In Disarming Testimony, Apple Chief Eases Tax Tensions

Even the panel’s fiery chairman, Senator Carl Levin of Michigan, after blasting Apple for creating “ghost companies” that diverted billions of tax dollars from American coffers and caused needy seniors to go without meals, had some kind words for Mr. Cook and his company.

“We love the iPhone and the iPad,” Mr. Levin said, going on to commend Mr. Cook and two other executives for voluntarily appearing before the Senate Permanent Committee on Investigations. “I know it’s not easy to come in front of a spotlight but it’s important for us.”

Other senators seemed even more mollified by Mr. Cook’s low-key performance.

Senator John McCain, the senior Republican on the panel, who had earlier criticized Apple “as among America’s largest tax avoiders,” took pains to modulate his message. “You managed to change the world, which is an incredible legacy for Apple,”he told Mr. Cook.

“You have to be a pretty smart guy and a pretty tough guy, too, and I say that in a complimentary way,” he added.

Mr. Cook was especially disarming.

“It’s important to tell our story, and I’d like people to hear directly from me,” he told Mr. McCain and the other senators.

Apple, he testified, pays “all the taxes we owe — every single dollar.”

Mr. Cook joined Apple in 1998 as an expert in sales and operations, creating the efficient supply chain that helped catapult the company into the top ranks of the technology industry. He became chief executive in 2011.

While his predecessor, Steven P. Jobs, was famous for his creative vision and flamboyant performances at introductions of the company’s products, Mr. Cook was known for his behind-the-scenes work — particularly for his shrewd negotiating tactics with suppliers.

These skills seemed to stand him in good stead on Tuesday.

Apple, Mr. Cook said, was a victim of an outdated tax system. “Unfortunately, the tax code has not kept up with the digital age,” he said.

“The tax system handicaps American corporations in relation to our foreign competitors who don’t have such constraints on the free movement of capital.”

Apple is hardly unique in seeking to legally shield tens of billions in profits from tax collectors in the United States and overseas, even if its tactics may have been unusually aggressive.

According to one study cited by Mr. Levin, 30 of the largest American multinationals, with more than $160 billion in profits, “paid nothing in federal income taxes over a recent three-year period. Zero.”

Corporate tax loopholes, Mr. Levin said, need to be closed “whether or not we reform the overall tax code.”

On Monday, Congressional investigators unveiled a detailed report showing how Apple subsidiaries — based in Ireland but spanning other regions around the world — had helped the company pay as little as one-twentieth of 1 percent in taxes on billions of dollars in income.

Mr. Cook sought to draw a sharp distinction between sales in the United States and those abroad, arguing that the company had complied with local laws everywhere.

“The way I look at this is that Apple pays 30.5 percent of its profits in taxes in the United States,” he said. “We do have a low tax rate outside the U.S., but this is for products we sell outside the U.S.”

Again and again, Mr. Cook said Apple was proud to be an American company, even if the majority of its sales took place outside the United States and were taxed at lower rates. “We are an American company, whether we are selling in China or Egypt or Saudi Arabia.”

In the most spirited exchange of the hearing, Mr. Levin bore down on the fact that Apple’s Irish subsidiaries manage to shelter much of the company’s income in Europe, Asia and the Middle East while it pays a higher rate on sales in North and South America.

Nelson D. Schwartz reported from Washington and Brian X. Chen from New York.