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Apple CEO Tim Cook  (Source:
The testimony has been prepared for Cook's appearance before the U.S. Senate tomorrow

Apple CEO Tim Cook's testimony on corporate tax laws has been made available on the Web just one day before he is expected to appear before the U.S. Senate.  

The PDF of Cook's statement aims to defend the way Apple pays taxes and offer suggestions for a revenue-neutral reform that brings foreign profits (made by U.S. companies) back to the U.S. 

The statement opens with an explanation of how Apple employs tens of thousands of U.S. citizens, and has paid "an extraordinary amount" of taxes in the U.S. According to the PDF, Apple paid nearly $6 billion in federal taxes in fiscal 2012 and the company expects to pay $7 billion in 2013.

Apple, a California company, employs tens of thousands of Americans, creates revolutionary products that improve the lives of tens of millions of Americans, and pays billions of dollars annually to the US Treasury in corporate income and payroll taxes. Apple’s shareholders – from individuals and institutions to pension funds and public employee retirement systems – have benefitted from the Company’s success through the appreciation of its stock price and generous dividends. Apple safeguards the capital entrusted to it by its shareholders with prudent management that reflects the Company’s extensive international operations. Apple complies fully with both the laws and spirit of the laws. And Apple pays all its required taxes, both in this country and abroad.

The testimony continues on to say that Apple doesn't use tax gimmicks and even describes (at length) the history of Apple. It says that Apple supports a simplification of the tax code, even if that leads to an increase in Apple’s overall corporate taxes. Apple went on to say that the current corporate tax system “applies industrial era concepts to a digital economy” and “undermines U.S. competitiveness."

The testimony goes into other specifics, such as Apple's how Apple accounts for U.S. profits, how research and developments costs are shared with its Irish subsidiary, etc. 

The Irish subsidiary is an important topic because of an attack from The New York Times last year. In April 2012, NYT accused Apple of dodging millions of dollars in taxes in California and 20 other U.S. states (and dodging billions of dollars in taxes worldwide) by routing its money through other locations. Even though Apple is based in Cupertino, California, it put an office in Reno, Nevada which allows Apple to escape California's 8.84 percent tax rate for Nevada's 0 percent. Apple has also sold digital content from low-tax countries anywhere around the world, and has used the "Double Irish With a Dutch Sandwich," which allows Apple to cut taxes by directing profits through low-cost Irish subsidiaries, the Netherlands and the Caribbean. 

What does Apple want? A tax system that is "revenue neutral, eliminates all tax expenditures, lowers tax rates and implements a reasonable tax on foreign earnings that allows free movement of capital back to the US."

The Senate also released a part of its investigation today, which claims that Apple’s system of subsidiaries has allowed it to dodge $44 billion in U.S. taxes over the last four years. But the Senate also mentioned that Apple did not break any U.S. laws.

Cook and CFO Peter Oppenheimer will appear in front of the U.S. Senate Permanent Subcommittee on Investigation at 9:30 a.m. EST on May 21, 2013. The hearing is titled "Offshore Profit Shifting and the U.S. Tax Code - Part 2" and concerns corporate tax laws and profit shifting. 

The entire PDF can be read here

Source: Apple

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If it's true
By fredgiblet on 5/21/2013 2:50:42 AM , Rating: 2
If the numbers they're quoting are true on their tax payouts then I may have gained a little respect for Apple.

RE: If it's true
By MadMan007 on 5/21/2013 6:41:42 AM , Rating: 2
In FY 2012, on $156B in revenue Apple paid $6B in taxes....that's a 3.8% effective tax rate. It's kind of sad that a company can 'gain a little respect' just because their effective tax rate isn't 0%.

RE: If it's true
By ilt24 on 5/21/2013 8:31:14 AM , Rating: 2
In FY 2012, on $156B in revenue Apple paid $6B in taxes....that's a 3.8% effective tax rate.

Businesses pay taxes on income not revenue.

Apples Income before taxes last year was $55B, they paid $6B in Federal taxes and another $8B in State, Local and Foreign taxes.

RE: If it's true
By Stuka on 5/21/2013 11:05:01 AM , Rating: 2
I wish I could pay taxes based on my "income" and not my "revenue".

