In front of the U.S. Senate’s Permanent Subcommittee on Investigations, Apple CEO Tim Cook reiterated the company’s claim that Apple uses no gimmicks to avoid paying U.S. taxes. “We pay all the taxes we owe. Every single dollar,” Cook said. Under the country’s current tax system, Cook argued that it would be expensive to bring money earned from international sales back to the U.S. As in the pre-released testimony, Cook said that Apple recommends “dramatic” tax code reform. Regarding Apple’s use of Irish subsidiaries, Apple Chief Financial Officer Peter Oppenheimer said those subsidiaries employ nearly 4,000 people. He noted that profits of Apple Operations International and Apple Sales International are already taxed by foreign governments, and U.S. taxes are unaffected by those profits.
Earlier in the hearing, U.S. Senators Carl Levin (D-Mich.) and John McCain (R-Ariz.) brought up many of the points they made in their statements, while placing additional emphasis on Apple’s techniques in using subsidiaries such as Apple Operations International and Apple Sales International to avoid taxes. For instance, in the case of Apple Operations International: the U.S. system taxes based on where a company is incorporated, while Ireland — where AOI is incorporated — taxes based on the people managing the company. Since AOI is incorporated in Ireland but managed in the U.S., it appears to avoid any tax burden in either country — though Apple noted that AOI pays taxes on interest. Levin estimated Apple avoided paying $9 Billion in U.S. income taxes in 2012 alone. McCain pointed to a “flawed system,” while Levin said closing unjustified tax loopholes could provide hundreds of billions of dollars, “whether or not we reform the overall tax code.” By contrast, Sen. Rand Paul (R-Ky.) praised Apple and said the company should be apologized to for having to attend the hearing, and the company should be congratulated for creating jobs.
The U.S. Senate’s Permanent Subcommittee on Investigations claims Apple has avoided paying billions of dollars in U.S. income taxes by using offshore entities. “Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” subcommittee chairman Carl Levin (D-Mich.) said in a statement. “Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.” The subcommittee also released a 40-page memorandum with findings and recommendations.
Apple CEO Tim Cook is scheduled to appear at a hearing on Apple’s tax practices this morning — the company released its testimony yesterday. In the testimony, Apple points out that it is “likely the largest corporate income tax payer in the US.” Subcommittee ranking member John McCain (R-Ariz.) said in a statement that “Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among America’s largest tax avoiders.” The subcommittee does not appear to believe that Apple acted illegally, however, the company took advantage of legal loopholes to dramatically lower its tax burden.
One of the findings in the subcommittee’s memorandum involves Apple’s tax rate in Ireland, which is said to be less than 2 percent. The subcommittee maintains Apple’s cost sharing agreement with offshore affiliates in Ireland is “primarily a conduit for shifting billions of dollars in income from the United States to a low tax jurisdiction,” as $74 billion in sales income was shifted to Ireland from 2009 to 2012. Ireland said it’s not to blame for Apple’s low payments, claiming its system is transparent, and other jurisdictions’ tax systems are at fault, according to Reuters.
Apple has released a document containing CEO Tim Cook’s testimony ahead of his scheduled appearance tomorrow before US Senate’s Permanent Subcommittee on Investigations. Responding to questions about the company keeping more than $100 billion overseas, Apple used the testimony to state that it does not use tax gimmicks, and “has substantial foreign cash because it sells the majority of its products outside the US.” The company also points out that it is “likely the largest corporate income tax payer in the US” and notes that it has “created or supported approximately 600,000 jobs in the US.”
As anticipated by comments from Cook last year, Apple proposes that the current US corporate tax system must be reformed — “to reflect both the digital age and the globalization of commerce.” The company believes comprehensive reform should “be revenue neutral; eliminate all corporate tax expenditures; lower corporate income tax rates; and implement a reasonable tax on foreign earnings that allows free movement of capital back to the US.” It does not make more specific proposals in the testimony, but suggests that the simplification of the tax system is in line with its long-held belief system that simplicity is superior to complexity.
Apple is testing a 1.5” OLED display for use in its smart watch, according to a report in Taiwan’s Economic Times. Reportedly, the company was looking at a 1.8” display, but decided for some reason that it was too big. For comparison, the sixth-generation iPod nano contained a wearable 1.5” touchscreen. Another report from the same publication notes that Foxconn has received a small-scale order for the smart watch for about 1,000 units, suggesting that Apple will be testing the device within the company. [via Macotakara]
A new report sheds light on the latest issue alleged to be delaying negotiations for Apple’s streaming radio service: Apple and Sony Music have yet to agree on how much Apple should pay for songs which people only listen to partially before skipping. The report notes that Pandora pays full royalties for each skipped song, as per the Digital Millennium Copyright Act, even if the song “only plays for a few seconds.” Another recent report indicated Apple’s streaming music service could miss debuting at the company’s Worldwide Developers Conference next month based on negotiation delays. Neither Sony Music nor BMG Rights Management — two of the largest music publishers — have apparently agreed to terms with Apple as of yet. [via CNET]
Apple’s continuing negotiations with record labels could prevent the company from debuting its streaming music service by its Worldwide Developers Conference next month, according to a new report. Sony still hasn’t agreed to royalty terms with Apple, and BMG Rights Management, the fourth-largest music publisher, is also said to be holding out. But Universal Music Group, among other industry heavyweights, would like to see iRadio launch “as soon as possible.”
