Apple (News - Alert) has released a statement ahead of CEO Tim Cook’s slated testimony on Capitol Hill today before the U.S. Senate’s Permanent Sub-Committee on Investigations. The panel released a report that the computer giant circumvents U.S. Tax Codes and keeps more than $100 billion overseas. Apple has firmly said that it does not use “tax gimmicks” and that it has substantial foreign cash because it sells the majority of its products outside the United States.
The Senate investigation on Apple found that the Cupertino, Calif., company employs a group of affiliate companies outside the United States to avoid paying taxes.
Apple is expected to face tough questions during the hearing today – the sub-committee’s chairman, Michigan Democrat Carl Levin, wants to reportedly use Apple as an example of a powerful company wielding its prowess to avoid paying taxes while “ordinary Americans” must pay them.
Last year, the subcommittee also probed the tax strategies of other tech giants like Microsoft and Hewlett-Packard (News - Alert) and that they too have circumvented billions in U.S. taxes by moving profits offshore and “exploiting” an ambiguous tax code.
The Washington Post reports that Apple is holding overseas some $102 billion of its $145 billion in cash, and an Irish subsidiary that earned $22 billion in 2011 paid only $10 million in taxes, according to the report issued Monday by the Senate Permanent Subcommittee on Investigations. Media reports says the strategies Apple employs are legal and other multinational companies utilize similar techniques to avoid paying income taxes on earnings they make overseas. However, the Senate report found that Apple’s tactics have found loopholes in the American tax code.
In his testimony, Cook is expected to say that Apple does not use tax gimmicks and it pays an extraordinary amount in U.S. taxes – about $6 billion to be exact in fiscal 2012, and likely making it the largest corporate income tax payer in the country, and its effective tax rate was about 30.5 percent.
The microscope on Apple comes as lawmakers try to find ways to raise revenue to help reduce the growing federal deficit. Many Democratic lawmakers lament that the government is missing out on collecting on billions of dollars because companies like Apple are finding loopholes to get out of paying taxes. Republicans, on the other hand, want to slash the corporate tax rate of 35 percent, according to the Washington Post, and ease the tax burden on monies U.S. companies earn aboard, saying their idea would encourage companies to invest at home.