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Tim Cook goes to Washington

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Apple will be in the hot seat on Capitol Hill this morning. Company CEO Tim Cook is expected to testify before the Senate Subcommittee on Investigation about how the tech giant dodges taxes on its corporate earnings. It’s common among multinational companies, but it’s a practice that’s coming under close scrutiny.

There are lots of ways companies can avoid paying taxes to the IRS on profits. Apple is pretty familiar with those. So the company is going under the microscope today. Why Apple?

“They’re one of the companies with the largest amount of overseas cash given the success of the iPhone,” says Michael Knoll, co-director at the center for Tax Law and Policy at the University of Pennsylvania. Apple has $102 billion in offshore accounts. Experts say the company keeps a growing portion of its profits abroad where tax rates are much lower.
While not commenting on Apple specifically, Robert Pozen, senior fellow at the Brookings Institution says the general strategy of keeping foreign earnings abroad is perfectly legal, though arcane.

“There is a consensus that the current system does not make much sense,” Pozen says,  “because we’re not raising a lot of revenue, and we’re keeping lots of money from coming to the U.S.”

Apple argues that it already gave more than $6 billion to Uncle Sam last year. And the worry is more taxes would put it at a disadvantage with competitors like Samsung.

Audio Extra: Marketplace’s London Bureau Chief Stephen Beard explains Apple’s taxes abroad.

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