The article also notes how Google beat Apple to a steaming music service with the launch of Google Play Music All Access. While Google’s service is more of a standard subscription service similar to existing services, Apple is building a hybrid service — streaming with on-demand features. “Of course [Apple’s] negotiations were going to take longer,” a source said. Apple’s reluctance to pay advances has also reportedly played a role in slowing the pace of negotiations. [via The Verge]
The Fair Labor Association has released a report acknowledging that Foxconn and Apple are making progress on improving work conditions, but the companies are still exceeding working-hour laws. Apple and Foxconn have agreed to comply with Chinese working-hour law by July — under the law, workers may work 40 hours per week and work 36 hours of overtime per month — but the report finds workers at three facilities have worked between 40 and 60 hours every week. The findings were based on observations and interviews at the facilities. Those same three Foxconn facilities have met more than 98 percent of the action items agreed upon by Foxconn and Apple, the FLA reports. The FLA report also notes “Progress has been made with respect to election of worker representatives to unions.” [via The Wall Street Journal]
Apple CEO Tim Cook has spoken out on the company’s tax practices prior to his scheduled testimony at a Senate hearing next Tuesday. Under pressure over Apple keeping more than $100 billion overseas, Cook told Politico that the company has acted legally. “I can tell you unequivocally Apple does not funnel its domestic profits overseas,” said Cook, “We don’t do that. We pay taxes on all the products we sell in the U.S., and we pay every dollar that we owe. And so I’d like to be really clear on that.” Like many companies, Apple allegedly keeps money overseas to avoid paying high U.S. taxes. Cook noted that Apple is one of the largest U.S. taxpayers — the company paid almost $6 billion in taxes in the 2012 fiscal year. Interestingly, it’s expected that Cook will share Apple’s ideas for comprehensive tax reform at Tuesday’s testimony. [via Politico]
Apple has released iTunes 11.0.3, adding a new MiniPlayer, improved Songs view, and support for multi-disc albums. A greater emphasis has been put on allowing users to showcase album artwork in the redesigned MiniPlayer and Songs view, and the MiniPlayer now includes a built-in progress bar.
In addition, users with multiple disc albums can now have them appear as a single album. Apple also notes that the update provides performance improvements for working with large iTunes libraries.
A newly published Apple patent application reveals a system whereby one iOS device could control the flashes on other devices to better light a scene for photos. The method would allow an iPad, iPhone or iPod touch to use the flashes on multiple other iPhones, for instance, by initiating a master-slave connection. A signal can be sent from the primary device to the secondary devices to adjust timing, intensity, duration, or flash angle.
As described in the filing, instructions sent from the primary device could be displayed as text on the secondary device’s screen. The devices could also be paired using Bluetooth to trigger the flash at the right time. [via Apple Insider]
Apple’s App Store today reached 50 billion downloads, as noted by the end of the official countdown. As the site says, “The grand prize winner will be announced soon. Stay tuned.”
The person who downloaded the 50 billionth app will win a $10,000 App Store Gift Card. The next 50 people who downloaded an app after that will win a $500 App Store Gift Card.
Update: Apple announced the winner as Brandon Ashmore from Mentor, Ohio. The 50 billionth app downloaded was Say the Same Thing by Space Inch, LLC. Ashmore gets a $10,000 App Store Gift Card for his download.
In response to a U.S. Justice Department court filing alleging that Apple engaged in a price-fixing scheme with book publishers, Apple claims that it acted legally, and negotiated different agreements with the publishing companies. A filing from Apple says that the publishers decided on their own to eliminate wholesale e-book discounts and take other steps in an attempt to get Amazon to raise its prices. Additionally, Apple’s filing describes tough negotiations with the publishers. “Apple did not conspire to fix eBook pricing,” Apple spokesman Tom Neumayr said in an email.
The DOJ, however, cites statements former Apple CEO Steve Jobs made as evidence of conspiracy — the evidence includes an email sent to the CEO of a publisher’s parent company and a statement made to Jobs’ biographer. Apple remains the only entity in the suit that has not settled since the case started in April 2012 — all publishers involved have settled with the Justice Department. [via Reuters, Bloomberg]
A class action lawsuit has been filed against Apple for iPhone 4s with defective power buttons. Filed by a Florida woman, the suit claims Apple knew about a flex cable defect controlling the power button but kept quiet about the problem to sell more phones. Apple discussion forums regarding the power button are cited as evidence. The lawsuit claims that the part often fails after the phone’s one-year warranty expires. [via GigaOM]
Blackberry has announced that its BBM messaging service will be released as a free iOS app this summer, complete with support for iOS 6 and above. BlackBerry CEO Thorsten Heins said the release of BBM on other platforms is a “statement of confidence,” and noted that the free app is expected to include messaging and groups at launch, with voice, screen share, and channels to be added later. As noted in a press release, BBM for iOS depends on Apple approval. [via The Verge]
In a quiet server-side update, Apple has given Siri the ability to respond to requests with quotes, notably to suggest that the user is being too long-winded. When asking the assistant a question — presumably one that Apple’s servers find too long or difficult to parse — Siri responds with William Strunk and Thomas Jefferson quotes alluding to brevity. Notably, the thirty-word Strunk quote itself takes several seconds for Siri to read aloud, and in one case was delivered in the middle of dictation.