RE: If it's true
By BRB29 on 5/21/2013 3:29:07 PM , Rating: 2
You do, that's why any expense contributed to your job is tax deductible.

Your gross pay is a revenue.

After expense deductions, your income is like gross profits.

After taxes and fees, your income becomes net income which is your take home pay.

RE: If it's true
By nolisi on 5/21/2013 5:58:40 PM , Rating: 2
You do

Actually, you don't. Because almost anything can be justified as a business expense necessary to the running and survival of a business. Corporate dinners can be expense deductions. Purchases of unnecessary equipment can be deducted as losses.

Running a personal life is kin to running a business (and make no mistake, individuals make important contributions to the economy no matter how they participate). However, individuals are likely to be audited if the attempt deduct the same things that businesses deduct.

Net income for individuals do not include the basic expenditures needed for the individual to continue to conduct business.

RE: If it's true
By Emryse on 5/21/2013 6:49:08 AM , Rating: 2
If you didn't already suspect that the numbers they're quoting are true on their tax payouts then I may have lost a little respect for you.

But that's not even the point. When will people get it through their heads that companies DON'T PAY TAXES - EVEN WHEN THEY DO!!!

In other words, the billions of dollars that Apple "paid" in taxes is nothing more than a price increase that Apple applied to their products. The CUSTOMERS who purchased the products Apple sold are the ones who payed this tax.

If anything, as a consumer you should be livid, because you've been taxed (in a given scenario), many times:
1.) Taxed when you earned your paycheck.
2.) Taxed by reduced wages because your company is also taxed when you earn your paycheck, and therefore need to factor that into the total amount they're willing to pay to employ you.
3.) Taxed because the price of that iPad you're buying is higher because Apple is baking in the tax THEY will have to pay for selling you the iPad.
4.) Taxed with a sales tax when YOU purchase the iPad.
5.) Taxed with a surcharge for the electronic medium you used to order your iPad online, or taxed for the fuel you used to drive your car to the store to pick it up.
(There are other taxes I'm sure could be added to this list as well - it's not exhaustive in this scenario...)

The bottom line is: businesses do not pay taxes. Businesses sell goods and services, incurr expenses (including taxes) which they pass on to the consumer, and make profits which they pass on to owners, employees, and shareholders (all of which are then taxed again when they receive their cuts).

For anyone to think that we don't pay enough taxes shows their utter ignorance and/or stupidity.

RE: If it's true
By fteoath64 on 5/21/2013 8:00:00 AM , Rating: 2
@Emryse: Well said. You are right in those aspects and many people cannot see what is wrong with the way in which taxes are foisted left and right on the normal worker. Well, read the constitution and see that each one of us are "slaves" to the system. Of franchisee if you want to use the correct term, but modern slaves whichever way you look at it.

This system has to change because the "hidden hand" that manipulates everything has gone berserk in the last two decades. It is slowing down real progress in mankind's evolution to the next phase of technological changes.

RE: If it's true
By nafhan on 5/21/2013 11:56:46 AM , Rating: 3
read the constitution and see that each one of us are "slaves" to the system
I'd be interested in seeing the relevant quotes from the constitution.

RE: If it's true
By BRB29 on 5/21/2013 3:39:39 PM , Rating: 2
That's why if you are a smart person, you would put your expenses on your business Tax ID. All those expense becomes tax deductible so you are pretty much getting your income and sales tax back.

In fact, most rich people I know doesn't have anything in their name except their money. Everything from their house to their car is all company owned. He just collect money, incurs no liabilities and expenses. Whatever he spends is tax deductible by year end. Depending on how you set up your Corporation, if your business incurs losses at the end of the year then that loss can be passed to your personal income as tax deductible. That person is still not liable for any debts from the business though.

That is how the rich gets richer and the poor gets poorer even when the economy tanks.

RE: If it's true
By retrospooty on 5/21/2013 8:12:41 AM , Rating: 2
I agree totally, but usually I look at in a different perspective. Instead of following "you" follow a single chunk of money. Lets say a $100,000 chunk of profit at a company. That company made 100k profit and paid tax on it. They then took what was left of that money and paid your paycheck and then you paid tax on that. You then took your share and bought goods and services, all of which was taxed. Those goods and services were other companies profits, all of which were taxed and so on and so on. I can never quite wrap my head around how the govt. is not only broke, but trillions in debt every year with such a setup. Aaaauugh. it makes me ill.

