Senate Summons Apple’s Tim Cook To Testify On Storing Cash Overseas To Avoid Taxes

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Apple has fallen under plenty of scrutiny for storing a majority of its $100+ billion cash horde overseas to avoid paying U.S. corporate taxes, the highest tax rate in the world. Now Apple CEO Tim Cook has been summoned to speak at a Senate hearing next week as part of an investigation into the offshore tax practices of U.S businesses.

Politico reports that Cook will testify before the Senate Permanent Subcommittee next Tuesday. Apple gave the publication an official comment:

“Apple is one of the largest taxpayers in the United States, having paid $6 billion in federal corporate income tax in fiscal 2012. We also help create hundreds of thousands of jobs in the U.S. by keeping our R&D in California and creating category-defining products like the iPhone, iPad and the app store, which has generated billions of dollars in sales for software developers.”

Apple isn’t the only company that stores money offshore to avoid taxation; plenty of other businesses also play the game. Microsoft and HP have already testified in the ongoing trial. Last year, The New York Times examined how Apple saves billions by moving its funds between continents.

To finance its $55 billion stock buyback, Apple recently went into debt for a $17 billion bond offering. By not using its offshore cash horde to pay for the buyback, Apple saved itself $9.2 billion in U.S. corporate taxes.

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  • MacAdvisor

    “The highest tax rate in the world.”

    Well, yes, the highest gross rate, but no where near the highest collection rate. The rate is paid only on the “taxable” income of a corporation and there are so many deductions and accounting methods as to make the de jure rate meaningless. The effective tax rate of American corporations is less than half the “official” rate. For example, Apple had net profits of $41.6 billion in 2012 and, as this article points out, paid $6 billion in taxes for a tax rate of 14%. I would bet most of Apple’s employees in this country paid a Federal personal income tax rate higher than that.

    Moreover, much like the personal income tax, the rates are marginal. The rate actually starts at only 15% for the first 50,000 in income (so Apple paid a lower rate than the lowest gross rate), ending at 35% for amounts over $18,333,333. You can see the rates at http://www.irs.gov/pub/irs-soi/02corate.pdf at page 289. Additionally, corporate taxes only account for about 10% of Federal revenue, down from nearly double that in 1950. Moreover, the total annual personal income of all personal Federal filers was about $13.5 billion in 2011, about as much made by the top four corporations alone.

    So, don’t cry for the tax rates of corporations, they are doing just fine.

  • LegacyRyan

    your math and logic are flawed…apple had $41.6 billion in NET INCOME/PROFIT last year and did pay $6 billion, but not all of that $41.6 billion was made in the US…all of the profit made offshore is not taxable unless it is repatriated…so the $6 billion paid is a percentage of a much smaller DOMESTICALLY made profit and therefore significantly higher than 14%. Not to mention the fact that individuals itemize their returns as well and end up paying far lower rates than the stated rates…just like corporations…individuals AND corporations are both taxed on their taxable income not gross income.

    In essence, your entire post is meaningless because nothing in it represents the entire truth…but just to play your game; lets say for a moment that we decided to eliminate all loopholes in corporate taxes, and tax corporations at what is truly the highest rate on earth. Do you think for a minute that corporations in turn would pay their executives less? make less money? have less in the bank? or spend less on R&D? Of course not…they would simply do what they have always done…raise their prices thereby passing that cost right back on to the backs of the consumer. The only way to avoid this outcome would be to set price controls at the same time…and BOOM…we are Venezuela. Who just had to import 50 million roles of toilette paper because private industry is no longer motivated to produce it efficiently since the price is controlled and established by the government…and no…I’m not kidding…they litterally ran out of toilette paper http://www.guardian.co.uk/world/2013/may/16/venezuela-toilet-paper-shortage-50m

  • hal9000mx

    If this practice is not illegal, they don’t have to respond or explain anything to anyone.

  • MacAdvisor

    LegacyRyan,

    That some of Apple’s profits were made abroad is irrelevant. First and foremost, citizens do pay for income they earn abroad whether or not they repatriate it, so why shouldn’t that be true for corporations? Moreover, it is certainly valid for comparing relative tax burdens.

    Second, yes SOME individuals do itemize, but a majority of tax payers take the standard deduction and of those that do itemize, the majority take only the home interest deduction. In the end, after deductions, individuals then pay takes on their adjusted gross income. The profits I used for Apple are after they have take deductions. That amount isn’t Apple’s gross revenue, which considerably higher, but after deductions, that is, the amount is Apple’s adjusted gross income, completely comparable to individuals.

    Lastly, I never suggested eliminating tax loopholes. In macro terms, I support tax exemptions. There are particular ones I don’t approve, but I approve of loopholes as a concept. Corporate profits are at an all-time high while individual incomes for the vast, overwhelming majority of Americans have remained stagnate for thirty years. Also, as noted, the share of Federal taxes paid by corporation, has shrunk by half.

    The article seemed to imply corporations had an overwhelming tax burden, when this could not be further from the truth. Corporations in the US are taxed rather lightly compared to other industrial democracies.

    The change I would make is for corporations to pay taxes on their gross adjusted profits even if those profits were earned abroad, just like for individuals. Then Apple and others would not have an incentive to not repatriate the earnings. I would also require any company listed on any US exchange to be be a US corporation.

About the author

Alex HeathAlex Heath has been a staff writer at Cult of Mac for three years. He is also a co-host of the CultCast. He has been quoted by the likes of the BBC, KRON 4 News, and books like "ICONIC: A Photographic Tribute to Apple Innovation." If you want to pitch a story, share a tip, or just get in touch, additional contact information is available on his personal site. Twitter always works too.

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