Segal, Cohen & Landis Reviews U.S. Senate Subcommittee Questioning of Apple

Apple CEO Tim Cook faced tough questions from a United States Senate subcommittee yesterday about the company’s offshore cash. The subcommittee charged Apple with utilizing tax loopholes in order to dodge taxes in the United States. They claimed that setting up offshore subsidiaries were part of the company’s plan to avoid billions of dollars in taxation.

Cook was quick to deny these claims. He countered by saying that the company is detrimentally affected by tax laws that no longer serve the current economic climate, with its multinational companies attempting to move cash from overseas back to the United States.

Cook vehemently stated that the company pays each and every dollar that it owes to the Internal Revenue Service. He noted that the company’s payments may make it the largest corporate taxpayer in the country. He went on to say that Apple is complies with both the law and the spirit of the law. According to Cook, the company does not depend on tax gimmicks or move intellectual property offshore to avoid tax bills from the Internal Revenue Service.

U.S. Senate Subcommittee

The hearing in which Cook testified on Apple’s behalf was called by the subcommittee’s investigation into loopholes utilized by corporations to avoid corporate taxes. Apple is not the only large company to be questioned. Microsoft and Hewlett-Packard were also asked to appear before the bi-partisan committee led by Carl Levin (D-Michigan) and John McCain (R-Arizona). According to the committee, an investigation into Apple yielded information regarding the company’s tax practices—which, purportedly, include shifting billions of dollars in profits away from the United States and into Ireland. This was apparently done with the purpose of taking advantage of a low corporate tax rate of 2 percent or less that was negotiated. The subcommittee said yesterday that such actions had resulted in the avoidance of tax on over $44 billion in earnings.

Subcommittee co-chair Levin remarked that Apple is focusing on taxes it has paid, and not on the vast quantity of tax avoided.

It is important to note, as does a Forbes article on the topic, the Apple has not done anything illegal. Its tax practices are merely an example of how multinational companies are utilizing tax loopholes. Apple remarks in a statement that the United States Tax Code is now antiquated in the digital age. It has simply not kept pace. Like many taxpayers, those leading Apple propose reform for the tax code, asking that it be simplified so that all taxpayers, and those leaders in Congress who preserve and write it, can understand it.

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