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Powered by Guardian.co.ukThis article titled “Julian Assange praises Edward Snowden as a hero” was written by Esther Addley, for guardian.co.uk on Monday 10th June 2013 18.03 UTC

Edward Snowden is a “hero” who has exposed “one of the most serious events of the decade – the creeping formulation of a mass surveillance state”, Julian Assange said on Monday.

The WikiLeaks founder said the question of surveillance abuses by states and tech companies was “something that I and many other journalists and civil libertarians have been campaigning about for a long time. It is very pleasing to see such clear and concrete proof presented to the public.”

Assange told Sky News that Snowden was “in a very, very serious position, because we can see the kind of rhetoric that occurred against me and Bradley Manning back in 2010, 2011, applied to Snowden”.

Following the Cablegate exposures in 2010 there were calls from some US politicians for Assange to be tried for treason and even assassinated. Manning, who has admitted leaking classified US military secrets to WikiLeaks, is on trial facing 21 charges, including “aiding the enemy”.

Assange has been confined for almost a year to the Ecuadorian embassy in London, having been granted asylum by the Latin American country in a bid to avoid extradition to Sweden to face sex assault and rape accusations, which he denies. The Australian fears answering the allegations in Sweden would make him vulnerable to onward extradition to the US to face potential charges relating to the WikiLeaks releases.

Assange had earlier told an Australian interviewer for ABC News that he had been in “indirect communication with [Snowden's] people”, but declined to elaborate further.

He described Manning and Snowden as “very serious, earnest young men who really believe in something, and have shown great courage, and there is no doubt actually that history will look on them extremely favourably and perhaps, in a few years, will liberate them from their predicament.”

Assange called on supportive countries to “line up” and offer support to Snowden. “It will be really telling to see which countries really protect human rights, the privacy of the public, asylum rights, or which countries are scared of the United States or are in bed with this surveillance complex.”

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Powered by Guardian.co.ukThis article titled “US in damage control mode after Edward Snowden’s explosive NSA leaks” was written by Dan Roberts and Spencer Ackerman in Washington and Tania Branigan in Beijing, for guardian.co.uk on Monday 10th June 2013 17.05 UTC

Washington was struggling to contain one of the most explosive national security leaks in US history on Monday as public criticism grew of the sweeping surveillance state revealed by whistleblower Edward Snowden.

Political opinion was split with some members of Congress calling for the immediate extradition of a man they consider a “defector”, but other senior politicians on both parties questioning whether US surveillance practices had gone too far.

Daniel Ellsburg, the former military analyst who revealed secrets of the Vietnam war through the so-called Pentagon Papers in 1971, described Snowden’s leak as even more important and perhaps the most significant leak in American history.

In London, the British foreign secretary William Hague was forced to defend the UK’s use of intelligence gathered by the US, and other European leaders also voiced concern.

The German chancellor, Angela Merkel, is expected to grill Obama next week during a much-awaited summit in Berlin. Peter Schaar, Germany’s federal data protection commissioner, told the Guardian it was unacceptable for the US authorities to have access to EU citizens’ data, and that the level of protection is lower than that guaranteed to US citizens.

In Washington, the Obama administration offered no indication on Monday about what it intended to do about Snowden, who was praised by privacy campaigners but condemned by some US politicians keen for him to be extradited from Hong Kong and put on trial.

The White House made no comment beyond a short statement released by a spokesman for the US director of national intelligence on Sunday. Shawn Turner said Snowden’s case had been referred to the Justice Department, and that US intelligence was assessing the damage caused by the disclosures.

“Any person who has a security clearance knows that he or she has an obligation to protect classified information and abide by the law,” Turner said.

Snowden disclosed his identity in an explosive interview with the Guardian, published on Sunday. He revealed he was a 29-year-old former technical assistant for the CIA and current employee of the defence contractor Booz Allen Hamilton. Snowden worked at the National Security Agency for the past four years as an employee of various outside contractors, including Booz Allen and Dell.

He left for Hong Kong on 20 May. He chose Hong Kong because “they have a spirited commitment to free speech and the right of political dissent”.

In his interview, Snowden revealed himself as the source for a series of articles in the Guardian last week, which included disclosures of a wide-ranging secret court order that demanded Verizon pass to the NSA the details of phone calls related to millions of customers, and a huge NSA intelligence system called Prism, which collects data on intelligence targets from the systems of some of the biggest tech companies.

Snowden said he had become disillusioned with the over-arching nature of government surveillance in the US. “The government has granted itself power it is not entitled to. There is no public oversight. The result is people like myself have the latitude to go further than they are allowed to,” he said.

“My sole motive is to inform the public as to that which is done in their name and that which is done against them.”

Snowden drew support from civil liberty activists and organisations. Ellsberg wrote for the Guardian: “In my estimation, there has not been in American history a more important leak than Edward Snowden’s release of NSA material – and that definitely includes the Pentagon Papers 40 years ago”.

Thomas Drake, a former NSA executive who famously leaked information about what he considered a wasteful data-mining program at the agency, said of Snowden: “He’s extraordinarily brave and courageous.”

The Electronic Frontier Foundation, an internet rights group, called for a “new Church committee” to investigate potential government infringements on privacy and to write new rules protecting the public. In the wake of the Watergate affair in the mid-1970s, a Senate investigation led by Idaho senator Frank Church uncovered decades of serious abuse by the US government of its eavesdropping powers. The committee report led to the passage of the Foreign Intelligence Surveillance Act and set up the Fisa courts that today secretly approve surveillance requests.

Both Snowden and the Obama administration appeared to be considering their options on Monday. Hong Kong is unlikely to offer Snowden a permanent refuge, but Snowden could buy time by filing an asylum request, thanks to a landmark legal ruling that has thrown the system into disarray.

For years, Hong Kong has relied on the United Nations refugee agency to handle the bulk of claims. But in March its court of final appeal ruled that the government must independently screen cases. No system for processing the claims is yet in place.

China-watchers also wonder if Beijing would wish to become publicly involved in such a high-profile case – particularly given China’s doctrine of non-interference in other countries’ domestic affairs, and that it comes days after the meeting between presidents Xi Jinping and Barack Obama, as the countries seek to improve bilateral relations.

In New York, the mayor, Michael Bloomberg cancelled at very short notice a planned photo opportunity with the Hong Kong chief executive, Leung Chun-ying. “It would have been a circus, so we decided to catch up with him another time,” a mayoral spokesman told the Guardian.

