Apple Inc. (AAPL): Tim Cook and U.S. Tax Code for Dummies … Er, Senators

Apple Inc. (NASDAQ:AAPL) is looked upon by investors and the technology sector as one of the leading forces in the markets and in the state of technology, innovation and competition. Because of its massive market valuation, the company is one of the bellwether stocks that seem to give some direction with the company and with the sector in general. As Apple goes, so goes the sector in terms of reputation and its current state of affairs. This week, however, Apple will be taking on a new role — one of instructor.

Apple Inc. CEO Tim Cook may be giving a lecture about the U.S. tax code and explain in business terms why it is so anti-business and in some cases, anti-American. Apparently the tax code has gotten so bad that our own U.S. Senate can’t get it straight, and a subcommittee is asking Cook to come before it to explain how Apple can get away with not paying its “fair share” of taxes.

It won’t be a matter of whether Apple Inc. will be able to explain it. It will be a matter of whether the senators will even listen or give any weight to what is said if it seems in any way like the it’s the government’s fault that Apple would rather go into $17 billion of debt than to re-patriate $100 billion from overseas because of the repatriation taxes that are on the books.

Yes, that is apparently  the reason behind Mr. Cook being called to testify – these senators find it appalling that an international corporation with more than $100 billion in cash overseas – enough to pay for the stock buyback and increased dividend the company announced last month – would take on debt than pay the government taxes on the money when it is come to the U.S. from abroad.

It seems to be pretty simple math. The U.S tax code has a 35-percent repatriation tax rate for overseas money. Apple Inc. will pay much less than that in interest payments on bond issues. However, the senators may likely focus on the company boasting of paying a 25-percent tax rate but only paying 15 percent into U.S. coffers. Cook had said recently to a Washington, D.C. newspaper, “If you look at it today, to repatriate cash to the U.S., you need to pay 35 percent of that cash. And that is a very high number. We are not proposing that it be zero. I know many of our peers believe that … But I think it has to be reasonable.”

What do you think will come out of this testimony? Do you think Apple Inc. has the cachet to sway some opinions about the tax code, or is this a witch hunt that really won’t amount to much? Let us know your thoughts in the comments section below.