The Strunk and Jefferson quotes appear to have been added to Siri over the last week and a half, and represent a new direction for Apple’s virtual assistant. Rather than just recognizing or failing to recognize a user’s natural speech, Siri now appears to be using quotations to change the user’s speaking patterns.
New York Attorney General Eric Schneiderman sent a letter today to Apple CEO Tim Cook — as well as the CEOs of Microsoft, Google, and Samsung — regarding the growing theft of electronic devices such as iPhones. Citing an increase in the theft of Apple products in New York City, Schneiderman argues that Apple and other companies need to do more to combat theft, a topic previously raised by San Francisco District Attorney George Gascón. As Schneiderman wrote to Cook, “In particular, I seek to understand why companies that can develop sophisticated handheld electronics, such as the products manufactured by Apple, cannot also create technology to render stolen devices inoperable and thereby eliminate the expanding black market on which they are sold. I would be especially concerned if device theft accrues to your company’s financial benefit through increased sales of replacement devices.”
Schneiderman also writes that though Apple presents itself as concerned about safety, “…Apple may have failed to live up to these representations, limiting its focus to information security, without providing safeguards that would truly deter theft and thereby protect the safety of your customers.” These crimes, sometimes referred to as “Apple picking,” have been getting more attention recently. San Francisco’s Gascón pushed for Apple to make a “kill switch” to render stolen phones inoperable, but met with resistance from the company’s representatives. As legal pressure mounts, Apple and other companies may be pushed toward a resolution on device thefts in the future.
Apple’s countdown to 50 billion App Store downloads is nearing its end. At the current download rate depicted by Apple’s web site counter, the 50 billionth app should be downloaded at some point in the next two days; however, it’s unclear how accurate the counter is, and whether the speed will accelerate as the milestone draws nearer.
The person who downloads the 50 billionth app will win a $10,000 App Store Gift Card, and the next 50 people to download an app will win a $500 App Store Gift Card.
Apple informed staff at a recent town hall session that major changes would be coming to the AppleCare and AppleCare+ programs this fall, according to a report. Many of the changes will apparently focus on in-house repairs — instead of exchanging an iPhone, iPod, or iPad for a new device, Apple will repair the same device and return it to the customer. Apple Stores will reportedly have the ability to replace displays by June, and to repair cameras, sleep/wake buttons and logic boards by July. Advanced diagnostic tools to remotely assess hardware issues will also be available. It’s unclear whether this new system will lengthen initial turnaround times for customers, who were previously able to walk into Apple Stores and swap devices quickly, though repaired units might not require time-consuming content restoration.
AppleCare may introduce a new tier for consumers, instead of specific products, and offer in-store training for customers. There’s also a possibility that AppleCare will be reconfigured as a subscription model. Additionally, free support for the iPhone may jump from 90 days to one year without buying AppleCare. Apple Vice President Tara Burch announced the changes, which would come to the U.S., then the rest of the world, reportedly under the “One Apple” brand — though it’s unclear if “One Apple” is an internal or marketing term. [via Apple Insider]
Apple has created a waiting list to decrypt iPhones seized by police, due to high demand. A new report notes a case in which the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) had to wait for Apple to assist in unlocking the device of a man accused of distributing crack cocaine. According to the search warrant affidavit of an ATF agent, numerous law enforcement agencies do not have “the forensic capability” of unlocking an iPhone. Reportedly, the agent was told there would be at least a seven-week delay to unlock the phone, but the process apparently took at least four months. [via CNET]
Despite a report last month that Apple was close to making the deals necessary to move forward with the company’s streaming music service, a new report notes Apple is still discussing royalties. Universal Music is reportedly on board, and Warner Music is close, but Apple is still negotiating with Sony Music. Sources say Apple raised its royalty offer of 6 cents per 100 songs streamed up to 12.5 cents per 100 songs — the same rate as Pandora — but it’s unknown if Universal accepted that rate.
Some music executives argue Apple should pay a higher rate than Pandora due to its “broader ambitions” for iRadio, including the use of prediction data from iTunes users and a seamless plan to purchase songs through iTunes. Apple is reportedly offering revenue to labels through streaming royalties and advertising, while offering a guaranteed minimum sum as a safety net in case the revenue streams disappoint. [via Financial Times]