Shares in Snowden’s employer, Booz Allen, fell on Monday by 61¢, or 3.4%, in midday trading, a slight recovery from a 5% drop earlier in the session.

In a statement on Sunday, the company said it has employed Snowden for less than three months on a team in Hawaii. It added that it is working with clients and authorities to investigate the leaks. “News reports that this individual has claimed to have leaked classified information are shocking, and if accurate, this action represents a grave violation of the code of conduct and core values of our firm,” the statement said.

Booz Allen Hamilton is a consultant to government and corporate clients. About 23% of its revenue, or $1.3bn, came from US intelligence agencies last year. The company has said in SEC filings that security breaches could materially hurt results.

Additional reporting by Matt Williams and Tom McCarthy in New York, and the Associated Press

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Powered by Guardian.co.ukThis article titled “Edward Snowden revealed as NSA whistleblower – reaction live” was written by Paul Owen in London and Tom McCarthy in New York, for guardian.co.uk on Monday 10th June 2013 17.13 UTC

The Guardian’s Adam Gabbatt writes from the Union Square rally to support Edward Snowden:

Around 20 people have gathered at Union Square to rally in support of Edward Snowden. It’s pouring with rain, which organisers say has impacted numbers.

“History has shown that whistle blowers of this nature tend to be demonised quickly,” said Andrew Stepanian, who helped organise the event. He said he hoped rallies like this would celebrate Snowden’s “heroic act” in exposing the extent of the US government’s surveillance.

Attendees wrote messages on yellow and pink signs expressing support for Snowden. Stepanian’s said: “We stand with Edward Snowden.” Another sign described Snowden as a “hero,” while one woman had a banner which said: “I [heart] Manning and Snowden.”

Jeff Jarvis, the prominent media commentator, was among those at the small rally. He said the revelations could be damaging for the US as other countries were already wary of storing their users’ data in the states.

“I also fear for the Internet,” he said. “I think this could yield more of a lack of trust in the cloud, which I think is bad for the Internet.”

Adam made a Vine of scenes from the rally here.

Updated

“Call it digital Blackwater”: that’s the tagline of a new Tim Shorrock piece in Salon about the magnitude of the private contractor presence at US intelligence agencies:

With about 70 percent of our national intelligence budgets being spent on the private sector – a discovery I made in 2007 and first reported in Salon– contractors have become essential to the spying and surveillance operations of the NSA. [...]

If the 70 percent figure is applied to the NSA’s estimated budget of $8 billion a year (the largest in the intelligence community), NSA contracting could reach as high as $6 billion every year.

But it’s probably much more than that.

Read the full piece here. Tom Gara reports in the Wall Street Journal that of the 25,000 employees of Booz Allen Hamilton, whistleblower Edward Snowden’s employer, “76% have government security clearances allowing them to handle sensitive national security information.”

Rod McLeod, a regional security director for a major multinational company who spent 14 years with British military intelligence, tells the Guardian that Snowden’s case would be among the minority of leak cases in the UK, where most unauthorized disclosures of sensitive information are carried out by permanent staff.

McLeod (on Twitter) defines “insiders” as those who exploit their legitimate access to an organization’s assets for unauthorized purposes:

Recent (UK) evidence reveals that the majority (88%) of insider acts are actually carried out by permanent staff. Only 7% of cases involve contractors and 5% agency/temp staff. That said, there seem to be an enormous number of contractors working in the US intelligence community.

Back in the UK, other factors seem more closely aligned with these recent US cases. Most insiders have been male (82%), aged between 31-45 years and most take place within 5 years of employment (and extend over a period of around 6 months). The most frequent type of insider activity is unauthorized disclosure of sensitive information.

Updated

George Orwell’s 1984 is climbing Amazon’s list of Movers & Shakers – the site’s “bigger gainers in sales rank overs the past 24 hours,” the Washington Examiner’s Charlie Spiering notes.

Sales are up 83% since Sunday.

Updated

The Guardian’s Adam Gabbatt is in Union Square, where a rally to support Edward Snowden is proceeding under rainy skies:

British foreign secretary William Hague was specifically asked how the NSA collects the information and on what date Hague was made aware of the Prism programme.

He refused to answer this.

The statement and question session is now over.

The Guardian’s Rory Carroll reports on a crowdfunding campaign to help whistleblower Edward Snowden pay legal fees and other costs:

The campaign on Crowdtilt, an alternative to Kickstarter, has raised over $4,700 and is aiming for $15,000, urging would-be donors: “We should set a precedent by rewarding this type of extremely courageous behavior.”

Dwight Crow, a Facebook employee from San Francisco’s bay area, said he launched the initiative to reward and encourage whistleblowing and because he heard Snowden’s accounts had been frozen. He wrote: “Figured a little cash might help significantly :P

Crow said he hoped to get the money to Snowden in Hong Kong via relatives. How feasible this would be and whether there was any potential legal risk for donors was unclear.

Updated

Here are the key quotes from British foreign secretary William Hague in full:

It has been suggested that GCHQ uses our partnership with the United States to get around UK law, obtaining information that they cannot legally obtain in the United Kingdom.

I wish to be absolutely clear that this accusation is baseless.

Any data obtained by us from the United States involving UK nationals is subject to proper UK statutory controls and safeguards …

Our agencies practise and uphold UK law at all times, even when dealing with information from outside the United Kingdom.

Hague was also asked whether any member of parliament was having his or her phone tapped. He refused to answer.

Updated

The Electronic Frontier Foundation, an Internet rights group, calls for a “new Church committee” to investigate potential government infringements on privacy and to write new rules protecting the public.

In the mid-70s a Senate investigation led by Idaho Senator Frank Church uncovered decades of serious, systemic abuse by the US government of its eavesdropping powers, an episode Glenn Greenwald has written frequently about. The Church Committee report led to the passage of the Foreign Intelligence Surveillance Act and set up the Fisa courts that today secretly approve surveillance requests.

A statement from EFF reads in part:

Congress now has a responsibility to the American people to conduct a full, public investigation into the domestic surveillance of Americans by the intelligence communities, whether done directly or in concert with the FBI. And it then has a duty to make changes in the law to stop the spying and ensure that it does not happen again.

In short, we need a new Church Committee.

