Apple's offshore tax havens come under harsh spotlight

NEW YORK (CNNMoney) -- Apple's strategy of avoiding U.S. taxes came under a harsh spotlight on Capitol Hill Tuesday.

Michigan Sen. Carl Levin, chairman of the Senate's Permanent Subcommittee on Investigations, and ranking member John McCain of Arizona both started the hearing with withering criticism of Apple's practice of shifting income to Ireland, to avoid paying U.S. taxes.

Levin called the practice a "sham," while McCain said that Apple's claims that it did not reduce its U.S. taxes is "demonstrably false."

"U.S. corporations cannot continue to avoid paying their appropriate share in taxes," said McCain. "Our military can't afford it. Our economy cannot endure it. And the American people will not tolerate it."

The comments came on top of a report released Monday by Levin and McCain detailing Apple's tax strategy. CEO Tim Cook and other top executives are slated to testify later.

In prepared testimony from the CEO and other executives released Monday, Apple defended its actions. It argued that the company employs nearly 50,000 people in the U.S. and that its overseas cash supports its expansion and capital investments in this country.

"Current U.S. corporate income tax law severely discourages the use of these funds in the US," the company said.

Apple did garner support from one corner: Sen. Rand Paul of Kentucky, who said he was offended by the hearing.

"Tell me one of the politicians up here who doesn't minimize their taxes. Tell me a chief financial officer you would hire if he didn't try to minimize taxes legally. Tell me what Apple has done that is illegal," said Paul. He said that Congress should apologize to Apple for calling it before the committee, and for a tax system that is "bizarre and Byzantine."

"Money goes where its welcomed," Paul said. "Currently our tax code makes money not welcomed in this country."

Levin struck back at Paul, saying the committee was doing nothing wrong looking at the issue of offshore tax havens and Apple's tax practices.

"Apple is a great company, but no company should be able to determine how much it's going to pay in taxes...using all kinds of gimmicks to avoid paying the taxes that should be paid to this country," Levin said. "The people know it's not right."