'We are proud to be an American company,' Cook said. | John Shinkle/POLITICO Cook defends Apple on taxes

Apple CEO Tim Cook on Tuesday vigorously defended his company on Capitol Hill against charges that the tech company stashes billions of dollars overseas to lower its U.S. tax bill.

In his first appearance before Congress, Cook told a Senate investigative committee that the company is a leading U.S. taxpayer that’s generated thousands of new jobs. And he countered that the U.S. Tax Code itself is faulty because it hamstrings “American corporations in relations to our foreign competitors.”


“We are proud to be an American company and equally proud of our contributions to the American economy,” Cook added.

( Also on POLITICO: Senate investigators: Apple sheltered $44 billion from taxes)

Still, the Apple chief, flanked by fellow company executives, seemed unlikely to win over the panel’s most skeptical leaders: Democratic Chairman Carl Levin and ranking Republican John McCain. Even before Cook began his testimony, lawmakers released a report that found Apple had established overseas entities to help it bypass some taxes while exploiting U.S. loopholes that shielded about $44 billion from U.S. levies.

“Just like millions around the world, I carry an iPhone in my pocket. The company’s engineers and designers have a well-earned reputation for creativity. What may not be so well-known is that Apple also has a highly developed tax avoidance system — a system through which it has amassed more than $100 billion in offshore cash in a tax haven,” said Levin, who sits at the helm of the Permanent Select Committee on Investigations.

( PHOTOS: Politicians and their iToys)

The committee leaders, however, stopped short of calling any of Apple’s conduct illegal. One committee member, Sen. Rand Paul (R-Ky.), even went as far as to defend the company Tuesday while urging the subcommittee to “apologize” for “bullying” executives.

“If anyone should be on trial here, it should be Congress,” Paul stressed in pointing out serious problems with the U.S. Tax Code.

( Also on POLITICO: Paul criticizes Senate hearing on Apple's tax tactics)

Still, Apple has drawn Washington scrutiny because the company maintains more than $100 billion in cash overseas. That money, if ever returned to the United States, would be subject to a 35 percent U.S. corporate tax — a big bill that’s deterred the broader tech industry from repatriating its foreign earnings.

Apple isn’t the only company with a complex international tax scheme seemingly designed to lower its multibillion dollar tax dues. Two other tech leaders — Microsoft and Hewlett-Packard — were the subjects of the same committee’s 2012 tax probe. Levin suggested earlier this week that additional similar investigations are forthcoming, but he declined to specify who might be in the cross hairs.

With Apple, though, Levin said its “tax avoidance” strategies and “gimmicks” are especially unprecedented.

Apple’s long-established entities in Ireland handle the tech company’s sales and operations outside the Americas. But some of those entities, including one called Apple Operations International, aren’t legally tax residents of the European country, according to Senate investigators. In the case of AOI, it means the holding company hasn’t even filed an income tax return for the past five years, even as it reported income of roughly $30 billion over that period, lawmakers’ probe found.

Senate investigators further charged in their report that Apple had avoided paying taxes on $44 billion of income by transferring the economic rights to its intellectual property abroad and exploiting a series of U.S. tax loopholes.

Top U.S. tax officials are slated to testify about Apple’s tactics later in Tuesday’s hearing.

For his part, Cook said in testimony that Apple already paid more than $6 billion to the federal treasury last year and expects to pay more this year.

Alongside Cook, Apple’s chief financial officer, Peter Oppenheimer, argued Apple follows international laws. And Oppenheimer added Apple’s international structure isn’t meant to reduce its taxes in the United States, as those earnings already are taxed in their local jurisdiction.

Oppenheimer, however, acknowledged later to Levin that Apple Operations International did not file an income tax return over the past five years. “That income is not subject to U.S. tax, both by statute and regulation,” the executive said.

Even before Apple executives testified, though, members of the subcommittee divided sharply over the nature of the probe itself.

“There is a direct relationship between this rapidly accelerating shift of corporate profits offshore, on the one hand, and on the other, a worrisome federal deficit fed in part by a decline in the contributions corporate taxes make to federal revenue,” said Levin, coupling Apple’s “tax avoidance” tactics with the country’s current budget debate.

Levin’s comments drew a stinging rebuke from tea-party darling Paul. At one point, the Kentucky senator derided the entire hearing as a “show trial.”

That didn’t sit well with the chairman. After Paul suggested the subcommittee “apologize” to Apple, Levin retorted that Paul is “free to apologize if you wish.”

“No company, no company, should be able to determine how much it’s going to pay in taxes,” Levin said.

McCain, for his part, later came to the chairman’s defense, describing Paul’s comments as offensive. “Apple’s corporate tax strategy reflects a flawed corporate tax system — and it’s a system that allows large multinational corporations to shift profits offshore to low-tax jurisdictions,” McCain added.