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Apple’s Cook faces Senate questions on taxes

May 22, 2013
By MARCY GORDON , THE ASSOCIATED PRESS

WASHINGTON - The Senate dragged massively profitable Apple Inc. into the debate over the U.S. tax code Tuesday, grilling CEO Tim Cook over allegations that its Irish subsidiaries help the company avoid billions in U.S. taxes.

Cook said the subsidiaries have nothing to do with reducing its U.S. taxes, a message he struggled to convey to the Senate Permanent Subcommittee on Investigations.

"We pay all the taxes we owe - every single dollar," Cook said. "We don't depend on tax gimmicks."

Article Photos

AP PHOTO
Senate Homeland Security and Governmental Affairs Permanent subcommittee on Investigations Chairman Sen. Carl Levin, D-Mich., holds up his own Apple iPhone, on Capitol Hill in Washington, Tuesday, as he presses Apple CEO Tim Cook, left, for answers about how Apple, the world's most valuable company, and based in Cupertino, Calif., diverts a billion dollars to an Irish subsidiary as a tax strategy, according to a report issued this week by the subcommittee.

It was the first time an Apple CEO testified before Congress. Cook did so voluntarily.

The senate subcommittee released a report Monday that held up Apple as an example of the legal tax avoidance made possible by the U.S. tax code. It estimates that Apple avoided at least $3.5 billion in U.S. federal taxes in 2011 and $9 billion in 2012 by using its tax strategy, and described a complex setup involving Irish subsidiaries as being a key element of this strategy.

But Cook said the Irish subsidiaries don't reduce the company's U.S. taxes at all. Rather, the company avoids paying the 35 percent federal tax rate on profits made overseas by not bringing those profits back to the U.S., a practice it shares with other multinationals.

Apple's enormous, iPhone-fueled profits mean that it has more cash stashed overseas than any other company: $102 billion.

Cook reaffirmed Apple's position that given the current U.S. tax rate, it has no intention of bringing that cash back to the U.S. Like other companies, it has a responsibility to shareholders to pay as little as possible in taxes.

That means cash-rich Apple is, paradoxically, borrowing money to finance dividends and buybacks for its shareholders.

In effect, Apple is holding out for a lower corporate tax rate, and Cook spent some of his time in the spotlight to advocate for one, accompanied by a streamlining of the tax code to eliminate

Cook, who is more accustomed to commanding a stage in front of investors and techies than facing a congressional committee, took a defensive tone with his opening statement. He punched out words when stressing the 600,000 jobs that the company supports while adding that Apple is the nation's largest corporate taxpayer.

 
 

 

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