Read the full statement here. There’s support for such a new push inside Congress, too. On Sunday Senator Rand Paul said he would try to challenge the NSA surveillance programs in court, and Senator Mark Udall said he wanted to “reopen” the Patriot Act, to clarify limits on what it allows. Republican Rep. Jim Sensenbrenner recently wrote an editorial for the Guardian saying “I authored the Patriot Act, and this is an abuse of that law.”

Responding to his Labour opposition shadow Douglas Alexander, British foreign secretary William Hague said he was not saying the security agencies were incapable of error – ”but I am arguing that there is a strong system of checks and balances”. The combination of ministerial oversight, independent scrutiny and parliamentary oversight minimise the chance of error, he said.

Hague was asked by Tory David Davis about US law that distinguishes how far the American government can apply surveillance to US citizens as opposed to foreigners. Hague said: “We apply our own laws.” All of the acts that we have passed relating to the gathering of intelligence are applied to data from other countries, Hague said.

Earlier my colleagues Nick Hopkins and Richard Norton-Taylor drew up a list of eight questions Hague had to answer.

He sort of answered question 4: has GCHQ been garnering information about British citizens living in the UK from the NSA? He said it was “baseless” to say that GCHQ had used the NSA to get around UK law.

And he sort of answered question 8: is he sure that GCHQ is strictly abiding by the law and ministerial oversight – and how can he be satisfied? He said British intelligence agencies practised and upheld UK law at all times.

But he failed to answer the other questions, which you can read again here.

Frank Gardner of the BBC said the key question was whether Hague said “no British law has been circumvented”. Hague does seem to have said that by saying British intelligence agencies always operated within the law and that GCHQ had not used the NSA to get around UK law.

Updated

William Hague, the British foreign secretary, has just spoken to the House of Commons about GCHQ and Prism.

Hague said that the claim that GCHQ had used the NSA to get around UK law was “baseless”.

British intelligence agencies practise and uphold UK law at all times, he said.

The Commons intelligence and security committee has received some information from GCHQ and will receive a report from GCHQ tomorrow. He said the committee would be free to take any further action it saw fit once it had read the report.

Hague said that to intercept any individual’s communications required a warrant signed by him or another secretary of state and was “no casual process”. Not every proposal was approved, he said. The system of checks and balances was one of the strongest anywhere in the world, he said.

The relationship between GCHQ and its US equivalents – today the NSA – was a unique one, Hague said, and was “essential” to the security of both nations. It had stopped many terrorist and espionage plots and saved many lives, he said.

The basic principles of the relationship and the framework for exchanging information had not changed.

Hague said he deplored the leaking of any classified information wherever it occurs. Leaks are dangerous because they provide a “partial and misleading picture”, he claimed.

He said he would not confirm or deny any aspect of the leaked information.

Updated

The Guardian’s Spencer Ackerman flags a 2012 video featuring Booz Allen Hamilton CEO and president Ralph Shrader talking about how the company can respond quickly in the event of a security breach.

“If a breach occurs, we’re there to help, with real-time incident response,” Shrader says in the video, “Missions that Matter: Inspired Thinking,” which was produced to go with the company’s 2012 annual report.

On Sunday whistleblower Edward Snowden, accused of / credited with creating a major intelligence breach, revealed himself to be a Booz Allen Hamilton employee. In a statement the company called the revelation “shocking.”

“Booz Allen’s inspired thinking can also be seen in the way our people apply their expertise to help make the world a better place,” Shrader says, but he was talking about reducing gang violence.

I’ve been speaking with Guardian finance and economics editor Heidi N. Moore, who notes that BAH stock, which is down 4.22% on the day as of this writing, is trading at five times normal volume today.

Not everyone thinks it’s an obvious sell. Here’s CNN Money:

Updated

William Hague, the British foreign secretary, is about to address the House of Commons on the relationship between GCHQ and Prism. We’ll be covering his statement and his answers to MPs’ questions here.

Updated

New York City Mayor Michael Bloomberg has cancelled at extremely short notice a planned photo op this morning with Hong Kong chief executive, Leung Chun-ying.

The Guardian’s Matt Williams headed down to New York’s city hall to capture the moment, only to be turned away.

“It would have been a circus, so we decided to catch up with him another time,” a mayoral spokesperson told Matt.

Guardian columnist Glenn Greenwald is an active Twitter user whose timeline hosts many lively mini-debates about privacy and security issues:

Here is a video presenting two expert views on Edward Snowden’s decision to seek refuge in Hong Kong and the likelihood or not of his finding such refuge there.

Regina Ip, Hong Kong’s former security secretary, calls on Snowden to “leave Hong Kong.”

“Hong Kong is not a legal vacuum as Mr. Snowden might have thought,” she says:

However Simon Young of the University of Hong Kong says “coming to Hong Kong is probably a good decision”:

because not only do we have protections under extradition law through the court system, and the political offense exception, but we also have strong protections for people making asylum claims.

Young says he doesn’t think China “is going to be involved in any decision. I think that this is a matter that China is going to leave to Hong Kong’s autonomy.”

A spokesman for the director of national intelligence, James Clapper, said Snowden’s case had been referred to the justice department and US intelligence was assessing the damage caused by the disclosures. The spokesman, Shawn Turner, said:

Any person who has a security clearance knows that he or she has an obligation to protect classified information and abide by the law.

Read the full report by the Guardian’s Julian Borger and Spencer Ackerman here.

Updated

Daniel Ellsberg, who as a 40-year-old defense researcher leaked documents to the New York Times 40 years ago that would become known as the Pentagon Papers, writes in the Guardian that Snowden’s disclosure “gives us the possibility to roll back a key part of what has amounted to an ‘executive coup’ against the US constitution.”

“In my estimation, there has not been in American history a more important leak than Edward Snowden’s release of NSA material – and that definitely includes the Pentagon Papers 40 years ago,” Ellsberg writes:

The government claims it has a court warrant under Fisa – but that unconstitutionally sweeping warrant is from a secret court, shielded from effective oversight, almost totally deferential to executive requests. As Russell Tice, a former National Security Agency analyst, put it: “It is a kangaroo court with a rubber stamp.”

For the president then to say that there is judicial oversight is nonsense – as is the alleged oversight function of the intelligence committees in Congress. Not for the first time – as with issues of torture, kidnapping, detention, assassination by drones and death squads –they have shown themselves to be thoroughly co-opted by the agencies they supposedly monitor. They are also black holes for information that the public needs to know.

