Economy

The Problem With Tim Cook’s Claim That Apple ‘Pays Every Tax Dollar We Owe’

CREDIT: AP Photo/Eric Risberg

Apple CEO Tim Cook

Apple, which made $53 billion in net income this year, says it pays an effective corporate tax rate in the U.S. of around 25 percent, despite the on-paper corporate rate of 35 percent. Some have said is actually more like 8 percent and it has avoided paying billions in taxes. The strategies it’s used to reduce its tax bills have drawn scrutiny from the U.S. Senate and the European Commission.

But the company’s CEO, Tim Cook, is fighting back. When confronted with some of the claims against its accounting practices, Cook told interviewer Charlie Roes it’s “total political crap,” adding, “There’s no truth to it. Apple pays every tax dollar we owe.”

Cook started the interview saying that the company pays “more taxes in this country than anyone,” adding, “We happily pay it.” But an analysis in 2012 found that the company was able to avoid paying $2.4 billion in taxes it would otherwise have had to pay through both offshore tax havens and low-tax states here in the U.S.

One of the main accusations levied against Apple is that it stores an estimated $181 billion in offshore profits, more than any other company. Cook told Rose that its lower U.S. rate is because so much of its business is overseas, but that while the company would “love to bring it home,” it would cost too much to do so.

While Apple earns more from all areas of the world added up than it does in the U.S., its largest sales by far come from the Americas. And one of the company’s most notable tactics for lowering what it owes in taxes is using three subsidiaries it headquartered in Ireland, which has a corporate tax rate of 12 percent and where Apple has been accused of inking a sweetheart deal where it only has to pay a 2 percent rate, and routing most global revenue through them. While those subsidiaries pay royalties to the U.S.-based headquarters that it pays taxes on, most profit is left in Ireland. The tax analysis group Citizens for Tax Justice has calculated that the company would owe $59.2 billion in U.S. taxes if it didn’t hold so much profits offshore.

Cook also lashed out at the American tax code generally. “This is a tax code…that was made for the industrial age, not the digital age,” he said. “It’s backwards, it’s awful for America.”

There may be some truth to the claim, as no one has accused Apple of doing anything illegal. But while Cook has advocated for lowering the corporate tax rate and closing loopholes, corporate taxes are already a shrinking portion of the government’s revenue, getting replaced instead by payroll taxes paid by working people.