Apple’s Tax Strategy: ‘Think Different’

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Chairman Sen. Carl Levin, D-Mich., left, and the subcommittee's ranking Republican Sen. John McCain, R-Ariz., arrive on Capitol Hill this morning. McCain quipped that Apple's tax strategy has given "new meaning" to its old slogan, "Think Different." (AP Photo/J. Scott Applewhite)

As Apple CEO Tim Cook answers questions before the Senate’s Permanent Subcommittee on Investigations about its “unusual tax structure,” a quick look over at OpenSecrets.org reveals that 92 percent of company lobbyists (25 out of 27) have been through the revolving door.

A government report (PDF) released yesterday says that Apple kept billions of dollars in profits in an offshore tax haven that made it possible for them to avoid paying taxes in any country. Reuters reports:

The main subsidiary, a holding company that includes Apple’s retail stores throughout Europe, has not paid any corporate income tax in the last five years.

The subsidiary, which has a Cork, Ireland, mailing address, received $29.9 billion in dividends from lower-tiered offshore Apple affiliates from 2009 to 2012, comprising 30 percent of Apple’s total worldwide net profits, the report said.

“Apple has exploited a difference between Irish and U.S. tax residency rules,” the report said.

Apple CEO Tim Cook arrives on Capitol Hill, in Washington, Tuesday, May 21, 2013, to testify before the Senate Homeland Security and Governmental Affairs Permanent subcommittee on Investigations hearing to examine the methods employed by multinational corporations to shift profits offshore and how such activities are affected by the Internal Revenue Code. (AP Photo/J. Scott Applewhite)

Apple CEO Tim Cook arrives on Capitol Hill this morning to testify before the Senate Homeland Security and Governmental Affairs Permanent subcommittee on Investigations hearing. (AP Photo/J. Scott Applewhite)

In Cook’s prepared testimony (PDF), he states that Apple already pays an “extraordinary” amount in U.S. taxes and “does not use tax gimmicks.” Cook explains that the U.S. corporate tax system has “not kept pace with the advent of the digital age and the rapidly changing global economy” and that the company “welcomes an objective examination of the U.S. corporate tax system.”

Interesting comments from a CEO whose company spent a total of nearly $3 million on lobbying in 2012, including more than $300,000 on five revolving door lobbyists from Capitol Tax Partners, which according to its website is “Washington’s largest independent consulting firm specializing in tax legislative and regulatory matters… offering intimate knowledge of the tax-writing and rulemaking process.”

The Sunlight Foundation blog notes that of all the issues Apple lobbies Congress about, taxes tops the list. One of the pieces of legislation that Apple lobbied on last year was the Freedom to Invest Act, a bill sponsored by Rep. Kevin Brady (R-Texas) that would “allow U.S. companies to bring home some of the cash they hold overseas without facing tax on it.” Despite Apple and other companies employing an “army of over 160 lobbyists” to persuade Congress to pass the Freedom to Invest Act, the bill never made it out of committee.

Cook insisted in his prepared remarks that Apple is a powerful jobs creation engine that has “created or supported approximately 600,000 jobs in the U.S.” including 50,000 at Apple and about 550,000 in related areas, such as engineering, manufacturing and software development. Over 300,000 of the jobs grew out of the so-called “App Economy.” He says that Apple carefully manages overseas accounts in the best interests of Apple shareholders.

You can watch Cook deliver his prepared remarks and hear senators’ questions at C-Span and The Guardian live blog.

But, as Matt Iglesias notes this morning in Slate, the “showdown” between Senator Carl Levin, the chair of the Permanent Subcommittee on Investigations, and Cook is unlikely to amount to much beyond good theater. He writes:

The unfortunate thing here is that Carl Levin, the Senator with the interest in this matter, chairs this investigations committee rather than, say, the Finance Committee. There really isn’t a great deal to “investigate” here. It’s not like it turns out that Apple minimized its tax bill by blackmailing IRS agents by secretly reading their iPhone emails. The issue here is with the tax code not with Apple. Portraying it as a showdown between the Senate and a CEO makes for better television, but the actual issue here is one of legislators versus legislators. Apple has its favorite tax strategies and General Motors has its favorite tax strategies. It’s a question of public policy how much revenue we want to raise via corporate income tax and what sectors do we want to coddle with loopholes.

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  • Anonymous

    So, Apple and all these other firms making tens of billions of untaxed profit throw up their hands and say ‘but we’re not cheating, we’re operating within the law’. What they don’t tell you is that they spend tens of millions to influence lawmakers, and the laws in their favor. Sounds like a pretty good return on investment. And unfortunately for every Elizabeth Warren out there, there’s 5 other legislators all too willing to be bought.

  • Anonymous

    Liars.

  • Lenora

    They should support the country that supports them!

  • dr.no

    “Offshore Tax haven”

    You mean deposited in American banks buying US Treasury bills
    controlled by Irish Subsidiary.

    Ireland is not a tax haven. Apple negotiated tax deal 30 years ago.
    Which you would know if you actually did research.

    Ms. Gretchensen also made similar misstatements.
    Like Apple asking for loopholes in the tax code.

    Apple is simply not bringing any of its foreign profits.
    There is no loophole being exploited unless you are
    going to ban things like Bank Holding Company which
    all Banks really are. Or tell Ireland what Tax rate to charge Apple.

    Now crying about Apple lobbying.
    Apple didn’t lobby or buy off congress for last 30 years.
    only when congress started sniffing for dollars for their
    campaign funds that they start planting these kinds of stories
    in NYT.

    Pathetic.

    GE paid negative tax. Where is their hearing.
    Microsoft, Google, other actually move American profits offshore.
    Why no tears. Oh because Apple is making more money outside US.
    That is why.

  • Jesus

    Ireland IS a tax haven. As is the Netherlands. As is a lot of other countries and a lot of their specific territories. Lets face it.