If there was one theme that ran consistently through Tim Cook’s appearance before the Senate on Tuesday it was that the Cupertino company had not broken a single law in its fight to pay as little tax as possible. Apple Inc. (NASDAQ:AAPL) according to Cook, kept to both the spirit and the letter of the law in its tax dealings.
According to the Apple Inc. (NASDAQ:AAPL) CEO, Apple did not avoid paying $9 billion in taxes in 2012, as one Senator, Carl Levin of Michigan, accused. Cook said that the company paid every single dollar that it owed. The company paid around $6 billion in taxes in 2012, an effective rate of around 30 percent.
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The heart of the matter is the way in which Apple Inc. (NASDAQ:AAPL) uses its international cash. Apple thinks that it shouldn’t be taxed on that money, because it is outside of the United States, and Apple Inc. (NASDAQ:AAPL) claims to pay taxes on the money in the jurisdictions in which it is owed.
Apple Inc. (AAPL) Used Ireland To Transfer Revenue
Earlier we took a look at the interesting ways in which Apple Inc. (NASDAQ:AAPL) used Ireland to transfer revenue from its international sales locations into a much friendlier tax regime. Since 2009, the company has paid an effective rate of 0.6 percent in that country, and only a small amount on operations it moved the cash to Ireland from.
Apple Inc. (NASDAQ:AAPL) has in the past decried the 35 percent effective tax rate it would have to pay in order to repatriate its cash to the United States. At today’s hearing, Senator John McCain of Arizona said that the company had avoided paying up to $44 billion in tax in the last several years. Tim Cook denied that accusation.
There was some support for the argument that Apple Inc. (NASDAQ:AAPL) made. Rand Paul, Senator from Kentucky, said that the company was doing the best it could with an awful tax code. Apple has stated that it would not mind paying a higher effective rate if the government would make the tax code simpler.
The clear message coming out of the testimony is simple, Apple Inc. (NASDAQ:AAPL) did nothing illegal. The company complied with the tax code to the best of its ability. It did not steal or wrongfully defraud the government. Apple saved its shareholders a huge amount of money by cleverly manipulating the law.
Lawmakers can only resolve the situation, of which Apple isn’t the only company that takes advantage, by changing the law, something that seems difficult in the current climate.