Apple's Tim Cook defends tax strategy in Senate

Apple CEO Tim Cook: "We pay all the taxes we owe. Every single dollar"

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The technology giant Apple has been defending itself against accusations that it's avoided paying tax on tens of billions of dollars in profits.

Chief executive Tim Cook told a US Senate committee Apple paid all the taxes it owed, complying with both the law, and the spirit of the law.

He said last year it paid $6bn to the US Treasury, a tax rate of about 30%.

Earlier, the head of a Senate committee panel accused Apple of "exploiting an absurdity" in its tax payments.

Apple's grilling comes as leading global brands are under growing scrutiny over their tax methods.

Analysis

Apple is a US success story. Its iPods, iPhones and iPads are known all around the world. It has earned a reputation for engineering creative and popular products.

But it has some baggage too. Apple's manufacturing practices in China have been criticised. And now US lawmakers are calling the tech giant to task for not paying its fair share of taxes.

Apple boss Tim Cook forcefully defended his company's financial practices: The problem isn't us, it's the way the US tax law is written, and there should be a dramatic overhaul of the corporate US tax code.

That may be, but it doesn't change the fact "Apple is exploiting an absurdity," according to one US senator.

A central theme in this post-financial crisis environment is getting wealthy Americans to pay their fair share in taxes. So it's not too surprising congressional leaders are coming after multinationals that are, in their opinion, also not paying their fair share.

Google, Amazon and Starbucks have all appeared recently in front of UK politicians to answer questions about their affairs.

One country where Apple has a favourable tax regime is the Republic of Ireland.

Apple's appearance comes just a day after the same panel branded Apple's complex structure the "Holy Grail of tax avoidance".

On Monday, the Subcommittee said Apple had used "a complex web of offshore entities" to avoid paying billions of dollars in US income taxes. But it said there was no indication the firm had acted illegally.

Mr Cook told the panel that a "dramatic simplification" of US tax laws was required, and said the firm believed that reform should be "revenue neutral".

Legal web

Apple has been accused by The Senate Permanent Subcommittee on Investigations, which has been examining "methods employed by multinational corporations to shift profits offshore", of being "among America's largest tax avoiders".

Committee member John McCain said although the action taken by Apple was legal, it could be unfair to other companies: "My question is, couldn't one draw the conclusion that you and Apple have an unfair advantage over domestic based corporations and companies, in other words, smaller companies in this country that don't have the same ability that you do to locate in Ireland or other countries overseas?"

Mr Cook said he believed Apple was one of the largest taxpayers in the US, having paid $6bn in federal corporate income tax in the 2012 fiscal year.

Panel chairman Senator Carl Levin says Apple avoided paying $9bn in tax in the US in 2012

Mr McCain said: "Apple claims to be the largest US corporate taxpayer, but by sheer size and scale, it is also among America's largest tax avoiders."

Apple has a cash stockpile of $145bn (£95bn), but the Senate committee said $102bn of this was held offshore.

Mr Cook also told the hearing that Apple considered itself an American firm, and was one that had created jobs across the country.

"We are proud to be an American company, and equally proud of our contribution to the American economy," he said.

'Holy Grail'

In its report into Apple, the subcommittee's chairman Carl Levin said: "Apple wasn't satisfied with shifting its profits to a low-tax offshore tax haven.

"Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere."

Start Quote

For Apple to be seen as the world's greatest accumulator of cash that seemingly has little productive use may not be adding lustre to its image”

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Apple has stated: "Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax.

"It does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands."

It added that it had "substantial" foreign cash because it sells the majority of its products outside the US, and these foreign earnings were taxed in the jurisdictions where they were earned.

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