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Apple CEO Tim Cook  (Source: rack.0.mshcdn.com)
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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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
Yup.

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. http://www.thebigquestions.com/chari.pdf).

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


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