Apple's tax strategy portrayed by Senate subcommittee as a unique 'absurdity'

Posted:
in General Discussion edited January 2014
In opening remarks of a hearing Tuesday morning, the U.S. Senate Permanent Subcommittee on Investigations accused Apple of being the mastermind of elaborate tax avoidance practices that are unique to the iPhone maker.

Levin
U.S. Sen. Carl Levin gave the opening remarks of Tuesday's hearing on Apple's tax policies.


U.S. Sen. Carl Levin (D-Mich.) took particular issue with Apple Operations International, an Ireland-based entity owned by Apple that he said has paid no taxes. The issue comes from a loophole in U.S. tax law that Levin believes should be closed.

"Apple is exploiting an absurdity, one that we have not seen other corporations use," the senator said. "And the absurdity need not continue."

At issue are incompatibilities between U.S. and Irish tax laws. In Ireland, only companies that are managed and controlled in Ireland are considered tax residents. Apple Operations International is incorporated in Ireland, but is not managed and controlled there."Apple is exploiting an absurdity, one that we have not seen other corporations use. And the absurdity need not continue." ? U.S. Sen. Carl Levin

But in the U.S., tax laws are based on where a company is incorporated, rather than where it is managed and controlled.

Apple has a total of three offshore corporations that allow it to reduce its effective tax rate to just 15 percent, which is less than half the U.S. effective tax rate of 35 percent, Levin said.

In singling out Apple, the senator said the iPhone maker has been a particularly egregious offender in exploiting tax law loopholes. The company currently has more than $100 billion in cash kept overseas.

Levin went as far as to call Apple's offshore tax practices the "holy grail" of tax avoidance. He has taken particular issue with the offshore transfer of "profit generating potential" from intellectual property.

The senator did praise Apple as an "American success story," and noted that he carries an iPhone in his pocket. He also acknowledged that many U.S. multinational corporations beyond avoid taxes by exploiting loopholes in the law.

Slamming Apple's use of "ghost" corporations, Levin called the company's practices a "sham." He said while Apple wants members of the public to focus on the "extraordinary amount" of taxes the company already pays, it does not excuse the taxes he believes the company should be paying.

"The real issue is the billions in taxes that it has not paid, thanks to offshore tax strategies whose purpose is tax avoidance, pure and simple," Levin said.

Joining him in criticizing Apple was U.S. Sen. John McCain (R-Ariz.), who said the company has avoided paying taxes on some $44 billion in income in the last 4 years alone.

"It's unacceptable that corporations like Apple are able to exploit tax loopholes to avoid paying billions in taxes," McCain said.

Taking a dissenting opinion on the subcommittee was U.S. Sen. Rand Paul (R-Ken.), who criticized his colleagues for "bullying, badgering and berating" a great American success story. He said that Apple has broken no laws, and is simply following the rules of an outdated U.S. tax code.U.S. Sen. Rand Paul took his colleagues to task for Tuesday's hearing, suggesting they instead apologize to Apple and thank them for creating American jobs.

"Congress should be on trial for chasing the profits of American companies overseas," he said.

Paul characterized Tuesday's hearing as a waste of time, both for the politicians involved and for Apple executives who were in attendance to testify. He also suggested that other members of the subcommittee do all they can to lower their individual tax rates as well.

Rather than criticizing Apple, Paul said the subcommittee should apologize to the company, and compliment them for their job creation.

"We should have brought in here today a giant mirror, so that we can look at the reflection of Congress, because this problem is created by the awful tax code," he said.

Following the opening remarks on Tuesday, Apple Chief Executive Tim Cook and Chief Financial Officer Peter Oppenheimer are scheduled to testify. AppleInsider will have ongoing coverage throughout the day.
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Comments

