Apple publishes execs' opening statements from US Senate testimony

Posted:
in General Discussion edited January 2014
After Apple chief executive officer Tim Cook and chief financial officer Peter Oppenheimer appeared before the U.S. Senate Permanent Subcommittee on Investigations to explain the tech giant's offshore tax practices, the company has made available the opening statements as read in testimony.

Subcommittee


The short documents, released just hours after the Senate hearing, sum up Apple's main arguments as presented to the subcommittee on Tuesday.

Central to the hearing was Apple's tax practices, which Cook defended by saying, "We pay all of the taxes we owe ? every single dollar. We not only comply with the laws, but we comply with the spirit of the laws."

At issue are so-called "ghost" corporations Apple set up in Ireland to avoid U.S. corporate taxes, the most well known being Apple Operations International in Cork. The company's subsidiaries are cost sharing arrangements, which Apple said help fund research and development, as well as the creation of new jobs in America.

Cook's opening statement in full:


Oppenheimer's statement:

Tuesday's hearing is part of the Senate's investigation into loopholes large multinational corporations exploit to avoid paying high U.S. taxes. Previously, Microsoft and Hewlett Packard's tax practices went under the microscope, though Apple's recent hearing garnered the most media attention as Cook himself chose to visit Washington to explain his company's actions.
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Comments

  • Reply 1 of 88
    SpamSandwichSpamSandwich Posts: 33,407member


    How about posts including McCain and Levin? Now there's some entertaining insanity.

  • Reply 3 of 88
    haggarhaggar Posts: 1,568member


    Just don't tax it that way.


     


    Sent from my iPhone

  • Reply 4 of 88
    jragostajragosta Posts: 10,473member
    slurpy wrote: »

    Rand Paul got it right:
    "I'm offended by the spectacle of dragging in Apple executives," said Senator Rand Paul, a Kentucky Republican. "What we need to do is apologize to Apple and compliment them for the job creation they're doing."
    Instead of "bullying" Apple executives, Mr. Paul said, "we should have brought in a giant mirror to look at the reflection of Congress. If you want to assign blame, look in the mirror and see who created this mess.
    "Apple hasn't broken any laws, yet Apple is forced to sit through a show trial," he said.

    Cook should simply say:

    "If we've broken the law, tell us what we did wrong and we'll fix it and pay any taxes and penalties due. If we didn't break the law, then get off our backs. If you don't like the flipping tax code, fix it instead of going on witch hunts against law-abiding companies." Then "Any other questions before I go back to California and do my job?"
  • Reply 5 of 88
    mj1970mj1970 Posts: 9,002member

    Quote:

    Originally Posted by jragosta View Post



    Cook should simply say:



    "If we've broken the law, tell us what we did wrong and we'll fix it and pay any taxes and penalties due. If we didn't break the law, then get off our backs. If you don't like the flipping tax code, fix it instead of going on witch hunts against law-abiding companies." Then "Any other questions before I go back to California and do my job?"


     


    I so wish he could and would have. The problem is, these guys are a bunch of fucking mafia goons. They would have gone after him and Apple.

  • Reply 6 of 88
    jragostajragosta Posts: 10,473member
    mj1970 wrote: »
    I so wish he could and would have. The problem is, these guys are a bunch of fucking mafia goons. They would have gone after him and Apple.

    That's obviously why he didn't do it. However, I wonder. Apple is paying an extremely high tax rate in the US - far more than most companies. They do not appear to be playing tax games like many companies. What could the Senate actually do to them (especially in today's climate where the Senate and the House can't even agree on what day of the week it is)? While they could make their life difficult in little ways, I wonder if it would be outweighed by the PR benefit of standing up to the Senate's chief thugs. Maybe we'd see the headlines that Apple got its groove back.

    Obviously, Cook played it conservative and felt that it was right to do so. Since he's got access to an army of top advisors, it was probably the most reasonable decision. In the end, we'll never know what would have happened if he gave the Senators the middle finger and told them to go diddle themselves.
  • Reply 7 of 88
    I wonder about the use of the word "re-patriate," in particular, the "re" part of it. If the money is earned outside of the US, we have to think that it was never IN the US. If it was never in the US, how could it be re-patriated? Patriated perhaps but not repatriated.