Read the full piece here.

Updated

Christine Harper is chief financial correspondent for Bloomberg News:

Wikileaks founder Julian Assange claims he has had “indirect communication” with Edward Snowden, the whistleblower behind the Guardian’s exclusive revelations on the NSA surveillance scandal, reports Oliver Laughland in Sydney.

Speaking to Lateline, an Australian current affairs TV show, from the Ecuadorian embassy in London, Assange declined to go into detail on the nature or level of correspondence he had entered into with Snowden’s “people”, but claimed that the whistleblower stood for the same the aims of the Wikileaks organisation.

“What he [Snowden] has revealed, is what I’ve been speaking about for years, that the National Security Agency and its allies have been involved in a mass interception programme,” he said.

Assange, who is standing for election in the Australian senate later this year, also claimed that Snowden’s actions complemented those of the Wikileaks political party.

“If I am elected to the [Australian senate], the Australian Wikileaks party position is there should be no interception, none at all of Australians without proper judicial oversight…

“We run the danger here of the west more broadly drifting into a state where there are two systems. There is one law for the average person and there is another law if you are inside the American intelligence complex … That is not acceptable, I don’t believe Australians find that acceptable, I don’t believe Americans find that acceptable, Snowden clearly didn’t find it acceptable, and he was even someone in the system.”

When pressed on precisely the sort of correspondence he had with the whistleblower, Assange said: “I don’t think it’s appropriate we go into more details.”

Frank Gardner of the BBC was just telling BBC News that if William Hague does not say “no British law has been circumvented” during his statement to parliament in an hour he (Gardner) will be concerned.

Index on Censorship, the free-speech lobby group, has condemned the Prism programme.

“Mass surveillance is a major chill to free expression and so undermines the right to free speech as well as the right to privacy,” the group wrote in a statement calling on the EU’s José Manuel Barroso and Herman van Rompuy to “stand up against mass surveillance on the scale seen in the Prism programme and to stand by the EU’s position against mass surveillance”.

Kirsty Hughes, the group’s CEO, said:

National security should not be used by governments to justify the mass surveillance of their citizens. This is not about the targeted surveillance of criminals but surveillance of private citizens on a massive scale. It is the kind of free speech violation we expect from Iran and China, not a democracy like the US. The Prism scandal shows that tech companies’ transparency reports are just the tip of the iceberg when it comes to data surveillance by governments.

A Hong Kong legislator has called for Edward Snowden to leave the territory, the Independent reports. Regina Ip, whom the paper describes as a “pro-Beijing” legislator, said Hong Kong was “obliged to comply with the terms of agreements” with the US government (although this includes exceptions for political fugitives) and adds: “It’s actually in his best interest to leave Hong Kong.”

The US army has confirmed an aspect of surveillance whistleblower Edward Snowden‘s military service to the Guardian, Spencer Ackerman writes from New York.

As Snowden told the Guardian in announcing his responsibility for detailing multiple mass surveillance efforts by the National Security Agency sweeping up Americans’ communications data, Snowden indeed tried to join the elite special forces.

Snowden was unsuccessful.

“His records indicate he enlisted in the army reserve as a special forces recruit (18X) on 7 May 2004 but was discharged 28 September 2004,” the US army’s chief civilian spokesman, George Wright, emailed the Guardian on Monday.

“He did not complete any training or receive any awards,” Wright added.

Wen Yunchao, an outspoken Chinese blogger now based in Hong Kong, has noted on Twitter that Snowden has “left the tiger’s den and entered the wolf’s lair”, the Guardian’s China correspondent Tania Branigan notes.

Julian Assange of Wikileaks has been speaking to the Lateline news programme in Australia about the Snowden case. My colleagues in our Sydney office are watching and will send me full details shortly.

Snowden told the Guardian that he chose Hong Kong because of its “spirited commitment to free speech and the right of political dissent“. Yet analysts say that mainland China’s encroaching influence in the territory’s schools, media and courts have put these values at risk, reports Jonathan Kaiman in Hong Kong.

“Most people here just got the news this morning, and they are very, very surprised,” said Luther Ng, a television journalist in Hong Kong. Ng called Hong Kong a “free, but not democratic city,” where “freedom of speech is getting tighter and tighter”.

“I hope [Snowden] is right,” said Charles Mok, a member of Hong Kong’s Legislative Council. “To some, these comments about Hong Kong’s environment may be an encouragement. To others it’s a reminder that we need to preserve it, to make sure it doesn’t go away.”

“At least in the system here, being in the Legislative Council, we don’t get to decide what happens to him,” Mok continued. “We’ll keep a close eye on him, but we want to make sure that China doesn’t just grab the guy and turn him over to the Americans.”

“[Snowden] is right, but he should also know that people here are very worried about losing our freedoms,” said Emily Lau, another member of Hong Kong’s legislative council and chairwoman of the influential Democratic party. “That’s why we are so vigorous and so vocal – when we see anything we think is wrong, we speak out, we protest … The government is coming in thick and fast, and people are concerned.”

Questions for Hague

Nick Hopkins and Richard Norton-Taylor have drawn up this list of the questions British foreign secretary William Hague has to answer in the Commons at 3.30pm BST about the legal framework under which GCHQ operates.

Hague is the cabinet minister responsible for the agency and has already stated that it is “nonsense” to suggest GCHQ acts outside the law, ahead of any probe by the Interception of Communications Commissioner Office, or the intelligence and security committee. Here are the questions:

1. When did he first learn of the Prism programme?

2. Was he told by GCHQ the method by which the NSA was gathering the material?

3. How long has GCHQ had access to Prism?

4. Has GCHQ been garnering information about British citizens living in the UK from the NSA?

5. Was the interception commissioner told about Prism, and was he allowed to review the documents around it?

6. How does he ensure that all GCHQ communication intercepts, including those provided by the NSA, are legal?

7. Should GCHQ be subjected to more scrutiny to reassure the public and parliament?

8. Is he sure that GCHQ is strictly abiding by the law and ministerial oversight – and how can he be satisfied?

Carl Miller of the British thinktank Demos is more surprised at the tech companies who collaborated with Prism than the fact the US operated the programme.

