Apple 'tax gimmicks': rotten to the core or sensible business?

Two senators on Tuesday plan to grill Apple CEO Tim Cook about the company's tax practices, which they say cheat the US out of billions of dollars. Apple says it's playing within the rules.

By David Grant,?Staff writer / May 20, 2013

Apple CEO Tim Cook speaks during an event to announce new products in San Jose, Calif., in this Oct. 23, 2012, file photo. On Tuesday, he faces a Senate panel more interested in Apple's success at tax avoidance.

Marcio Jose Sanchez/AP/File

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?While technology giants like Apple are esteemed by the public for their role as innovative engines of America?s economy, two influential senators will grill the tech giant Tuesday for what they see as a less sterling part of its resume: tax avoidance.

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Sens. Carl Levin (D) of Michigan and John McCain (R) of Arizona will put Apple CEO Tim Cook to a congressional roasting before their Senate Permanent Subcommittee on Investigations, alleging that the company shielded as much as $10 billion in profits per year through creative accounting measures which, while legal, violate the spirit of American tax law.

Apple?s tax moves are ?right at the top of the list of creative tax gimmicks,? Senator Levin told reporters Monday. ?I had never seen anything like this, and we don?t know anybody who has seen anything like this.?

Apple isn?t alone in drawing the committee?s ire: Last year, fellow tech titans Microsoft and Hewlett-Packard were the focus of another hearing on tax avoidance strategies. Apple holds some $100 billion in cash overseas.

The inquiry cuts right to the heart of several brewing debates in Washington. First are questions of equity in the tax system, where lawmakers find it hard to explain why a US-based company like Apple can negotiate a special 2 percent tax rate with Ireland for a chunk of its foreign profits, for example.

That question of tax fairness is of particular importance in today?s tight fiscal times, with lawmakers straining for ways to find new revenues in politically palatable ways or reduce spending without cutting into core government functions from military spending to the social safety net.

In the long run, the issue of how the nation should structure corporate taxation is a key piece of America?s global competitiveness, an issue often raised by tax reformers like Sen. Max Baucus (D) of Montana and Rep. Dave Camp (R) of Michigan, the chairs of the tax-writing committees in the Senate and House. They want to close tax deductions and lower tax rates for both individuals and corporations ? and shift most corporate profits earned abroad into a lower tax threshold than the 35 percent rate that hits many private sector bottom lines today.

Source: http://rss.csmonitor.com/~r/feeds/csm/~3/nii7UozMF_M/Apple-tax-gimmicks-rotten-to-the-core-or-sensible-business

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