Apple CEO Tim Cook has called for radical changes in the US corporate tax code, as the company came under fire over its paying of tax, both in the US and internationally.
Cook was speaking before a Senate committee hearing which was highly critical of Apple's use of offshore tax strategies. It cited the company's use of three subsidiaries based in Ireland that appear not to be resident anywhere in the world but are responsible for around 70% of the company's global profits.
Apple was accused of keeping $30bn (£20bn) of international profits in the Irish companies from 2009 to 2012, but without filing an income tax return in either the US or Ireland.
Committee chair Senator Carl Levin described Apple's approach as 'tax avoidance, pure and simple' and claimed the company used 'loopholes' to avoid paying $9bn (£6m) in US taxes in 2012.
Senator Paul Rand who also sits on the Senate committee, called on the US government to stop 'bullying, berating and badgering one of America's greatest success stories' that provides over 600,000 US jobs.
He said: 'The Senate subcommittee admitted that Apple had not broken any laws. Yet, they are forced into a public trial at the whims of politicians, when in fact, Congress should be on trial for chasing the profits of great American companies overseas.
'Apple has done more to enrich people's lives than our federal government will ever do. Technology is a revolutionary force that continues to change the world in so many ways. The best thing the government can ever do is get out of the way.'
In its evidence, Apple said the company was one of the largest corporate income tax payers in America, paying nearly $6bn (£3.9bn) last year. But Cook said that Apple held billions of dollars of cash generated from its international sales with its overseas subsidiaries because repatriating the money would be 'very expensive'. He called for a simplified tax system and said: 'The tax code has not kept up with the digital age.'
Under current US tax law, a 35% levy is imposed on so-called 'repatriated' funds. Apple wants to see a simpler law that lowers corporate income tax rates and implements a 'reasonable' tax on foreign earnings that allows free movement of capital back to America.
Cook said the tax rate for repatriated money should be set 'in single digits' to persuade companies to bring it back, while standard tax for US profits should be in the 'mid 20s'.
In its evidence, Apple denied using 'tax gimmicks' and said that the Irish subsidiaries were set up in 1980 as part of a cost-sharing agreement designed to pool the risk and benefits of the company's expansion beyond its home market.
The Senate committee suggested that Apple had negotiated a domestic tax rate of less than 2% with the Irish government, significantly lower than the 12% statutory rate and claimed in its report that: 'Ireland has essentially functioned as a tax haven for Apple.'
Ireland's prime minister, Enda Kenny, stated that this was incorrect and said that Ireland does not do special tax-rate deals with companies.