The real and sensational revelation is that this transfer of data was allegedly on the basis of willing, cooperation from the internet giants – Google, Facebook, Hotmail, Yahoo, Apple – as voluntary ‘Special Sources’ for the NSA. These same internet companies have, both in public and in private championed the privacy of their users’ data and long and noisily championed a vision of a free internet altogether hostile to government involvement in the internet. They have consistently opposed a British attempt – the Communications Data Bill – to create a legal basis to be able to conduct information collections ironically similar to those revealed in the slides. Google, for instance, publishes regular transparency reports on attempts by public authorities across the world to remove content from its search index.

The fact that these very same companies were willing, if secret, partners in this endeavour, whilst mounting a vocal opposition to it, would be a gruesome hypocrisy. ‘You have to fight for your privacy or you will lose it’, Google’s Eric Schmidt insisted earlier this year. The stunning duplicity is, it seems, this is exactly what they have failed to do.

The communications data bill was blocked by Nick Clegg, the UK deputy prime minister, but since the murder of Drummer Lee Rigby in Woolwich last month there have been calls to put it back on the table, with talk that Labour could work with the Tories on it to circumvent Lib Dem objections. Miller argues that the internet companies implicated in Prism have now lost the moral authority to oppose the communications data bill.

In the US, Peter King, the Republican chairman of the House of Representatives counter-terrorism and intelligence subcommittee, has called for Snowden to be extradited from Hong Kong and prosecuted. He flew there 10 days ago in order to disclose the top-secret documents and give interviews to the Guardian. King said:

If Edward Snowden did in fact leak the NSA data as he claims, the United States government must prosecute him to the fullest extent of the law and begin extradition proceedings at the earliest date. The United States must make it clear that no country should be granting this individual asylum. This is a matter of extraordinary consequence to American intelligence.

Updated

Malcolm Rifkind, the chair of the UK’s intelligence and security committee, has suggested that GCHQ may have broken the law if it accepted information from the NSA on British citizens through Prism, Patrick Wintour and Nicholas Watt report. Rifkind told BBC Radio 4 this morning:

One of the big questions that is being asked is if British intelligence agencies want to seek to know the content of emails can they get round the normal law in the UK by simply asking an American agency to provide that information?

The law is actually quite clear. If the British intelligence agencies are seeking to know the content of emails about people living in the UK then they actually have to get lawful authority. Normally that means ministerial authority. That applies equally whether they are going to do the intercept themselves or whether they are going to ask somebody else to do it on their behalf.

Rifkind will meet NSA and CIA representatives in Washington this week.

Douglas Alexander, the shadow foreign secretary, said he was going to ask William Hague, the foreign secretary, today about the legal framework GCHQ worked under:

What we need clarity from the foreign secretary [about] today is the legal framework governing UK access to intercepts secured by the NSA.

Updated

My colleague Nick Hopkins notes that since the revelations on Friday, neither GCHQ nor any government minister has denied the agency had access to material gathered by Prism.

The classified documents obtained by the Guardian stated that GCHQ had last year generated 197 intelligence reports from Prism, which was set up in 2007 to help the US monitor traffic of potential suspects abroad.

The papers also showed GCHQ, the UK’s eavesdropping and security agency, has had access to Prism since at least May 2010. Nick writes:

Ministers have also not attempted to explain why GCHQ would need to access information from Prism, rather than going through the normal legal protocol when seeking information from an internet company based in another country. This involves making a formal request to the US department of justice, which would make the approach to the firm on the UK’s behalf. The company then has to decide whether to provide information.

In the UK, GCHQ is bound by the Regulation of Investigatory Powers Act to seek approval for intercepting material from telecoms and UK-based internet companies …

Prof Peter Sommer, a cybersecurity expert, said it was well known the US and British intelligence agencies shared information, but asked whether [William] Hague and Theresa May, the home secretary, had any way of independently verifying what the GCHQ, MI5 and MI6 were telling them.

The intelligence and interception commissioner, who reviews whether the agencies are working to the letter of the law, and the members of the parliamentary intelligence and security committee (ISC), have some powers of scrutiny, but Sommer questioned whether they had enough resources to give proper oversight.

Updated

David Cameron’s official spokesman has also spoken about GCHQ’s relationship with Prism this morning:

I think the PM’s view is that the agencies operate within this framework and as the foreign secretary said the idea that in GCHQ people are sitting working out how to circumvent a UK law with another agency in another country is fanciful.

He thinks that the necessary and important frameworks are in place and that there has been a lot of questions that have been raised and the right thing to do is for the foreign secretary to go to the House [of Commons] and give a statement.

He refused to be drawn on whether the UK and the US had discussed the allegations.

Updated

Here is some of the Guardian’s key coverage of Edward Snowden and his revelations about the US internet surveillance programme.

Here Julian Borger, our diplomatic editor, explains why Snowden’s decision to choose Hong Kong as the place where he would unmask himself represents a “high-stakes gamble”.

Just before sovereignty over Hong Kong passed from Britain to China in 1997, the US signed a new extradition treaty with the semi-autonomous territory. Under that treaty, both parties agree to hand over fugitives from each other’s criminal justice systems, but either side has the right of refusal in the case of political offences.

Beijing, which gave its consent for Hong Kong to sign the agreement, also has a right of veto if it believes the surrender of a fugitive would harm the “defence, foreign affairs or essential public interest or policy” of the People’s Republic of China. In short, the treaty makes Snowden’s fate a matter of political expediency not just in Hong Kong but in Beijing …

The combination of a comparatively liberal civic culture and the sovereignty of Beijing, America’s great Pacific rival with which it has an often testy relationship, seems to have been a factor in Snowden’s choice of Hong Kong. It may play to his advantage that Presidents Barack Obama and Xi Jinping reportedly agreed to differ on cybersecurity issues in their weekend summit in California. Against this background, Snowden’s extradition might be seen in the party leadership in Beijing as a capitulation. But such calculations can change.

• The Guardian’s Glenn Greenwald and Ewen MacAskill asked Snowden a number of key questions over several days. Here are his answers in Q&A form. They include:

Q: Why did you decide to become a whistleblower?

A: “The NSA has built an infrastructure that allows it to intercept almost everything. With this capability, the vast majority of human communications are automatically ingested without targeting. If I wanted to see your emails or your wife’s phone, all I have to do is use intercepts. I can get your emails, passwords, phone records, credit cards.

“I don’t want to live in a society that does these sort of things … I do not want to live in a world where everything I do and say is recorded. That is not something I am willing to support or live under.”

Q: What about the Obama administration‘s protests about hacking by China?