    I believe Cook et. al. have used this term in error and to their great disadvantage.
  • Reply 8 of 88
    crowleycrowley Posts: 10,453member


    Perhaps it's called "repatriated" because (theoretically at least) every $ should have been born in the US, so it's coming home?


     


    Not an argument against your point about the money being earned overseas, just a thought on the use of the term.

  • Reply 9 of 88
    MarvinMarvin Posts: 15,359moderator
    There's a couple of videos here with the opening statements:


    [VIDEO]


    [VIDEO]


    Unfortunately the second video cuts short of the whole hearing but it still covers a decent amount. The girl sitting behind McCain is hot so even if you don't like listening to tax reform, the videos are worth a look. Tim mentioned that Texas will be where the next US Mac will be built. His expectations for tax reform include around 25% US Corporate Tax rate and single digit repatriation tax rate.

    The international Corporation Tax they paid was just $900m. They make 60% of their profits overseas but paid $900m. They pay $6b US rates where the earnings make up 40% of their profits. Tim also mentioned that the gross margins are actually higher on iOS products than Mac products too, which is why international profits are higher because Macs sell better in the US than worldwide but iOS products are popular everywhere and have a higher gross margin.

    Some of the senators seemed to be liking the idea of them paying so little to foreign governments - it's ok to avoid paying taxes as long as it's not US taxes but screw every other country.

    There are obviously two ways to look at this and both highlighted in the videos. A negative for US businesses is that if Apple is allowed to bring overseas profits in at <10%, it makes it harder for a US-based company to compete with them internationally. On the other hand (the way Tim sees it) is that bringing money back into the US allows them invest in US operations.

    I don't agree most with Tim's side of things. If they brought back $50b and had to pay just 9% tax, they'd keep $45.5b vs $32.5b. The latter is plenty to invest more in the US if they wanted to and the taxes would obviously be invested in the US and it's not likely they'd invest the extra they'd get from a single digit rate. There will have to be conditions in place if they lower the rate so that if they say that by having the lower rate, they will invest in jobs and manufacturing they actually do it. I think they should have a credit reward program so keep the repatriation tax high but allow them to claim what they bring back against taxes related to manufacturing and employment. If they don't stick to their word then they don't get the credits.

    That means they get the lower rates and government gets increased investment in the US economy, job creation etc.

    That just leaves the small issue of every other country in the world getting seriously screwed out of Corporation Taxes.
  • Reply 10 of 88
    crowleycrowley Posts: 10,453member


    Crikey, $900m.  That may not be technically criminal, but it's tempting to call it that.  Outrageous that this has been allowed to happen.

  • Reply 11 of 88


    Why dont they pull in the big banks like JP Morgan, Goldman Sachs and Bank of America ?   After all they rob trillions of dollars from the tax payer, use the same loopholes, commit fraud ( robo signing ) manipulation ( libor ) and we get stuck footing the bill.    

  • Reply 12 of 88
    MacProMacPro Posts: 19,758member
    How about posts including McCain and Levin? Now there's some entertaining insanity.

    As in ... "I am going to repeat the question / accusation ... again and again and again ...even though you totally answered me and showed me I was wrong because that is what we always do and the news folks edit everything so I look good on (insert TV station of choice) ..."
  • Reply 13 of 88
    tomhayestomhayes Posts: 128member


    > His expectations for tax reform include around 25% US Corporate Tax rate and single digit repatriation tax rate.


     


    Apple is dead wrong about this. Greedy. (Remember, as much as we love the products that they are ruthless as a business.)

  • Reply 14 of 88
    MacProMacPro Posts: 19,758member
    Marvin wrote: »
    There's a couple of videos here with the opening statements:


    [VIDEO]


    [VIDEO]


    Unfortunately the second video cuts short of the whole hearing but it still covers a decent amount. The girl sitting behind McCain is hot so even if you don't like listening to tax reform, the videos are worth a look. Tim mentioned that Texas will be where the next US Mac will be built. His expectations for tax reform include around 25% US Corporate Tax rate and single digit repatriation tax rate.

