Apple chief executive Tim Cook went to Washington DC on Tuesday to defend his company's tax practices in front of a congressional committee.
The Apple CEO said his company does not deliberately shift its money to offshore banks and tax havens in order to avoid paying its fair share of US income tax. Cook said that Apple shifts much of its money out of the country because it sees a large proportion of its income come from its international operations.
“Apple has substantial foreign cash because it sells the majority of its products outside the US. International operations accounted for 61 percent of Apple’s revenue last year and two thirds of its revenue last quarter,” said Cook.
Cook said he believed that Apple contributed more tax revenues to the US than any other company last year, having paid around $6bn in the 2012 fiscal year. Additionally, he said the company uses its overseas revenues to fund expansions on its international operations rather than hiding the funds in order to gain advantageous tax rates from countries with lower corporate tax rates.
The testimony continued: “If the company repatriated these funds, they would be reduced by a 35 percent US corporate tax rate. 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, the company can return capital to shareholders using debt at a far lower cost than through repatriation of foreign cash.”
The testimony comes as the congressional committee is probing the use of tax evasion practices by technology firms. Apple was specifically named in the investigation along with Microsoft and HP.
Senator Carl Levin said: “There is a direct relationship between this rapidly accelerating shift of corporate profits offshore on the one hand; and on the other, a worrisome federal deficit fed in part by a decline in the contributions corporate taxes make to federal revenue.
“Corporate income tax revenue has accounted for a smaller and smaller share of federal receipts, and today is down to about nine percent of federal revenue.”
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