RE: If it's true
By LongTimePCUser on 5/21/2013 11:39:53 AM , Rating: 2
You said:
" Lets say a $100,000 chunk of profit at a company. That company made 100k profit and paid tax on it. They then took what was left of that money and paid your paycheck and then you paid tax on that."

That is not the way the tax codes work.
The salary they paid to you was an expense to them and reduces their taxable income.

It is true that the dividends they might have paid to share holders is not deductible and comes from their net income after they have paid their taxes. That is the rationale for taxing dividends at 15% and not as ordinary income. The idea is that the money was already taxed.

Of course, in the strange world of Apple, until recently, they have chosen not to pay dividends to shareholders. Probably because dividends came from after tax income.

RE: If it's true
By retrospooty on 5/21/2013 12:02:30 PM , Rating: 2
Reducing taxable income isnt "tax free", its just less. Its like a deduction in personal income tax terms. If I make $100,000 this year and get 2x $5000 deductions for my 2 kids I then pay tax on $90,000. I know the corp. Tax codes are complex as all hell, but they do pay for the most part, unless "loopholed" out, which is a different corruption altogether.

RE: If it's true
By Mint on 5/21/2013 6:32:52 PM , Rating: 2
Your other post shows that you have a poor understanding of taxation.

For the sake of simplicity, let's assume a company has only labor costs, pays a net 20% tax rate, and employees pay 20% net tax. If a company has $10M in revenue and pays $8M in wages, it has an income of $2M and pays $400k to the gov't in corporate tax, while the employees collectively pay $1.6M in income tax. If the company only payed $6M to employees on the same revenue, it'd pay $800k tax while employees pay $1.2M tax.

Either way, the gov't gets $2M tax on 10M revenue. There's no tax upon tax, and companies don't pay employees with after tax profits like you implied.

RE: If it's true
By SuperFly03 on 5/21/2013 9:47:52 AM , Rating: 2
And? All taxes ultimately come from the people no matter what. Where else could they possibly come from? Money is generated by people so therefore it can only come from people.

It is a fact of life... if you can figure out how to tax something other than people ... let me know.

Till then all we can do is attempt to reighn in spending which will reduce the need for taxes.

RE: If it's true
By Stuka on 5/21/2013 11:20:06 AM , Rating: 2
This is true. Our system is a patchwork of 200 years of evolving tax law which has to keep up with growing expenditures. A more overhaul to a more simplified system would be extremely beneficial, however, I wouldn't expect any tremendous savings.

Whether we went to a single use tax, or a flat personal income tax, we would still end up paying the same in the end. A use tax without any other taxes would result in any product you buy costing 30% more than it does now, at least. Similarly, an exclusive income tax would result in, at least, another 15% of your paycheck disappearing. This won't happen.

Like you said, spending has to be curtailed first. This also won't happen.

The government or the economy has to crash again before anyone will wake up. This is how it has been throughout human history, I see no reason to expect different now.

RE: If it's true
By BRB29 on 5/21/2013 3:45:47 PM , Rating: 2
If you reduce spending, the economy tanks as well.

Our economy and dollar's value is based entirely on faith of debt being paid. The bank's reserve ratio will pretty much tell you that. The banks also loan each other money to maximize the reserve ratio.

Our dollar will not fall and will always stay as the universal currency. The main reason for that is we have the largest economy and also the highest debt. Other countries buys our debt(eg. bonds) and depend on us to pay them back.

The world's economy is a tangled web and we own the largest part in the middle. What a tangled web we've weaved.

RE: If it's true
By Mint on 5/21/2013 5:37:45 PM , Rating: 2

The whole basis for reducing spending as a means of improving the economy is that money not spent winds up being saved and ultimately invested. A similar case is made for flat taxes, since the rich save and poor spend. This logic was valid during the Reagan and Clinton eras.

Now it's completely invalid. So much money was being saved in the 2000's that housing bubbles and debt derivatives became investment vehicles of choice to use these savings (of course, unknown to be junk investments at the time), and now all we get with savings is excess reserves.