    The international Corporation Tax they paid was just $900m. They make 60% of their profits overseas but paid $900m. They pay $6b US rates where the earnings make up 40% of their profits. Tim also mentioned that the gross margins are actually higher on iOS products than Mac products too, which is why international profits are higher because Macs sell better in the US than worldwide but iOS products are popular everywhere and have a higher gross margin.

    Some of the senators seemed to be liking the idea of them paying so little to foreign governments - it's ok to avoid paying taxes as long as it's not US taxes but screw every other country.

    There are obviously two ways to look at this and both highlighted in the videos. A negative for US businesses is that if Apple is allowed to bring overseas profits in at <10%, it makes it harder for a US-based company to compete with them internationally. On the other hand (the way Tim sees it) is that bringing money back into the US allows them invest in US operations.

    I don't agree most with Tim's side of things. If they brought back $50b and had to pay just 9% tax, they'd keep $45.5b vs $32.5b. The latter is plenty to invest more in the US if they wanted to and the taxes would obviously be invested in the US and it's not likely they'd invest the extra they'd get from a single digit rate. There will have to be conditions in place if they lower the rate so that if they say that by having the lower rate, they will invest in jobs and manufacturing they actually do it. I think they should have a credit reward program so keep the repatriation tax high but allow them to claim what they bring back against taxes related to manufacturing and employment. If they don't stick to their word then they don't get the credits.

    That means they get the lower rates and government gets increased investment in the US economy, job creation etc.

    That just leaves the small issue of every other country in the world getting seriously screwed out of Corporation Taxes.

    Sorry if I am being slow ... but I'm not seeing where you quote the actual tax paid on earnings in each individual country where the profits are generated by sales in those countries prior to sending the net profit to Ireland to be used to invest etc..
  • Reply 15 of 88
    tbelltbell Posts: 3,146member
    Some people criticizing McCain and Levin might consider the goal of the hearing is not necessarily to beat up Apple, but to point out the absurdity of the means Apple goes to to lower its tax burden. Obama ran on a platform of closing down corporate tax loop holes, and met with Jobs to discuss the matter. However, the Tea Party extremists have killed the idea of compromise making it impossible to get this done.
  • Reply 16 of 88
    tallest skiltallest skil Posts: 43,388member


    Originally Posted by TBell View Post

    …the absurdity of the means Apple goes to to lower its tax burden.


     


    … Having subsidiaries in the countries in which it does business.


     


    OOOHOOHOOHOOOOOO, so absurd¡


     


    Take the rest of your political crap to PO.

  • Reply 17 of 88
    crowleycrowley Posts: 10,453member
    If the subsidiaries exist solely to provide a channel to evade tax I'd say that's a pretty absurd state of affairs.
  • Reply 18 of 88
    mj1970mj1970 Posts: 9,002member

    Quote:

    Originally Posted by Crowley View Post



    If the subsidiaries exist solely to provide a channel to evade tax I'd say that's a pretty absurd state of affairs.


     


    Agreed. But what's absurd is that they have to go to such lengths to keep the money they've earned.

  • Reply 19 of 88
    crowleycrowley Posts: 10,453member


    No, what's absurd is that they've been allowed to.  An effective tax rate of less than 5% for outside the US is pretty sickening.  If you hate government and tax in the US that's fine, do what you want over there, but let citizens of other countries be disgusted at what's been allowed to happen in our own back yards.

  • Reply 20 of 88
    mj1970mj1970 Posts: 9,002member

    Quote:

    Originally Posted by Crowley View Post


    No, what's absurd is that they've been allowed to.



     


    Clearly we strongly disagree.


     


     


    Quote:

    Originally Posted by Crowley View Post


    An effective tax rate of less than 5% for outside the US is pretty sickening.



     


    Sickening? On what objective basis have you arrived at this conclusion (and this rate)?


     


     


    Quote:

    Originally Posted by Crowley View Post


    If you hate government and tax in the US that's fine, do what you want over there, but let citizens of other countries be disgusted at what's been allowed to happen in our own back yards.



     


    Not sure what you're getting at.

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