A: “We hack everyone everywhere. We like to make a distinction between us and the others. But we are in almost every country in the world. We are not at war with these countries.”

Q: Is it possible to put security in place to protect against state surveillance?

A: “You are not even aware of what is possible. The extent of their capabilities is horrifying. We can plant bugs in machines. Once you go on the network, I can identify your machine. You will never be safe whatever protections you put in place.”

Q: Washington-based foreign affairs analyst Steve Clemons said he overheard at the capital’s Dulles airport four men discussing an intelligence conference they had just attended. Speaking about the leaks, one of them said, according to Clemons, that both the reporter and leaker should be “disappeared”. How do you feel about that?

A: “Someone responding to the story said ‘real spies do not speak like that’. Well, I am a spy and that is how they talk. Whenever we had a debate in the office on how to handle crimes, they do not defend due process – they defend decisive action. They say it is better to kick someone out of a plane than let these people have a day in court. It is an authoritarian mindset in general.”

Updated

David Cameron has been speaking about the cooperation and involvement of the UK’s GCHQ intelligence agency with the US Prism programme.

He emphasised repeatedly that the British security services operated within UK law (“a law that we have laid down”).

The British prime minister said:

First of all I think it’s worth remembering why we have intelligence services and what they do for us.

We do live in a dangerous world. We live in a world of terror and terrorism. We saw that on the streets of Woolwich only too recently.

And I think it is right that we have well-organised, well-funded intelligence services to help keep us safe.

But let me be absolutely clear. They are intelligence services that operate within the law, within a law that we have laid down, and they are also subject to proper scrutiny by the intelligence and security committee in the House of Commons.

And that scrutiny is going to be very important, and I’ll always make sure that it takes place.

He was asked how long GCHQ had been cooperating with Prism, and said the foreign secretary, William Hague, would “answer all these questions” in a statement to the Commons expected this afternoon at 3.30pm. But he added:

Let us be clear. We can’t give a running commentary on intelligence issues.

There will be things that he will be able to explain, questions he will be able to answer. I’m satisfied, as I’ve said, we have intelligence agencies that do a fantastically important job for this country to keep us safe and they operate within the law. They operate within a legal framework and they also operate within a framework of being open to proper scrutiny by the intelligence and security committee.

That is what the foreign secretary will discuss today in the House of Commons. And he and I have discussed this matter, will continue to discuss this matter, always to make sure that we are satisfied that they operate properly in our interests and within the law.

Updated

Good morning.

On Sunday the Guardian revealed the source behind its series of stories on the US National Security Agency – one of the most significant leaks in US political history.

Edward Snowden, 29, revealed his identity at his own request.

Here he talks about why he revealed the existence of the US’s Prism programme, which gives the NSA direct access to the systems of Google, Facebook, Apple and other US internet giants:

I really want the focus to be on these documents and the debate which I hope this will trigger among citizens around the globe about what kind of world we want to live in. My sole motive is to inform the public as to that which is done in their name and that which is done against them.

You can watch Snowden – who is now in Hong Kong – speaking about his decision to go public and his thoughts about the US government’s probable reaction might be in this video interview.

We’ll have full coverage of the continuing fallout from the revelations here throughout the day.

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Powered by Guardian.co.ukThis article titled “Two passengers arrested after RAF jets escort diverted Pakistan plane” was written by Sam Jones and Nick Hopkins, for guardian.co.uk on Friday 24th May 2013 17.01 UTC

Two men have been arrested after a passenger jet from Pakistan was escorted into Stansted airport by RAF fighter planes following a security alert.

The Pakistan International Airlines plane took off from Lahore with 297 passengers people on board and had been due to land at Manchester airport at 2pm local time.

However, the Guardian understands that the pilot, concerned about at least one disruptive passenger who had started shouting 10 minutes before landing, asked to divert to Stansted as a precaution.

The Pakistani TV channel Geo reported that two British passengers had quarrelled with airline staff and then threatened to bomb the plane.

The Ministry of Defence confirmed that Typhoon fighters from RAF Coningsby, in Lincolnshire, were “to investigate an incident involving a civilian aircraft”, and that the planes escorted the airliner – flight PK709 – into Stansted.

A spokesman for Essex police said officers boarded the plane at the airport, adding: “Two men have been arrested on suspicion of endangerment of an aircraft. They have been removed from the plane.”

A spokesman for Stansted airport said the remaining passengers would be taken to a reception centre in the terminal where police may ask them to give accounts of the incident.

He added: “At some point police and the airline will arrange for their onward transportation to Manchester.”

Mahmouda Aslam, 50, from Prestwich, was at Manchester airport waiting her husband, Mohammed, who was on the flight.

After speaking to him on his mobile, she said: “I said, ‘Are you alright? Are you scared?’ He said, ‘We are all OK. The flight is full of police.”

The MoD said the incident was now a police matter and that the RAF jets had returned to their base.

He said Typhoons can be scrambled after the pilot or crew of a passenger aircraft sends out an emergency signal.

“The purpose of going up is to investigate what the situation is,” he said. “Often when a quick reaction alert aircraft is launched the details are not known, but it is known that a signal has been sent.

“Part of the purpose of sending a Typhoon up is to have a look and see what they can see.”

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Powered by Guardian.co.ukThis article titled “Apple CEO Tim Cook testifies at Senate hearing over tax practices – live” was written by Jim Newell in Washington, for guardian.co.uk on Tuesday 21st May 2013 18.00 UTC

Summary

Now that the panel with Apple executives is over, we’re going to wrap up after a long morning dissecting corporate tax minimization maneuvers.

There was some controversy heading into this, as voiced by Rand Paul in the first part of today’s hearings: why “drag” a company so successful as Apple before the investigations subcommittee to question its tax strategies, which all accept as legal? Hasn’t Apple done enough?

Senator Carl Levin, chair of the subcommittee, is retiring at the end of his term. That may explain why he was willing to tread a fair line, but one which nevertheless might invite some backlash. His goal was to use Apple – a company so prominent that it compels livebloggers to watch hours of early subcommittee hearings about it – to show the strategies that the largest U.S.-headquartered multinational corporations can use to exploit a loophole-ridden corporate tax code to the point where somehow, they’re barely paying any taxes.

All of the senators agreed that the corporate tax code is in desperate need of fixing.

