Sen. Ran Paul, the Kentucky Republican and libertarian, Tuesday defended Apple’s tax machinations, saying he was “offended” that Apple CEO Tim Cook was being “dragged” before the Senate’s Permanent Subcommittee on Investigations to explain how the company could attribute nearly two thirds of its income to Irish entities that have no employees, no physical residence, and are not taxed by any government anywhere, but are totally controlled by Apple.
Paul accused chairman Carl Levin, D-Mich, and fellow Republican John McCain, R-Ariz., of trying to “bully America’s greatest success story.” Paul said Congress should have “brought a giant mirror” to look at itself instead of scrutinizing Apple, because Congress created the tax code that Apple is manipulating. Paul argued that multinationals should pay only a minimum tax of five percent on foreign earnings.
“Frankly I think the committee should apologize to Apple,” Paul said.
McCain’s blistering critique of Apple’s tax strategies and Paul’s unabashed defense makes for interesting new tax politics in the GOP. Stay tuned. McCain chastised Paul for accusing Levin of bullying the company, calling Paul’s comments, “frankly, offensive.”
Meanwhile, tax experts Richard Harvey, a professor at Villanova University, said he almost “fell off my chair” when he heard Apple claim that it was not using “gimmicks” in its Irish tax strategy. Harvey compared Apple’s tax strategy to “magic,” that allows it to divert its profits to subsidiaries that are not taxed anywhere at all.
Stephen Shay, a tax law professor at Harvard University, said Apple’s “ocean income,” meaning it’s floating out in the sea tethered to no country anywhere and thus avoiding all taxation, means that the tax burden is shifted to domestic U.S. companies as a result. Shay called it “a whopper” to believe that Apple was conducting an arms-length transaction with its Irish subsidiaries.