Apple, Cook show no apology for flawed tax strategy

Washington, May 22: Apple, in 2012 alone, avoided paying $9 billion in U.S. taxes, using a strategy involving three offshore units with no discernible tax home, or "residence", found out the Senate Permanent Subcommittee on Investigations.

Cook, in his first congressional testimony since becoming Apple CEO in 2011, said his company is a major taxpayer, handing over nearly $6 billion in cash to the U.S. government in 2012.

"We expect to pay even more this year," Cook said. "We pay all the taxes we owe."

But Senator Carl Levin, chairman of the subcommittee and a veteran tax sleuth, said Apple had sought "the Holy Grail of tax avoidance," creating one Irish unit that paid no income taxes to any national tax authority for the past five years, reported Reuters.

The top U.S. corporate tax rate is 35 percent, one of the world's highest, and Levin said Apple used Ireland as a base for a web of offshore holding companies and negotiated a deal with the Irish government for a tax rate of less than 2 percent.

Cook said Apple did not depend on tax gimmicks. "We don't move intellectual property offshore and use it to sell our products back to the United States to avoid taxes. We don't stash money on some Caribbean island," he said.

Reuters reported that in Ireland, where low corporate taxes have been an economic development tool for many years, the government said it had not made a special tax deal with Apple. If Apple's tax rate was too low, it was the fault of other countries, deputy prime minister Eamon Gilmore told national broadcaster RTE on Tuesday.

White House spokesman Jay Carney said on Tuesday that President Barack Obama "thinks it is inexplicable that our tax code would actually be written in a way that rewards companies for taking jobs and profits offshore."

Apple's success story fell low in front of the company's tax strategy reflecting a "flawed" tax system for Senator John McCain.

"For years, Apple has opted to forego fully contributing to the U.S. Treasury and to American society by shifting profits and circumventing U.S. taxes," McCain said.

Cook said Apple agreed with those in Congress who want to reform corporate taxes and called for changes that include lower corporate income tax rates and a reasonable tax on foreign earnings.

"Apple recognizes these and other improvements in the U.S. corporate tax system may increase the company's taxes," he said in prepared testimony.

It is not clear, however, whether that controversy and Levin's allegations will lead to an overhaul of the U.S. tax code. Tax law writers in Congress had been inching forward on such a project before the IRS scandal erupted earlier this month. Levin's inquiry has been under way for months.

Shares of Apple closed down 0.7 percent at $439.66 on Tuesday.

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