Update: Live coverage of the Senate hearing on Apple’s offshore tax practices is above.
As things heat up in the row on alleged tax avoidance by Apple, Ireland has denied a claim made by the Senate Permanent Subcommittee on Investigations that it had agreed a special deal with the company to allow it to pay corporation tax of just 2% on its Irish earnings.
The denial was made to Yahoo! Finance reporter Conor Humphries:
According to the congressional report, Ireland had also agreed a special 2 percent rate for Apple’s Irish taxable profits instead of the normal 12.5 percent, but a spokesman for Ireland’s finance department, when asked how and why this had come about, said: “Ireland’s tax system is statute based, so there is no possibility of individual special tax rate deals for companies.”
This appears to flatly contradict a statement by the Senate subcommittee that accused Apple of …
Negotiating a tax rate of less than 2 percent with the government of Ireland – significantly lower than that nation’s 12% statutory rate
Apple yesterday published its testimony to the committee, which states:
Apple does not use tax gimmicks. Apple does not move its intellectual property into
offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands.
There is no direct reference to the 2% claim in Apple’s testimony, but it will almost certainly be addressed when Tim Cook appears before the subcommittee later today. C-SPAN is covering the hearing live - which is now underway.
Apple today has published its testimony proposing corporate tax reform and detailing the company’s tax practices ahead of CEO Tim Cook’s appearance at a Senate hearing on offshore tax practices scheduled for tomorrow.
In the testimony, Apple proposed what it called comprehensive corporate tax reform that 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.
While some Subcommittee members may have differing views on these tax policy matters, Apple hopes the Subcommittee will see that these recommendations aim to create meaningful change and go well beyond what most US companies propose. As both a pioneer and participant in the American innovation economy, Apple looks forward to working with the Subcommittee on its efforts to encourage comprehensive reform of the US corporate tax system. Apple appreciates the opportunity to appear before the Subcommittee to contribute constructively to this important debate.
Apple also detailed the company’s current tax practices and noted it “made income tax payments to the US Treasury totaling nearly $6 billion – or $16 million per day.” Apple points out that, at a rate of 30.5%, that accounts for around “$1 out of every $40 of corporate income taxes collected by the US Treasury last year.”
Apple continued by commenting on its recent decision to borrow $17 billion in debt instead of repatriating offshore funds to help fund its shareholder return:
If Apple had used its overseas cash to fund this return of capital, the funds would have been diminished by the very high corporate US tax rate of 35% (less applicable foreign credits). By contrast, given today’s historically low interest rates, issuing debt at a cost of less than 2% is much more advantageous for the Company’sshareholders. Because Apple was able to borrow at a cost lower than the cost of its equity, issuing debt lowered Apple’s overall cost of capital. Additionally, issuing debt served the interests of Apple’s shareholders because the debt’s interest
Apple CEO Tim Cook, along with other Apple executives, is expected to testify before the U.S Senate Permanent Subcommittee on Investigation tomorrow morning in a hearing on “Offshore Profit Shifting and the U.S. Tax Code.”
Beginning in 2015, all new cars in the United States will likely need to be fitted with data-recording “black boxes” very similar to the devices currently used in aircraft. The U.S. Senate has already passed a bill that will make the devices a requirement, and the House is expected to approve the bill as well. Section 31406 of Senate Bill 1813 states that mandatory event data recorders must in installed in all cars starting in 2015, and it outlines civil penalties that will be levied against violators, Infowars.com reports. While the primary function of the black box devices would be to record and transmit data that could be used to assist a driver and passengers in the event of an accident, the bill has legislation built in that would give the government access to the data with a court order, and it also gives authorities the ability to access the data as part of an investigation. According to the report, these caveats could potentially lead to Big Brother-like scenarios where citizens are monitored or even actively tracked without their knowledge or consent.