Apple Says "We Pay Our Taxes", Well, Some of Them

The CEO's of big multinational enterprises have to be masters of using words to justify avoiding unnecessary responsibilities, like US Income tax.  This CNN article has some of the back and forth between Tim Cook, Apple CEO and Carl Levin and John McCain.  They start off by calling him a liar, then they get into the meat of the issue.

Michigan Sen. Carl Levin, chairman of the Senate's Permanent Subcommittee on Investigations, and ranking member John McCain of Arizona both started the hearing with withering criticism of Apple's practice of shifting income to Ireland to avoid paying U.S. taxes.
Levin, a Democrat, called the practice a "sham," while McCain, a Republican, said that Apple's claims that it use of the Irish subsidiary did not reduce its U.S. taxes is "demonstrably false."
"U.S. corporations cannot continue to avoid paying their appropriate share in taxes," said McCain. "Our military can't afford it. Our economy cannot endure it. And the American people will not tolerate it."

"Apple is a great company, but no company should be able to determine how much it's going to pay in taxes...using all kinds of gimmicks to avoid paying the taxes that should be paid to this country," Levin said. "The people know it's not right."
Even the critics of Apple at the hearing did not claim that it was doing anything illegal with its tax strategy, they were only saying that the way the current tax system is now set up was bad policy.

In a related article, CNN explains how some of their tax gimmicks worked.

The 10-page overview of tax principles and law in the middle -- a history of how a program to block the use of offshore tax havens begun by President Kennedy was riddled with loopholes introduced by Congress -- is almost impenetrable.
Yet you need to wrap your mind around how Subpart F of the U.S. Tax Code was undermined by the so-called check-the-box and look-through rules in order to understand how Apple, by the subcommittee's calculations, was able to legally avoid paying U.S. taxes on $44 billion of income over a four-year period.
In one two-year span, according to the report, Apple was able to make $35 billion in income disappear through the check-the-box loophole and avoid paying $12.5 billion in U.S. taxes, or $17 million a day. The trick, as illustrated by the chart above, was to have billions in profits and dividends from overseas operations made payable to Apple Operations International, Apple's Irish subsidiary that by the company's own description is, for tax purposes, resident neither in the U.S. nor in Ireland.

 The report prepared by the Senate committee noted that:

At the same time as the U.S. federal debt has continued to grow – now surpassing $16 trillion the U.S. corporate tax base has continued to decline, placing a greater burden on individual taxpayers and future generations. According to a report prepared for Congress:

“At its post WWII peak in 1952, the corporate tax generated 32.1% of all federal tax

revenue. In that same year the individual tax accounted for 42.2% of federal revenue,

and the payroll tax accounted for 9.7% of revenue. Today, the corporate tax accounts for

8.9% of federal tax revenue, whereas the individual and payroll taxes generate 41.5% and

40.0%, respectively, of federal revenue.”

 Incidentally, Ireland was pissed about being called a Tax Haven.