But some of the senators, notably Paul and Ron Johnson, noticed few to no problems here: fewer taxes on corporations if beneficial to economic growth, “everyone” has an ownership stake in Apple one way or another. Apple deserves an apology.

By the end of the second panel with Apple executives, it looked as though the committee had lost its focus and just wanted to bounce some ideas off of Cook: what would be a good corporate tax rate? What do you think about Simpson-Bowles? What can we do to help protect our intellectual property owners in foreign markets?

Control worked back to Levin by the end, who closed things with a charge. Basically, he just wanted Apple to admit that it, like other MNCs, set up subsidiaries overseas and transferred assets there there to avoid paying taxes in the United States. That’s all. And what he got in return was legalese.

Thank you for joining us.

The second panel is over.

As the “bullying” hearing shifts pretty quickly into rich folks on both sides on the questioning complaining about how long it takes to do their taxes, Senator Levin tries refocus things. If Apple says it can’t bring its profits home from the Irish subsidiaries, why can it bring them back from South America? Bullock, the tax chief, says it’s because of the different cost-sharing agreements.

The question is whether transfer of intellectual property (the “crown jewels”) is really an “arms-length agreement” between two separate parties. Are the parties really “separate,” if Apple owns and controls the foreign parties?

Levin is asking Cook why he says he “can’t” bring those $100 billion properties home? Apple can, but of course it would require more tax payments, which is the whole point of these things.

Cook seems to like it better when Republican senators are complimenting him on dodging taxes.

The Apple suits keep trying to move everything back to the original agreement made in Ireland in 1980, calling everything since then a natural continuation of it. Levin wants to ask about the specific agreement, made between Apple employees in 2008, that “shifted” the “crown jewels” overseas.

“Don’t kid us” about the implications this makes on U.S. revenues, Levin says.

This is a great line of questioning from Levin, and the first time all day that Cook and co. look uncomfortable.

Updated

While Senator Rob Portman asks Apple’s tax chief how much tax compliance costs the company in administrative costs (“A lot”), let’s watch McCain ask about why he has to update his apps all the time.

Senator Kelly Ayotte asks Cook what a good corporate tax rate would be. (Remember when people thought this hearing would be a crucifixion of Apple, instead of asking them for advice?) Cook suggests mid-20s, according to studies he’s seen.

Updated

Senator Ron Johnson again is asking about who owns Apple – it’s largely mutual funds, pension funds, etc. He’s getting around to the same point he made earlier, that “everyone” benefits from Apple not paying taxes. This does assume that “everyone” has a sizable investment portfolio, or at least one that’s more beneficial than expanded public services would be.

Updated

The second panel is restarting after a break. Senator McCaskill is up. She asks about the relationship with the Irish government.

Cook explains, again, that this arrangement was set up in 1980, and since then the company has built up a valuable operation there. McCaskill, like Levin earlier, wants to talk about now. How does the U.S. keep other countries from ”undercutting us” like Ireland did in the 80s? Cook offers the usual corporate tax code simplification/base-broadening talk.

McCaskill asks about how Apple applies a cost-benefit analysis in deciding if it should relocate to another country. Cook goes on an adorable patriotic tangent about how much he loves America. “We are an American company!” Hmm.

Updated

The second panel ends (for now) with McCain asking “why the hell” he keeps having to update all his apps. 

Updated

Cook: “I don’t see it as unfair. I’m not an unfair person.”

Cook: “I personally don’t understand the difference between a tax presence and a tax residence.” (He probably does, is the thing.)

McCain: Why does AOI exist? 4,000 employees is impressive, but not compared to the size of Apple’s workforce.

Cook: Well, in the 1980s, Apple was looking for a place to distribute its products abroad…

McCain: But what about today?

Cook says that the company’s long relationship with the Irish government has allowed it to develop employees overseas with great experience and knowledge of what they do there. (Perhaps realizing that this sounds laughably silly, he reiterates that AOI is just a holding company, doesn’t matter.)

Senator McCain asks Tim Cook if he feel he has been bullied. Cook is delighted to be here.

You don’t feel you had to be “dragged here?”

“I didn’t get dragged here, sir,” Cook responds, giggling.

Updated

Levin asks about if the subsidiaries own Apple’s intellectual property. “They do in part,” Bullock answers.

But do AOI and AOE file tax returns?

In the United States, they do not. But Apple Inc. does!

“We’ve already been through that,” Levin says.

And Levin’s time is up.

Watching Bullock is tense. Regarding the subsidiary AOI, he says: “It… does… not… have a… tax residence… which doesn’t mean it doesn’t pay taxes!” He could use a drink of water.

Updated

Senator Levin is ready for questions. He asks Apple tax chief Phillip Bullock where the Irish subsidiaries are “functionally” controlled. After a long pause and some strange faces, Bullock believes that the central management control is in the United States.

Cook doesn’t know the “legal definition” of where companies are centrally managed and controlled but “practically” agrees that the subsidiaries are.

Bullock doesn’t believe that “centrally managed and controlled” is an actual term in U.S. tax law.

What a chest-thumpingly patriotic speech from all-smiles Tim Cook. Now it’s time for the CFO, Peter Oppenheimer, to get into the weeds of the subsidiaries.

Oppenheimer talks of a time not long ago, when it was possible there would be a “world without Apple.” He talks about the streamlining of international operations that helped turn the company around. (There were some inventions along the way, if we recall.)

Updated

Cook: “We estimate that the App Store has developed over 300,000 jobs in the U.S … None of that activity was there five years ago.”

We keep the “design and development” of Apple products in the United States.

Perhaps coincidentally, perhaps not, he responds to McCain, noting that Apple does comply with “the spirit of the law.”

He adds that U.S. tax law has not kept up with “the digital age.” Good for him, no?

Updated

Tim Cook’s panel begins

The first panel of tax experts is dismissed, the second is brought in. Apple CEO Tim Cook is delivering his statement.

Apple is proud to be an American company he says, exuberantly. He is now delivering corporate pablum about the excitement of innovation and so on.

The grinning man second from the right. Check out that grin.

Our Dan Roberts, in the room, adds: “Apple team (lots of pinstripes and ties for the Valley) nodding along and smiling as Rand Paul says they would be neglecting their duty to shareholders if they didn’t seek ways to minimise their tax exposure.”

Updated

Senator Claire McCaskill has no questions, but just wants to say that she loves Apple. “I love Apple. I love Apple!”

