A few hours after Apple published a testimony prepared for CEO Tim Cook, who will face a U.S. Senate subcommittee on Tuesday to defend the tax practices of his company, the senate body also released its own report revealing how the technology giant avoided paying domestic taxes amounting to $44 billion in the last four years.
The top executive of Apple will come with Peter Oppenheimer and Phillip Bullock, CFO and head of tax operations, respectively. On the other side will be Democrat and Republican senators playing tag team to pin down Cook for the tax avoidance of the most profitable technological firm in the country. The public hearing is expected to be a battle royale.
What The Senate Report Revealed
According to the report of the U.S. Senate's Permanent Subcommittee on Investigations, Apple used an elaborate network of subsidiaries located in other countries to avoid billions of dollars in local taxes in the past four years.
"Apple has $145 billion in cash, cash equivalents and marketable securities, of which $102 billion is offshore. Apple has used off shore entities, arrangements, and transactions to transfer its assets and profits offshore and minimize its corporate tax liabilities," according to the senate report.
The investigators disclosed that some of the subsidiaries set up by Apple did not have employees but were largely operated by the company's own officials from California. The company officially located these subsidiaries in other countries where taxes are significantly low and setting them up to make them stateless so they are exempted from tax duties.
The subcommittee report also noted that Apple did not violate any laws. The tactics used by the company are also being used by other big multinational companies. However, some subsidiaries of Apple claim no tax responsibility to any country.
How Apple Plans to Present Its Case
Apple insists that it is one of the biggest job generators in the country and that it paid a whopping $6 billion in taxes last year.
Based on the prepared testimony of Cook, the Apple executive will discuss how the company deals with its profits earned in the U.S., how taxes are computed for its foreign assets, how it shared costs with certain subsidiaries overseas, among others. It seems Cook will push for the simplification of the country's tax system for corporations. The suggested overhaul will encourage U.S.-based firms such as Apple to bring foreign profits back to its local accounts.
Cook will appear before the subcommittee and call for changes of the U.S. corporate tax code and include points about tax expenditures, reasonable tax liability on overseas earnings, and lower tax rates. The Apple CEO will also spend a lot of time explaining the accounting methods of his company. Apple has around $100 billion in terms of foreign earnings that is beyond the grasp of the IRS because it does not want to pay 35 percent local taxes if it brings the money to its local account.
