Wednesday, 22 May 2013

Apple CEO Defends Tax Strategy, Attacks US Tax Code in Testimony with Senate Panel

 by Mark J. Miller

Apple CEO Tim Cook was in Washington, D.C. Tuesday to go before the Senate Permanent Subcommittee on Investigation, which is accusing the huge corporation of avoiding paying US taxes.
Sure, Apple paid about $6 billion in taxes to the US government last year and,according to, “already pays $1 out of every 40 tax dollars the U.S. collects,” but according to the committee, Apple has been stashing billions in offshore accounts in Ireland, where the company had reportedly negotiated a tax rate below 2 percent. One of the Irish subsidiaries is known as Apple Operations International, which has no employees but posted $30 billion in income from 2009 to 2012, the Committee reports. 
"We are proud to be an American company, and we are equally proud of our contributions to the U.S. economy," Cook told the panel. While the company was lauded for its technilogical and economic contributions to the US, Sen. Carl Levin told the panel that "Apple executives want the public to focus on the U.S. taxes the company has paid, but the real issue is the billions in taxes it has not paid, thanks to offshore tax strategies whose purpose is tax avoidance, pure and simple," the L.A. Times reports.
"Apple claims to be the largest U.S. corporate tax payer, but by sheer size and scale, it is also among America's largest tax avoiders," Senator John McCain said Monday, according to ABC News. As of April, Apple had $145 billion in cash and $102 billion of it was stored somewhere overseas, the Chicago Tribune reports.
However, Ireland says that no special deal was negotiated. "Ireland does not do special tax rate deals with companies," a spokesman for the Irish finance ministry said, according to the Wall Street Journal. "We do not have a special extra low corporation tax rate for multinational companies. Ireland's tax system is statute based so there is no possibility of individual special tax rate deals for companies."
In preparation for Tuesday's hearing, Apple released what was expected to be Cook'sbasic talking points in a 17-page PDF: Apple "does not use tax gimmicks"; Apple already pays “an extraordinary amount; and the company’s tax rate last year was approximately 30.5 percent. The document goes on to detail not what Apple can do to change its behavior but how the US tax code might be changed to reflect the new digital age.
ABC News reports that the Senate Subcommittee was ready with its own document, a 40-page paper that aimed to show that Apple had used “offshore structures, arrangements, and transactions to shift billions of dollars in profits away from the United States and into Ireland.”

While no laws have apparently been broken, the US isn't too happy about Apples tax-dodging ways. After all, it just lost out on over 9 billion in taxes after the company financed part of its $55 billion stock buyback with debt instead of overseas cash, which would have incurred repatriate fees if used. Apple is far from the only company being accused of bilking taxes. Last year, the US Subcommittee dealt with Microsoft and Hewlett-Packard in hearings, the Chicago Tribune notes, while Europe has dealt with similar accusations against Starbucks and Google, who also pointed to Ireland as the reason it avoids paying so much tax. 

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