May 21 - Apple CEO Tim Cook tells lawmakers ''we are a proud American company'' but the U.S. tax code has not kept up with the digital age, leading Apple to keep billions of dollars offshore, a practiced which is being criticized for avoiding U.S. tax payments. Conway G. Gittens reports.
The controversial issue of offshoring tax liabilities made it to Capitol Hill - with the star witness being Apple CEO Tim Cook. His quick assertion that Apple is a proud American company turned to a sharp response to critics that Apple exploits loopholes at the expense of U.S. taxpayers. SOUNDBITE: APPLE CEO TIM COOK (ENGLISH) SAYING: "We don't depend on tax gimmicks. We don't move intellectual property offshore and use it to sell our products back to the United States to avoid taxes. We don't stash money on some Caribbean island. We don't move our money from our foreign subsidiaries to fund our U.S. business to skirt repatriation tax." And that was followed up by Cook pointing the finger at Congress for companies like his parking money overseas. SOUNDBITE: APPLE CEO TIM COOK (ENGLISH) SAYING: "Under the current U.S. corporate tax system it would be very expensive to bring that cash back to the United States. Unfortunately the tax code has not kept up with the digital age. The tax system handicaps American corporations in relation to our foreign competitors who don't have such constraints on the free movement of capital." But lawmakers were not willing to let Cook off easy. Senator Carl Levin, chairman of the senate sub-committee delving into the topic, claims Apple avoided $9 billion in U.S. taxes in 2012 alone. At issue: a group of Apple companies in Ireland, which are paying little tax to that European country. Cook says revenues and profits from Europe and Asia are funneled to that international hub in Ireland, which happens to have a low-tax rate given to Apple decades ago as an incentive to locate operations there. Republican Senator John McCain says this set-up has the appearance of giving Apple the upper hand. SOUNDBITE: SENATOR JOHN MCCAIN, REPUBLICAN, ARIZONA (ENGLISH) SAYING "Isn't it obvious that you are not bearing the same tax burden as if you were bearing in the United States, which then gives you some advantage over corporations and companies, which are smaller, which are strictly located in the United States of America. I'm not saying that's wrong doing, but I think you would agree, it gives you a significant advantage." SOUNDBITE: APPLE CEO TIM COOK (ENGLISH) SAYING: "What I see is Apple's earning these profits outside of the United States by law and regulation they are not taxable in the U.S. We've set up a holding company to collect these after-tax profits from our different foreign subsidiaries into AOI." Apple Operations International, or AOI, is the subject of much scrutiny. But Irish officials are also defending the tax policies that lured Apple and other companies at the heart of a growing chorus of global tax dodging complaints.