Timothy Cook, CEO of Apple, faced the fury of law makers in Washington yesterday, who claimed that Apple has avoided paying billions of dollars in tax money. By the time the whole interrogation was finished, even senior members of the senate were eating out of Cook’s hand. The chairman of the panel, Senator Carl Levin of Michigan, who claimed Apple had created ‘ghost companies’ for tax avoidance had sweet words to part with. Senator John McCain, who was also critical of Apple, joined the bandwagon of hypocrisy by lauding the company eventually. Cook eventually stood testament to the fact that his company pays every last dollar they owe as taxes.
Tim Cook was always a behind the scenes person, who is an expert in sales and supply chain management, and became CEO in 2011. He blamed the tax code for not keeping up with the digital age as it handicaps American corporations from free movement of capital unlike foreign nations. An earlier study by Senator Levin claimed that any company that made more than $160 billion in profit (including Apple) has not paid a single dollar in federal taxes for the past 3 years. Tim Cook claimed that Apple has always paid its 30.5% in taxes to the government and claimed that the company was proud of its American heritage even though majority of its sales and high income due to lower tax rates came from its markets which are based abroad.
J. Richard Harvey Jr., a professor at Villanova law school, was very amused with statements claiming Apple has never used tax gimmicks. He estimated that Apple’s legal prowess had saved it from paying $7.7 billion in taxes in 2011. Moreover, by redirecting profits to its Irish subsidiaries, Apple pays less than two percent in taxes to the Irish government because it qualifies as a non-taxable resident. This was noted because 2/3rd of Apple’s global pretax income came from Ireland, where only 4% of its employees and 1% of its customers were present.
Senator Rand Paul, a Republican from Kentucky, was easily the most ardent defender of Apple amongst the members. He went on to claim that rather than blaming Apple for tax evasion we should rather blame the Congress for creating such a mess by referring to the tax laws. Mr. Levin eventually showed a tough stand against Senator Paul and Apple, claiming just because it makes great products doesn’t mean it can evade tax as well. Tim Cook was appreciated for treating the interrogation as a constructive business conversation on how to improve tax laws in business and seemed relaxed throughout.