  • Reply 1 of 159
    mj1970mj1970 Posts: 9,002member
    That picture captures the perfect iconic image if a life long, fat cat politician.
  • Reply 2 of 159
    modena360modena360 Posts: 49member
    Is anyone fooled by that comb over? Talk about a bad cover up.
  • Reply 3 of 159
    kent909kent909 Posts: 730member
    So Apple pays 6 billion in taxes and GE pays 0, and Apple is the problem?
  • Reply 4 of 159
    tkell31tkell31 Posts: 216member
    Our inept, corrupt govt shouldnt be critical of anyone. Just close the loophole and move on.
  • Reply 5 of 159
    decondodecondo Posts: 21member
    Benefits of a complicated tax system - pre loopholes tax rate of 35% = post loopholes 15%.
  • Reply 6 of 159
    solipsismxsolipsismx Posts: 19,566member
    There isn't a word at just how ridiculous and absurd Levin's comments are. Government troll? Teckstudian politician?
  • Reply 7 of 159
    mytdavemytdave Posts: 447member


    So, stop bitching about Apple, and fix the tax code.  The problem is the Govt. not the companies they're trying to vilify.  Any company who isn't using every legal means to avoid paying tax isn't acting with due diligence.

  • Reply 8 of 159
    Instead of investigating why Apple pays less in taxes than it otherwise might, why not investigate why Congress passed tax laws with so many loopholes in them? I notice that the Senator(s) do not suggest that Apple has broken the law: rather, they seem angry that Apple has simply followed the law and used the loopholes that Congress provided. So why get mad at Apple?
  • Reply 9 of 159
    gazoobeegazoobee Posts: 3,754member


    Senate hearings and committees are all about grandstanding.  What the head guy waffles on about in his opening remarks is essentially meaningless.  


     


    We won't have an idea even of how it's going for many days yet.  

  • Reply 10 of 159
    bullheadbullhead Posts: 493member

    Quote:

    Originally Posted by tkell31 View Post



    Our inept, corrupt govt shouldnt be critical of anyone. Just close the loophole and move on.


     


    right. they should just laugh at the clueless idiots who keep voting them into office.

  • Reply 11 of 159
    decondodecondo Posts: 21member


    I'll bet Apple wishes it had GE's tax attorneys and/or politicians. Maybe next year.

  • Reply 12 of 159
    bullheadbullhead Posts: 493member

    Quote:

    Originally Posted by mytdave View Post


    So, stop bitching about Apple, and fix the tax code.  The problem is the Govt. not the companies they're trying to vilify.  Any company who isn't using every legal means to avoid paying tax isn't acting with due diligence.



     


    the problem is _not_ the government. the problem _is_ the voters who keep voting in Republicans and Democrats.

  • Reply 13 of 159
    rtamesisrtamesis Posts: 88member
    Just another greedy politician.
  • Reply 14 of 159
    mj1970mj1970 Posts: 9,002member

    Quote:

    Originally Posted by bullhead View Post


     


    the problem is _not_ the government. the problem _is_ the voters who keep voting in Republicans and Democrats.



     


    image


     


    image


     


    No. The problem is the government. The politicians and the voting patterns are the symptoms.

  • Reply 15 of 159
    eliangonzaleliangonzal Posts: 490member
    If so, can't they get a commendation for original thinking?
  • Reply 16 of 159
    6ryph3n6ryph3n Posts: 48member
    Rand Paul 2016. The only senator there with an ounce of sense.
  • Reply 17 of 159
    tarfungotarfungo Posts: 92member

    Quote:

    Originally Posted by bullhead View Post


     


    the problem is _not_ the government. the problem _is_ the voters who keep voting in Republicans and Democrats.



    This ^^

  • Reply 18 of 159
    tbelltbell Posts: 3,146member
    Apple should pay more in taxes, but Apple should not be blamed for loop holes that allow it to do what it does.
  • Reply 19 of 159
    tbelltbell Posts: 3,146member

    Quote:

    Originally Posted by 6ryph3n View Post



    Rand Paul 2016. The only senator there with an ounce of sense.


     


     


    The purpose of the hearing is to highlight a problem with the tax laws because Senators like Rand Paul filibuster every time Congress tries to close the so called tax loop holes he says are antiquated. 

  • Reply 20 of 159
    rogifanrogifan Posts: 10,669member
    Wow I watched the first half hour of this and all I can say is what a farce. This is a show trial if there ever was one. Everything that Apple has done is perfectly legal yet you'd think they were on trial for murder or something. And the gall of senators blaming Apple because they spend more than they take in...it's appalling. :no:
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