Apple Hearing: Observations from an Expert Witness

5 Pages Posted: 3 Jun 2013 Last revised: 10 Jul 2013

See all articles by J. Richard (Dick) Harvey

J. Richard (Dick) Harvey

Villanova University School of Law and Graduate Tax Program

Date Written: June 3, 2013


The US Senate Permanent Subcommittee on Investigations held a highly publicized hearing on May 21, 2013 to discuss Apple, Inc.’s international tax planning. As the first expert witness, I had a ring-side seat to the hearing and Apple’s international tax planning. One purpose of this article is to clearly identify the two key tax policy issues that need to be addressed by policymakers both in the US and internationally. Because the discussion at the hearing was very U.S. centric, these two issues may have been lost in the rhetoric.

• Should the US and the rest of the world allow Apple to record approximately two-thirds of its global income in an Irish entity that has few or no employees and little or no real activity?

• Assuming the answer is “no”, where should the income be recorded? Should it be the US, other countries, or some combination?

Another purpose is to discuss arguments made at the hearing by Apple and Sen. Johnson to support Apple’s allocation of only 30% of its global income to the US. These arguments were not fully explored during the hearing and warrant additional discussion. In short, Apple should not be able to argue one thing to support its US income allocation and then argue something different for allocating income to foreign countries.

Finally, the article briefly discusses several items, including: Apple’s effective tax rate, and whether they used tax gimmicks.

Keywords: International tax planning, Apple, US Senate Permanent Subcommittee on investigations, shifting income, base erosion, profit shifting, Subpart F, CFC look-through rule, contract manufacturing, tax gimmicks, effective tax rate

Suggested Citation

Harvey, J. Richard, Apple Hearing: Observations from an Expert Witness (June 3, 2013). Tax Notes, pg. 1171, June 3, 2013, Villanova Law/Public Policy Research Paper No. 2013-3050, Available at SSRN:

J. Richard Harvey (Contact Author)

Villanova University School of Law and Graduate Tax Program ( email )

299 N. Spring Mill Road
Villanova, PA 19085
United States
610-519-4474 (Phone)

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