Everyone knows that the global corporate tax system needs to be overhauled, Apple Chief Executive Tim Cook said on Monday, backing changes to global rules that are currently under consideration.
The growth of internet giants such as Apple has pushed international tax rules to the limit, prompting the Organisation for Economic Cooperation and Development (OECD) to pursue global reforms over where multinational firms should be taxed.
The reforms being examined center around the booking of profits by multinational firms in low-tax countries such as Ireland where they have bases – and where Cook was speaking on Monday – rather than where most of their customers are.
“I think logically everybody knows it needs to be rehauled, I would certainly be the last person to say that the current system or the past system was the perfect system. I’m hopeful and optimistic that they (the OECD) will find something,” Cook said.
“It’s very complex to know how to tax a multinational… We desperately want it to be fair,” the Apple CEO added after receiving an inaugural award from the Irish state agency responsible for attracting foreign companies recognizing the contribution of multinationals in the country.
I think Tim Cook sees the writing on the wall, and wants to get out in front of it. Apple has long been the poster child for tax avoidance, but Cook knows this has to change.
While it is certainly complex, one thing is obvious: companies with subsidiaries in countries other than their own should pay taxes on earnings in those countries. Apple funnels all (or most) of its earnings to Ireland; Amazon funnels theirs to Luxembourg. I live in the UK, where Apple paid £3.8 million in taxes on £1.2 billion in sales, and Amazon earned £10.9 billion last year, and paid a paltry £220 million in tax. (That’s all taxes, not just corporate income tax, but including, say, payroll taxes.) That’s 0.3% for Apple, and just over 2% for Amazon, for all taxes; I pay 19% on my business’s earnings.
The company should certainly not be taxed for the full value of what they sell; much of that value is made in their home country. But there should be a reasonable way to calculate the wholesale value of an item, such as an iPhone, and what share of the retail price is profit in the local country.
It’s worth noting that Cook is calling for this overhaul after Apple saved $40 billion thanks to the “GOP’s corporate tax handout.”