Last week, Apple CEO Tim Cook went where Steve Jobs never had to go – to Capitol Hill for a Congressional committee grilling.
The hearing came a day after a Senate report slammed the company for avoiding taxes by “shifting” profits to a “complex web” of offshore entities. The report said that Apple used Ireland-based affiliates to pay little to no corporate taxes on $74 billion in worldwide income from 2009 to 2012. From 2009 to 2011, Apple International Operations, a unit which is incorporated in Ireland, but has no employees there and is controlled in the US, accounted for $30 billion of the company’s profits. Because the unit does not have tax residency in either country, it is out of the reach of the IRS and Irish tax collectors.
In other words, Apple behaved like a corporation.
But the company did not break the law. Apple pays “all the taxes we owe – every single dollar” according to Cook. He told the committee that last year the company paid $6 billion in taxes…which amounts to more than $16 million every day.
So basically, Apple was accused of obeying American tax laws and not paying more taxes than it was legally obligated to.
Apple is sitting on $145 billion in cash – and about $102 billion of it is offshore. With a US corporate tax rate of 35%, it’s not realistic to bring that money home. If the company needs cash it’s far cheaper to get it in the bond market. Case in point: just last month Apple raised $17 billion in the bond market, and it didn’t have to repatriate a single penny from overseas.
Dragging Apple’s CEO in front of a Congressional committee was meaningless. Lawmakers created the tax law and its loopholes, and then they acted surprised when a corporation used them. Some might say the people who created the problem were on the wrong side of the table last week on Capitol Hill.