Apple CEO Cook testifies on taxes, faces Senate critics

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.