Apple’s Tim Cook to Testify in Senate Offshore Tax Hearing

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Apple CEO Tim Cook has apparently been scheduled to testify before the United States Senate next Tuesday in an investigation into corporations moving funds into offshore accounts to reduce their tax liability. Mr. Cook will be speaking before the Senate's Permanent Subcommittee on Investigations and while Apple has an estimated US$100 billion outside the United States, the hearing isn't being used to charge the company with any wrongdoing.

Apple CEO Tim Cook to testify in Senate offshore tax shelter hearingApple CEO Tim Cook to testify in Senate offshore tax shelter hearing

Apple isn't the first big company to testify before the committee, according to Politico. Both HP and Microsoft spoke in September 2012 on offshore holdings.

Along with Apple, tax experts, IRS and Treasury Department representatives are also scheduled to testify at Tuesday's hearing.

While Apple and the subcommittee aren't confirming Mr. Cook will be at the hearing, the iPhone and Mac maker did say it has been cooperating with the investigation.

Apple spokesman Steve Dowling stated,

Apple is one of the largest taxpayers in the United States, having paid $6 billion in federal corporate income tax in fiscal 2012. We also help create hundreds of thousands of jobs in the U.S. by keeping our R&D in California and creating category-defining products like the iPhone, iPad and the app store, which has generated billions of dollars in sales for software developers.

Shifting funds offshore to avoid hefty tax payments is common for many corporations and current tax laws don't prohibit the action. Considering the massive amounts of money that aren't getting taxed, however, lawmakers have begun looking into the practice as a potential new revenue stream.

The subcommittee is expected to announce exactly who will be testifying at Tuesday's hearing before the end of the week.

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It's a safe bet that Apple made sure it isn't violating any tax laws before it started moving money outside of the United States, so the Senate subcommittee is most likely looking for information it can use to push for changes that make it easier for the government to take a cut of that cash.

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I wonder if this is money they moved offshore or is it money that was earned on sales outside the US that they’ve never brought in?

Lee Dronick

I would be open to granting the businesses, and I assume individuals, tax amnesty for bringing the money back to the USA.


I would expect that geoduck’s hunch is correct. Apple does more business internationally than in the U.S. so it is no surprise that there’s more money earned overseas. Maybe some has moved, but that isn’t the reason for the large pile there.


Everything about Tax law is a complicated mess. But I think the idea of moving money overseas is not what is happening. More to the point would be how income and business costs are being allocated. An example would be R&D expenses. If all of that comes out of U.S. revenues, the result would be lower U.S. profits and taxes. Profits would be higher on overseas revenues.

I don’t know the legality of that method of accounting or if it is even being done. That is just one category of expense; but it is an important point since most of that expense is stateside. I don’t believe profits should be taxed twice as in the country of sales plus in the U.S. But accounting practices need to be legal and the tax code should not provide a means of sheltering profits made in the U.S.

Bosco (Brad Hutchings)

They’re not shifting any money off-shore. They have profits from off-shore sales which haven’t been reinvested offshore or repatriated. Bringing those profits on-shore subjects them to a very high corporate tax. With that amount of money, they are clearly in a position to negotiate with the government, and have an obligation to do so on behalf of their shareholders. Ideally, the corporate tax rate would be reduced to zero, as investors eventually pay taxes on dividends and gains. Most tax policy experts agree that eliminating the corporate tax will actually increase revenues by making value more transparent and eliminating complicated tax avoidance planning and strategies.

That’s the reality of it. Put it in front of a Dem controlled Senate, and they may very well go all UK on Tim Cook’s ass and claim his company doesn’t want to pay its fair share of taxes. The worthless Republicans will have some sideshow gripe enabling that whole narrative to play out. Cookie, this is a trap you may have to actually fight your way out of.

Lee Dronick

I suppose that when Tim testifies that will learn more about the source of the money.

Other countries are looking into this. Apple can pay the taxes here, or they can pay it there, but sooner or later it is going to get paid.


Just hit the wire over at MacRumors:

He also defended his company’s conduct. “I can tell you unequivocally Apple does not funnel its domestic profits overseas. We don’t do that. We pay taxes on all the products we sell in the U.S., and we pay every dollar that we owe. And so I’d like to be really clear on that,” Cook said.

So I guess the question really is how to treat profits from a US company that they don’t earn in the US.


“So I guess the question really is how to treat profits from a US company that they don’t earn in the US.”

What question. We tax the hell out of it! At the extremely high, ridiculous rate of 12.1%.

I had a higher tax rate when I made $20,000 a year.

Bosco (Brad Hutchings)

The real question is whether anyone can do math. 35% of 0, and then capital gains or dividend tax rate on the result (by investors) = 0. Meanwhile, it is less expensive for Apple to invest the offshore money off shore than here. All in the name of “fairness”, you end up 0 + an advantage for Apple to invest offshore.

And if you think somehow you can tax it even if they don’t repatriate it, you break down all the wonderful free trade goodness that gets you $1500 MBPs and $320 iPad Minis. Go ahead and keep shooting yourself in the arse, tough guys!

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