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May 22, 2013

Cook Defends Apple’s Tax Practices, Pushes for Tax Code Reform

Apple CEO Tim Cook appeared before a Senate panel Tuesday (May 21) to advocate for a “dramatic simplification of the federal tax code” and to defend against accusations the iPhone maker has been dodging taxes for years.

Although the hearing began with some harsh words for Cook and his company, according to The New York Times, Apple’s CEO seemed to easily win the Senators over although he was frequently lambasted by panel chairman Senator Carl Levin of Michigan.

Levin accused Apple of using “ghost companies” in other countries to avoid paying more tax in the U.S. He described Ireland as a “tax haven” for Apple and even went so far as to say that Apple’s tax avoidances is the reason there is not more money to ensure elderly, low-income Americans have enough to eat each day.

Levin’s comments came a day after Congressional investigators filed a report about Apple’s practices. The report indicated that some of Apple’s overseas holdings had no employees and, instead, were run by Apple executives from its headquarters in Cupertino, Calif. By setting up shop in Ireland and other countries, Apple was able to find tax exemptions.

Tim Cook

Tim Cook

Cook, who appeared unruffled throughout the hearing, said, however, that Apple pays 30.5 percent of its profits in taxes each year — that is $16 million a day. This rate also makes Apple the “largest corporate income tax payer in America,” Cook said.

Apple pays “all the taxes we owe — every single dollar,” he added.

All products sold in the U.S. are taxed in the U.S., but, when sold internationally, it’s “taxed in the local market,” Cook said. In Ireland, for example, sales are taxed locally, with proceeds going to AOI. These proceeds, in turn, are taxed by the U.S.

Cook also used his appearance before the Senate committee to push for an overhaul of the federal tax code.

“Unfortunately, the tax code has not kept up with the digital age,” he said.

Cook said a “reasonable tax on earnings” would mean more money for U.S. coffers, adding that the current tax system hinders American companies “compared to foreign competitors.”

Cook said Apple will continue to push for tax law changes even though it “would likely result in an increase in Apple’s U.S. taxes.”