updated 11:30 am EDT, Thu May 23, 2013
Still far below most tech companies in fed spending
On the heels of Apple CEO Tim Cook's testimony in Washington on the subject of tax policy, Apple is being seen as doubling its spending on lobbying in Washington -- though it would still be a minor player when it comes to tech companies and money flowing to Congressional representatives. According to Reuters, Apple will boost spending to $4 million, about the same as what Facebook spends on lobbying.
The iPhone maker has found itself more and more in the focus of the government and Congress as it engages in a costly war over patents, fights the Department of Justice over alleged e-book price fixing, and addresses the controversy of its "tax avoidance" policy, the latter of which is no different than any other large corporation except for Apple's sheer scale. Like Google, Cisco, Yahoo and others, Apple takes advantage of every available loophole and legal strategy to keep its tax bill across the many countries in which it operates as low as possible.
Cook addressed the issue in a Congressional hearing on Wednesday, defending the company's methods as being completely legal and above-board, and gently pointing out that Congress both created the problem and could fix it if it chose to do so. He also put forth a proposal for compromise on America's current corporate tax rate, which (barring deductions and credits) is one of the highest in the world at 35 percent.
Under Cook's proposal, the tax rate would be lowered to somewhere in the "mid-twenties" in terms of rate, but would also remove some of the deductions and credits. Similar in nature to a proposal from the Obama administration, Cook believes that the reform would incentivize at least some companies into "repatriating" foreign profits currently held outside the US into bringing them into the economy, resulting in a significant revenue and tax boost. He also admitted that under his proposal, Apple would likely pay more in taxes than it does currently.
Without some kind of reform, he added, neither he nor most multinational corporations are particularly interested in bringing those profits home to the US, given that the money has already been taxed once in the countries in which they were earned and that it would be subject to a further 35 percent tax. Cook acknowledged that it was actually cheaper for Apple to borrow money in the US at the current historically-low interest rate for things like dividends and buyback programs than it would have been to bring in foreign profits to pay for those programs.
He stressed, however, that Apple pays taxes on 100 percent of its sales in the Americas at US tax rates, does not stash US profits in offshore havens as many other US corporations do. Apple's effective tax rate in the US is about 30 percent, and accounts for 1 out of every 46 dollars collected in corporate income tax.
The $4 million Apple will spend on lobbying this year pales in comparison to some tech companies. Oracle, for example, spends around $6 million a year on lobbying, while Microsoft's total is more than $8 million. Leader of the pack so far as been Google, which spent $18.2 million on influencing legislation and legislators in 2012.
Despite a serial list of bad behaviors, the Android maker has thus far been treated with kid gloves in most matters on the federal level: the DOJ refuses, for example, to look into charges that the company engaged in monopoly abuse through predatory pricing of e-books prior to Apple's entry into the market, and a recent consent decree signed by Google with the FTC to get it to stop seeking injunctions on SEP-based patents has proven all but worthless.
As part of its renewed lobbying effort, Apple has hired Capitol Tax Partners, the Glover Park Group, Franklin Square Group, and Fierce, Isakowitz & Blalock -- firms with experience in taxes, broadband, electronic waste and spectrum issues, reports AppleInsider. Given Cook's comments, the company will likely want to lobby Congress on environmental and corporate tax issues, along with intellectual property and patent reform issues.