Luca Maestri on Apple repatriation, manufacturing and Trump
The Chief Financial Officer of Apple, Luca Maestri, took a half-hour to visit the Goldman Sachs Technology and Internet Conference and talk about the company and money.
Let’s get this out of the way: the iPhone is expected to be a main revenue driver for at least the next few years, though it may be framed as such for up to a decade. Untapped geographies and innovation will be motivators on this front — as has been said time and time again for the past few years.
Talking about the company’s $200 billion or the two-thirds of its gross revenue that reside outside of the United States because of repatriation taxes that would need to be paid, the executive stated that “the situation we’ve got is no good.”
“Corporate tax at 35 percent, — it’s the highest in the world — it’s punitive for companies, it creates international tensions across jurisdictions because of this deferral system that’s in place in the United States,” Maestri said.
Technically, the US’s rate is third to Puerto Rico’s (a US territory that dictates its own tax regulations) and the United Arab Emirates.
He is betting on the Donald Trump administration (not mentioned by name) to lift some of that burden so that Apple can provide investors with major capital returns at a faster pace.
Another Trumpian move may lie with taxing foreign manufacturing — that is, making such costs non-deductible. The president campaigned on a promise to spike domestic manufacturing and has openly appealed to Apple on multiple occasions to build its iPhones in the US.
Maestri thinks that US companies should face lower foreign earnings tax rates as the nature of business continues to globalize. Domestic earnings are a slightly different and stricter story, despite the fact that there has been no proposed legislation for a “border tax.”
“It is a tax that would end up burdening the end consumers and it presupposes the idea that the Dollar would have to appreciate very significantly than it already is today — which is already too strong.”
The US Dollar Index has grown by 25 percent over the past two-and-a-half years. Such a strengthening dollar makes foreign investment and imports cheaper, but dampens branch businesses’ returns in part by making US exports more expensive.
So, to the idea of Apple moving components and assembly plants to the US? Maestri ends up making the point that his employer has two million jobs across the US as well as the Asian supply chain invested over the past decade along with billions of dollars and that the company looks forward to contributing more of that in the future… with shifty eyes towards Washington.