reserves, held mostly outside of the US.

Tim Cook said any new, lower federal tax rate on US companies' overseas earnings should be mandatory for all companies, and proceeds should be spent on upgrading US infrastructure.

"It should be a required tax," Mr Cook said in an interview with Bloomberg Television. "And so you're not asking the people that have had earnings from their international subsidiaries if they'd like to bring back money. You're saying that, you must pay the government X percent now or over some period of time."

Apple has $257bn in cash reserves, and most of it is outside of the US. Like many CEOs, Cook has supported US President Donald Trump's repatriation push, which could see Apple bring overseas cash back to the US without being hit with the country's full 35pc corporate tax rate.

During his campaign, Trump proposed requiring companies to pay a one-time 10pc levy on their offshore income.

Unlike most developed nations, the US applies its 35pc corporate income tax to global earnings, not just US income. But companies can defer tax on their overseas profits until they decide to return those earnings to the US, or "repatriate" them. To delay those bills, companies including Apple, Microsoft and Alphabet have stockpiled an estimated $2.6trn offshore, sometimes borrowing in the US against the offshore funds in order to return cash to shareholders.

Economists say removing the incentive to hoard cash outside the US would stimulate the world's largest economy by encouraging domestic investment. Investors are keen for the money to come home because they expect much of it to be spent on stock buybacks and dividends.

Cook told Bloomberg Television that he supports a "deemed repatriation" tax rule - the approach that Trump and congressional Republicans favour. Under that approach, companies would be deemed to have repatriated their cash already - whether they plan to or not - and automatically owe the tax. Payment schedules could be spread over years. (Bloomberg)

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