Apple to Congress: We do not use 'tax gimmicks'

Apple to Congress: We do not use 'tax gimmicks'

Summary: Ahead of a Congressional hearing on Tuesday, the iPhone and iPad maker sets out Apple chief executive Tim Cook's testimony. The company is clear: "what you see is what you get," but will Congress buy it?


Apple on Monday posted its full testimony that it will later this week present to Congress, explaining in detail how it arranges its financial affairs, such as how and where it pays tax.

The document, 16 pages in length [PDF], was posted by the Cupertino, Calif.-based technology giant on its website ahead of Apple chief executive Tim Cook's presence in the U.S. Senate on Tuesday.

The U.S. Senate Permanent Subcommittee on Investigation is looking into a number of tax avoidance schemes and strategies by major technology firms. It comes as companies, not limited to Google and Amazon, have faced the wrath of the U.K. parliamentary select committees on public finance.

Apple takes to multiple pages to trumpet its contribution to the U.S. economy, as well as others in which the company has major offices, such as in Ireland.

"Apple welcomes an objective examination of the US corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy," the testimony reads.

The company said it "supports comprehensive tax reform as a necessary step to promote growth and enable American multinational companies to remain competitive with their foreign counterparts in both domestic and international markets."

But the iPhone and iPad maker stressed certain points, seemingly pointing the finger at other companies, albeit without naming names. It noted one key point: it pays U.S. tax, and if Congress doesn't believe it is paying enough then it should try to fix the system.

"Apple is likely the largest corporate income tax payer in the US, having paid nearly $6 billion in taxes to the U.S. Treasury in [the fiscal year of 2012]," the testimony read. According to the firm, "these payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year."

Printed in bold text: "[We] do not use tax gimmicks," it said. Apple explained that it does not move its intellectual property portfolios to offshore tax havens, nor does it use it to sell products back into the U.S. to avoid paying tax in the country. It "does not hold money on a Caribbean island," and it "does not have a bank account in the Cayman Islands."

Amid the seriousness of the situation, Apple was actively pointing the finger at other firms that do. In recent weeks, British Prime Minister David Cameron sent a letter its overseas territories, including the Cayman Islands, stressing the need to "get our own houses in order" by sealing the tax loopholes exploited by behemothic firms.

Apple's testimony continues to argue that the reason why it does not bring its vast amount of offshore cash back to the U.S. is that it could lose more than one-third of the cash pile's value.

Apple said that 61 percent of Apple's revenue for last year came from international sales, and amounted to two-thirds of its revenue in its last earnings call, its fiscal second quarter.

"Apple uses its foreign cash for business operations, geographic expansion, acquisitions and capital investments, and to fund other expenses required by its overseas operations, such as the capital-intensive construction of retail stores in Europe and Asia and the purchase of customized tooling equipment." 

But the company warned that if it "repatriated" those funds, "they would be reduced by a 35 percent U.S. corporate tax rate."

As Apple still has shareholders to consider, it cites its investors as its sole reason for keeping its vast wealth overseas. "Apple serves its shareholders by keeping these funds overseas where they can be deployed efficiently to fund international operations at a lower cost."

"As Apple's recent bond issuance demonstrates, [we] can return capital to shareholders using debt at a far lower cost than through repatriation of foreign cash."

Cook told Politico last week that the company "unequivocally [...] does not funnel its domestic profits overseas." He reiterated that Apple "pay[s] taxes on all the products we sell in the U.S., and we pay every dollar that we owe."

Topic: Apple

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • 'We do not use 'tax gimmicks"

    And I just read that they don't use Foxconn anymore, going all in with cheaper supplier Pegatron.

    Guess those pesky raises and realistic schedule demands was more then Apple could afford, so the need the tax break, definately.
    William Farrel
    • The suicide nets must of costed too much

      nobody buys apple anymore anyways.
      • Channeling your Yogi Berra??

        "Nobody goes there anymore, it's too crowded"

        Funny stuff...and another pitifully predictable response from the Willy/Toddy/Owlie crowd
        • You really see zero humor in everything, UGBK?

          Oh, that's right. We're allowed - no required, to make fun of MS, but should we have a laugh at Apple or Google's expense, well then that's "Blasphemy! Defend the Church!"

          Got it. And here I thought it a humorus way to link two Apple related stories together.

