Apple vs. the Senate Permanent Subcommittee on Investigations

Apple CEO Tim Cook poses with an iPad Mini during Apple’s special event in San Jose, Calif. on Oct. 23, 2012

Photo by KIMIHIRO HOSHINO/AFP/Getty Images

Here is the report from the Senate Permanent Subcommittee on Investigations about Apple’s tax avoidance strategies (PDF) and here is Tim Cook’s prepared testimony in response (PDF).

Substantively speaking, Cook’s point is that Apple pays a lot of U.S. corporate income tax, employs a lot of Americans, and all things considered if Apple vanished off the face of the planet or pulled up its stakes and moved to Taiwan that would be bad for America. The Subcommittee’s point is that Apple engages in a lot of creative accounting tactics to minimize its corporate income tax bill. The most striking fact is that this isn’t just a matter of shifting profits to lower-tax jurisdictions, but that some of Apple’s profits aren’t taxed by anyone anywhere due to jurisdictional gaps.

The unfortunate thing here is that Carl Levin, the senator with the interest in this matter, chairs this investigations committee rather than, say, the Finance Committee. There really isn’t a great deal to “investigate” here. It’s not like it turns out that Apple minimized its tax bill by blackmailing IRS agents by secretly reading their iPhone emails. The issue here is with the tax code not with Apple. Portraying it as a showdown between the Senate and a CEO makes for better television, but the actual issue here is one of legislators versus legislators. Apple has its favorite tax strategies and General Motors has its favorite tax strategies. It’s a question of public policy how much revenue we want to raise via corporate income tax and what sectors do we want to coddle with loopholes.