That means on the margin, a dollar saved is no longer a dollar invested. Reduced spending now means economic contraction, as we're completely demand limited.

This was never true for 60+ years before the recession, and completely breaks a bunch of economic models, including the one that tells us capital taxes are a bad idea (e.g.

Somebody has to spend more to improve the economy. That's the bottom line.

RE: If it's true
By Mint on 5/21/2013 5:06:34 PM , Rating: 2
No, that is completely wrong.

In a competitive market, the price you can charge is determined by the price of competing products. Apple currently charges as much a premium over competing products as it can get away with.

LG's mobile division made $133M on $3122M in sales last quarter, HTC made $85M on $1.4B, Nokia basically broke even, etc. It's widely known that excluding Samsung and Apple, other phone makers are earning very little profit (due to competition) even though they collectively produce 51% of smartphones:

If the corporate tax rate goes up, all these low margin companies may increase prices a bit to compensate, but it will be very little. Take another 10% of LG's and HTC's profit, and they only need to increase revenue by less than 1% to compensate.

However, there's no reason that Apple can suddenly get away with charging $700 per iPhone instead of $600 if corporate tax rates go up, though, as the consumer remains the same. If it could, it would have done so already. Instead, it will have to keep less profit and pay more tax. Same with Samsung, though to a lesser degree.

RE: If it's true
By Mint on 5/21/2013 6:01:04 PM , Rating: 2
The bottom line is: businesses do not pay taxes. Businesses sell goods and services, incurr expenses (including taxes) which they pass on to the consumer, and make profits which they pass on to owners, employees, and shareholders (all of which are then taxed again when they receive their cuts).
That's NOT the bottom line, because you are completely ignoring how even revenue neutral tax policy changes rewards some and punishes others.

If you look at the income approach to GDP, wages now compose a smaller percentage and corporate profits compose a larger percentage than they used to. A DT article recently pointed out that the net corporate tax rate is only 12%.

Low corporate taxes also discourage reinvestment. With low tax, you'd rather just keep your profits than go down a risky venture. With high corporate tax, they'll take the risk because it's a use-it-or-lose-it environment. Might as well invest/hire (tax deductible expenditures) than pay the gov't.

Apple has $145B in cash that it's doing nothing with, largely because low tax rates are giving it no reason to.

this is the point
By kattanna on 5/21/2013 10:35:09 AM , Rating: 2
But the Senate also mentioned that Apple did not break any U.S. laws.

if they did not break any tax laws.. then no one can complain.

there is not a single person here who can honestly say that they decided to give more then the law requires when they filed their taxes, yet some expect "others" to do exactly that.


RE: this is the point
By retrospooty on 5/21/2013 12:04:51 PM , Rating: 2
This is true. I dont pay a penny more than I can get away with by law, and if I were Apple, or any other major company I would have done the same. You dont like the outcome congress? Fix the freegen tax codes. Oh, wait, your corporate overlords have it that way for a reason and wont let you? Bummer, stop wasting our time and get back to your regular day job of wasting our money. MUST you have both? LOL

By LongTimePCUser on 5/21/2013 11:29:41 AM , Rating: 3
According to the NY Times today, Apple actively evades taxes. Legally because they employ very expensive and very smart tax lawyers. From the US they move their profits to Ireland so they pay minimal taxes here. In Ireland they claim their headquarters are in the US so that they don't owe any taxes in Ireland according to Irish law.

They can do this because they are an international corporation. They have thousands of US employees and tens of thousands of manufacturer's employees in China. They manufacture high quality products for cheap in China and charge high US prices here. Big profit margins. Very little US taxes. Most of their "income" is recorded by their accountants in other countries so that they don't have to pay US Federal or state taxes.

If you and I could do what they do, we would not have to pay any income tax. Of course, that means that we would not have roads to drive on, police protection or public schools for our children.

Yes, they are right that the US Federal taxes need to be reformed since they are too easy to game and avoid if you are Apple.

If they don't have to pay much Federal taxes, then the value of their stock rises and the wealth of their CEO increases. The odds are that their senior management does not pay much income taxes. Only capital gains (max 15%). That is just a guess on my part. But, considering how they manage to use tax loop holes to avoid corporate taxes, I would suspect that the same tax lawyers found ways for their senior executives to avoid US taxes.

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