          Oh well, now back to your regularly scheduled paranoia....
          William Farrel
          • So you find humor...

            in suicides?
          • Incredible. You somehow managed to connect someone else's reply to me,

            in which they mention suicide, to me mentioning a story of Apple switching suppliers as laughing at suicide ?

            Amazing. Truly amazing.

            Could you please explain how it is I am making fun of suicide when I never said a word about it?

            Near as I can tell, I was making fun of Apple arguing "it needs a tax savings because our current supplier is raising their prices." Please point out were I mentioned suicide in my post. ( I won't scream plagiarism if you cut and paste, so go for it)

            Do you guys ever bother to read before posting, or is it anyone who does not worship at the alter of your tech companies just open season to put words in their mouths or feel the uncontrollable need to spin what they say?
            William Farrel
          • Maybe your sense of humor ......

            is a tad off for most folks here?

            Since this subject seems to come up from time to time, that may be a thought worth pondering.

            And "Nobody goes there anymore, it's too crowded" was actually quite funny, but perhaps lost on you.
          • I think it's an incredibly funny...

            and profound statement.

            I don't think jokes about suicide are funny. Sorry.
          • Neuth do I msalzberg

            Which is why I never mentioned it.
            William Farrel
          • Wow. Neither to Neuth?

            Not even sure what a Neuth is.

            "Well, she turned me into a Neuth"

            "A Neuth?"

            "I got better"
            William Farrel
  • Yeah right !!!

    Pay your fair share of tax, Apple !!! Otherwise you are a thief like Google(chased for tax evasion all around the world)
    • Nobody pays a fair share

      half pay nothing, the other half pay a % depending on how good they are at accounting and the number of sweetheart deals.

      A flat tax will solve this, fat chance of the government giving up the power to adjust tax rates on certain groups.
      • Flat tax

        A corporate flat tax with no loopholes? LOL, good luck with that. Business interests would torpedo any such legislation in a heartbeat.
        • it works, apparently

          In other countries, flat tax has done wonders.

          But you are correct, corporate interests and political populism cannot tolerate it. "We will get the money from the rich" .... until everyone is equally poor again.
      • @Owlie...Did you read the article?

        Zack quoted Apple as saying ""Apple is likely the largest corporate income tax payer in the US, having paid nearly $6 billion in taxes to the U.S. Treasury in [the fiscal year of 2012]," the testimony read. According to the firm, "these payments account for $1 in every $40 in corporate income tax the U.S. Treasury collected last year."

        Now...if you think Apple is lying or that this isn't enough..that's your facts and respond accordingly. If not, why bother just posting nothing more than a childish rant? Though, judging from your typical posts, childish rant is pretty much your forté...perhaps even your sole ability.
        • UGottaBKidding....when you say show the facts it only shows how stupid

          you are about busines in the real world. Microsoft, Apple & HP are America real whores......they get away with screwing all Americans and were supposed to LOVE them for that.

          They can't spend all those stolen BILLIONS in 10 life times, so why do it?

          Lets support closing those TAX loop holes once and for all for the betterment of ALL and nust a few..

          PS and dont talk about someone else making stupid post, I suggest you look at your posts once in awhile before shooting off your mouth...........
          Over and Out
          • Your ignorance of economics is staggering

            Do you actually think Apple has 15 billion dollars in a vault somewhere like Scrooge McDuck?
          • Your ignorance of economics and common sense is staggering

            No not actually Scrooge McDuck, but more like his brother Daffy Duck.

            Say Quack Quack for me will you...................
            Over and Out
        • Nonsense argument

          ...this argument is totally wrong. Apple makes a shed load of money - ergo it is a large tax contrib...when it chooses to do so.
      • What, precisely, is your standard for "Fair"?

        ...I mean, considering that there are FAR more than 40 other high tech firms in this country and Apple paid $1 out of ever $40 collected in Corporate Income Tax, not to mention having created more millionaires who pay income taxes, and have provided income for people who create hundreds of thousands of iOS apps, as well as a HUGE cottage industry in iPhone, iPad and iPod accessories...In light of all that, what does Apple get from the Federal Government that's worth $6 Billion a year? A shrinking defense? A collapsing infrastructure?? When has Uncle Sam gone to bat for Apple's I.P. holdings in Asia or assisted Apple in any substantive way...well, since Janet Reno stopped threatening Bill Gates I mean...?
        ReadWryt (error)