“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. (Continue reading here.)
Levin accused Apple of “using offshore tax gimmicks” to gain an advantage over other U.S. companies. Apple has been using a complex process to limit the taxes it must pay on its corporate profits, according to a Senate inquiry:
Between 2009 and 2012, the company shielded at least $74 billion in profits from U.S. tax laws by setting up subsidiaries in Ireland under a special arrangement, the report said. While the practice of using foreign operations to avoid U.S. taxes is legal and common among multinationals, Apple’s scheme was unprecedented in its use of multiple affiliates that had no semblance of a physical presence, Senate staffers said. . .
One of Apple’s Irish affiliates reported profits of $30 billion between 2009 and 2012, but because it did not technically belong to any country, it paid no taxes to any government. Another paid a tax rate of 0.05 percent in 2011 on $22 billion in earnings, according to the report. The U.S. corporate tax rate is 35 percent. (Read the full analysis here.)
Neil Irwin writes that the Senate inquiry reveals practices that are not uncommon:
It is a rare and detailed window into how multinationals juggle their international operations to avoid having to pay the taxman. This report may be about Apple, but the information it contains will sound familiar to anyone who has talked to tax lawyers or studied the 10-Ks of other major companies that do business around the world. . .
The strategies it has pursued are not unique, not at the outer limits of the law, and involve one of America’s most prominent and successful companies. As such, it shows just how much work on the corporate tax code there is to do. (Read more at Wonkblog.)
The hearing is part of lawmaker’s efforts to reform that tax code, and Cook offered some recommendations of his own. Read more on his proposal here. Sen. Rand Paul (R-Ky.) blamed Congress in his opening statement for establishing a tax code that encourages companies to keep money overseas:
“I am offended by the spectacle of dragging in here executives from an American company that is not doing anything illegal. If anyone should be on trial here, it should be Congress.
I frankly think the Committee should apologize to Apple. I frankly think Congress should be on trial here for creating a bizarre and byzantine tax code.” (Read Paul’s complete statement.)