"We pay all the taxes we owe –– every single dollar," Apple CEO Tim Cook said during his appearance before the Senate Permanent Subcommittee on Investigations Tuesday.
Earlier, Senator John McCain had accused Apple of tax avoidance. "Apple has over $100 billion, more than two-thirds of its total profits, stashed away in an offshore account," McCain said.
McCain was not alone in accusing Apple of avoiding billions of dollars of local taxes. Several lawmakers have blasted the accounting strategy of Apple. McCain even likened the tax practice of the Cupertino-based company to its old slogan: "Think Different." Cook submitted massive corporate tax code reforms in response and said Apple has done nothing wrong.
Senate on Offense
"The egregious loopholes that exist in the tax code must be closed so that the nearly $1 trillion in untaxed overseas profits can come back to the United States," McCain said.
The Republican senator with subcommittee chair Senator Carl Levin, grilled the Apple top executive about the different offshore entities of Apple. They pointed out that Apple tried to make the most of loopholes in the corporate tax code of the country to avoid paying taxes on its profits. The panel specifically pointed to Apple Sales International, Apple Operations Europe, and Apple Operations International that did not have tax residence in any country.
"In 2012 alone, due to the cost-sharing agreement essentially shifting profits from all Apple sales outside of the Americas to Ireland, ASI, received $36 billion in income in a nation where it pays almost no income tax," Levin said during the hearing.
However, Apple had an ally. Senator Rand Paul, the legislator from Kentucky, criticized the proceedings and asked the body if Apple has done anything illegal and blamed the problematic corporate tax code that was created by the U.S. Congress itself.
"I say, instead of Apple executives, you should have brought a giant mirror if you want to see who is responsible," Paul said.
Cook on Defense
The Apple CEO, who has until now faced techies and investors but not lawmakers, defended the company's practices. He emphasized how Apple supports 600,000 jobs and how the company is the biggest corporate tax payer in the U.S.
He explained to the lawmakers that the subsidiaries of Apple in Ireland do not affect the taxes it pays to the U.S. The company does it to manage its overseas earning. Cook defiantly declared that his company cannot bring home its overseas profits given the current tax rates.
Cook suggested that the country should give incentives to companies such as Apple to bring their accounts back to the U.S. He sees a lower tax rate to achieve this. Most likely Apple will pay more tariffs if this happens but he said it would be for the benefit of most companies.
Cook shared that Apple is finding ways to put more investment into the U.S. economy through bigger production and more data centers.
When the Bell Rang
The testimony of Tim Cook before the senate subcommittee ended around 1:30 pm EDT. When the smoke cleared, the lawmakers said they clearly did not blame Apple for any violation of the law but made a strong point that the company tried to take advantage of certain legal loopholes. Apple on its part made a clear point that it paid all taxes due for all of its profits in the U.S. and did nothing wrong. And, as both parties parted ways, the spotlight fell on the unfairness of the corporate tax code of the U.S.
