Recent allegations of Apple (NASDAQ: AAPL) sidestepping US taxes has met with vehement opposition from the firm’s boss Tim Cook.
Crackdown on multinationals with low tax bills
Apple is the latest of big name multinational corporations under scrutiny for possible tax avoidance. Others significant mentions in the mix are Google and McDonald's. All these organizations have a multinational presence, which some believe has been leveraged by them to sidestep taxes on home shores.
In spite of being headquartered in the United States, Apple and the others keep the bulk of their companies’ cash overseas - something naysayers attribute to their intent to avoid having to pay taxes in the United States. Pepsi and Ikea have in the past been in the limelight for all the wrong reasons, relating to a less than transparent tax deal with Luxembourg.
Apple comes back with strong response
Cook strongly denied these allegations, saying they were politically motivated statements. He underlined the fact that the company has the highest tax bill in the States, but chooses to hold larger quantities of cash on foreign shores where the bulk of its business lies. For Apple, an estimated two-thirds of their revenues is generated overseas.
Reacting to this claim on an interview in the popular 60 Minutes interview show set to air on CBS this weekend, Apple’s chief said that there was ‘no truth behind it’.
Need for tax law overhaul, says Cook
In other excerpts from the interview, Cook is seen remarking that it is in fact the tax law itself that is in need of change. The code, according to him, is designed to handle the Industrial Age, whereas companies today were operating in a Digital Age, one that works quite differently, necessitating an update to the law as well.
Apple makes a staggering USD 74 billion in overseas revenue, but prefers to keep this away from the United States, due to the prohibitively high costs associated with bringing the funds back. With a 40 percent tax that will hit the revenue should it be brought in, Cook says there is little incentive to do so. The law, which he says is ‘awful for America’, was keeping the technology giant from making this shift.
In the meantime, the Organization for Economic Cooperation and Development, led by President Obama, Chinese premier Xi Jinping as well as the UK’s Prime Minister David Cameron, is clamping down on such moves by multinationals. Some estimates put the losses of global tax revenues to governments at as much as USD 100-240 billion every single year. Numbers that are predictably sending world leaders into a tizzy. It is likely only a matter of time before companies like Apple will be forced to make some tough decisions or cough up higher taxes on American shores.