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Andrea Peterson

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Posted at 12:38 PM ET, 05/21/2013

Lawmakers grill Apple’s Tim Cook, other executives on taxes

Apple CEO Tim Cook is sworn in to testify Tuesday at a Senate hearing on offshore profit shifting and the U.S. tax code. (JASON REED - REUTERS)
Lawmakers had pointed questions for Apple chief executive Tim Cook and two other top company executives Tuesday at a Senate subcommittee hearing examining the Apple’s tax practices.

As The Washington Post reported, Apple is the latest technology firm to come under fire from Congress over its offshore accounting practices. Apple’s status as a legend in the tech industry — it was the most valuable company in the world as of Monday — makes it one of the highest-profile corporate firms to come under scrutiny for its use of legal loopholes in the tax code, which some lawmakers say is a ruse to avoid paying U.S. taxes.

Cook opened by defending his company against accusations that it uses tax loopholes to shift profits outside the United States and avoid U.S. taxes.

“We pay all the taxes we owe, every single dollar,” Cook told the committee.

But senators on the panel, particularly committee chairman Carl Levin (D-Mich.) and John McCain (R-Ariz.), repeatedly asked for more details about the company’s operations in Ireland. The senators were aiming to illustrate how Apple’s use of foreign subsidiaries could give it an advantage over domestic companies

Cook disagreed with that characterization, saying that the company pays taxes on income it makes in a variety of countries.

“I don’t see it as being unfair,” Cook said, adding that he would not preside over a company that engaged in unfair practices.

Questioned by Levin, Phillip Bullock, the head of the company’s tax operations, confirmed that Apple Operations International has not paid U.S. corporate taxes in five years. Apple Sales International and Apple Operations Europe have paid the Irish earned income tax rate in full, he said. Bullock reiterated that Apple Inc. has paid U.S. taxes.

In his opening remarks, Cook also recommended tax reforms that are revenue neutral, such as eliminating all corporate tax expenditures, lowering tax rates and setting what he called a reasonable tax on foreign earnings.

“We make this recommendation with our eyes wide open, fully recognizing that this would likely result in an increase in Apple’s U.S. taxes,” Cook said, adding that he believes the changes would help the Unites States compete on a global level.

By  |  12:38 PM ET, 05/21/2013

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