Tim Cook tells US senators the tech giant pays every dollar it owes and pushes for reform of tax system

APPLE’S chief executive yesterday made an embattled defence of his company’s tax payments, challenging US politicians to create a simpler system that would cut down on avoidance rather than criticising legally-compliant measures.

Tim Cook told a committee of senators that Apple pays “every single dollar” of US tax it owes and rejected accusations that the company uses so-called gimmicks to pay unfairly low rates of tax.

In an animated debate between Apple executives and the Senate permanent subcommittee on investigations – which includes former Republican presidential candidate John McCain – Apple was accused of exploiting loopholes and shifting the majority of its profits to holding companies in Ireland where a special rate allows it to pay just two per cent in corporation tax.

Cook rebuffed the accusations by saying Apple paid $6bn (£4bn) in US taxes last year, and told the committee that Apple would welcome simplifying the tax rate– even if it meant it would end up paying more taxes in the US.

“We pay all the taxes we owe – every single dollar” Cook said. “We don’t depend on tax gimmicks. We don’t move intellectual property offshore and use it to sell our products back to the United States to avoid taxes. We don’t stash money on some Caribbean island.

“The tax code has not kept up with the digital age,” Cook added. “We are handicapped in relation to our foreign competitors who do not have such constraints on the free movement of capital. Apple has always believed in the simple, not the complex. It is in this spirit that we recommend a dramatic simplification of the corporate tax code.”

Cook said he would welcome a reduction in US corporate tax rates – which at 35 per cent are among the highest in the world – which would be paid for by scrapping all business tax breaks, making the code much simpler. He also said that corporation tax levied on funds repatriated from overseas should be replaced by a more modest rate.

Apple currently holds more than $100bn in overseas funds but has been reluctant to hand the money to shareholders or invest it, due to the massive tax bill that would impose.

The committee’s report into Apple’s tax affairs claimed that Apple had “sought the Holy Grail of tax avoidance” and that it had avoided paying $9bn worth of US taxes last year.

Although the committee admitted that nothing Apple had done was illegal, senator Carl Levin accused Apple of “shifting the golden goose” to Ireland with “complicated and pernicious” measures, while McCain conceded that the company’s payments reflected a “flawed” system.

Despite saying that the measures used in Ireland did not affect US payments, Cook did not defend the minimal tax rates Apple pays in some other countries.