McCain, who does *not* get along with Rand Paul, expresses that he finds it “offensive” for Levin to be accused of trying to “bully” a company. Cue the gossip press.

Poor old Mr. Apple, just trying to mind his own business.

Rand Paul is up again. This should be fun. (Fun?)

He asks Professor Harvey if he makes use of any tax deductions.

“Obviously I do,” Harvey says, grinning.

Paul asks if he thinks he’s a bad person for doing that. Harvey does not. Well, there’s that.

Paul On tax reform: “Just do it.” Stop talking about “evil Apple.” Stop vilifying them – they should be getting an “award” today.

“I’m very frustrated by these proceedings… They’re just doing what every company does.” Bring me a company that tries to maximize their tax burden, he says.

This does simplify the issues under discussion a bit.

Updated

Responding to McCain, Shay strongly reiterates that the real problem is on the “imbalance” between the level of Apple R&D done in the United States and the tax revenue the government collects from it.

McCain says Apple has violated “the spirit of the law” if not the “letter of the law.” He agrees that much of the problem lies with Congress, however, and calls for comprehensive corporate tax reform.

McCain asks about how successfully a repatriation deal, for companies to bring home earnings under a lower rate, could be done. Harvey sees such a tax holiday as a bad idea, as the last time it was done in 2004, companies used it to distribute dividends and pay down debt – not expand domestically. Shay concurs, calling such holidays a temporary “windfall” for companies that does little long-term help.

Updated

Senator Tom Carper is asking questions. Carper hails from Delaware, America’s own tiny tax haven on-the-shore.

Carper is using this as an occasion to ask about the tax recommendations in the Simpson-Bowles deficit reduction plan. Shay says the plan’s broad recommendation to eliminate all tax expenditures as part of tax reform is a pretty, well… undeveloped suggestion?

This is “difficult stuff,” and doing tax reform in “broad brush strokes” is not a good idea. In the meantime, there are smaller steps against income-shifting that the government can take to reclaim tax revenue.

Updated

Harvey says it would be a good question for Congress to ask, “how should technology income be allocated?” as a means of focusing the issue.

Senator Ron Johnson is asking who benefits from Apple’s arrangement. Who are the shareholders? Harvey, trying to say this without being a jerk: “The people who own shares of the company.”

What Johnson’s trying to get around to is that many of Apple’s shareholders are American so everything is fine.

Johnson suggests only taxing income on a pass-through basis, eliminating the corporate tax.

Updated

Levin is asking about ASI (one of the subsidiaries) being located in a foreign jurisdiction but effectively being controlled by Cupertino’s headquarters. Does that make sense? (He is trying to get the bow-tied professor all outraged, which doesn’t appear likely.)

Shay says we need to rethink our rules on the “cross-border context” to get in the minds of MNCs.

It gets even more elegantly vague:

Shay says he doesn’t see this as an “Apple-bashing day,” more just an opportunity to “see where we are.” How the development of the corporate tax code got to the point where we are today, where Apple can legally set up such a structure.

Updated

It’s time for a few questions.

Harvard Law tax professor Stephen Shay is now speaking. He says Apple subsidiaries’ lack of tax residence produces what tax planners call “ocean income.”

Here are some recommendations from his submitted testimony:

In the context of current law, changes may be made that would limit the scope for profit shifting. Most promising is a “minimum tax” imposed on the U.S. shareholder of a controlled foreign corporation in respect of low-tax foreign income earned by the controlled foreign corporation. In design, it actually would be a deemed distribution, as under current Subpart F, but the remaining U.S. tax would be collected when the earnings are distributed or the stock is sold. This approach would effectively take away the advantage of tax havens.

This should be accompanied by taking away the advantage of tax havens for foreign companies that invest in the United States. The United States should protect its source tax base by measures that may include imposing withholding tax on and/or restricting deductions for deductible payments of income paid to or treated as beneficially owned by related persons not “effectively taxed” on the income. In doing this, the United States would take away a substantial advantage that foreign-owned companies have in structuring investments in the United States.

Adopting a balanced approach is necessary to assure a level playing field. I have described elsewhere an approach that if taken by the United States would provide an incentive for other countries to adopt complementary rules. Moreover, the United States should strongly support and lead efforts at the OECD to combat base erosion and profit shifting. I acknowledge that the ideas described above need development into specific proposals, but this may be done in a reasonable time frame and will have value in relation to the principal international tax reform proposals.

Updated

Tax professor Richard Harvey is now giving his statement.

“This is going to be a little bit of an Apple-bashing day,” he suspects, but he notes that what Apple has done is within the bounds of international tax law – which “raises its own issues.”

He says he nearly “fell off my chair” when he heard Apple say it doesn’t use tax gimmicks. Although it should be up to the committee, not him, to decide whether they should be labeled gimmicks. What he’s most interested is in why Apple does this and how the system can be changed.

He relates “check-the-box” regulations to his children’s interest in magic, where companies can max taxable earnings go “poof.” From his submitted testimony:

Although shifting income out of the US and locating it in a tax haven like Ireland are key steps in Apple’s international tax planning, Apple must also avoid the so-called “Subpart F” rules. These rules were originally designed to tax passive income earned by foreign subsidiaries of US MNCs and therefore discourage the shifting of income out of the US. However, the rules have been substantially “gutted” through adoption of (i) the check-the-box regulations, (ii) the CFC look-through rule, (iii) the contract manufacturing exemption, and to a lesser extent (iv) the same-country exception.

He recommends:

• Tightening “Subpart F” rules.

• Increase required transparency for MNCs to get a “true picture” of their tax-planning.

He has other ideas about either (a) drastically overhauling U.S. corporate tax low to lower the nominal rate or (b) achieving global “consensus” on handling MNCs. But he doesn’t see either of those as realistic anytime soon.

Updated

Levin is ticked at Paul’s statement, and getting rather angry.

Senator Rand Paul is up, and he is angry… at his fellow senators. He is “offended” by this hearing “to bully one of America’s greatest success stories. “If anyone should be on trial here, it is Congress.”

The committee “should apologize to Apple.”

He says it’s the government’s fault for creating such a “byzantine” corporate tax system.

Updated

You can read all of the witnesses’ prepared testimonies here.

Senator John McCain is up now.

McCain labels Apple the country’s biggest tax avoider. (It’s a very large company, so.) Most of Apple’s profits, he says, are held by the Irish subsidiaries.

McCain: Apple’s tax strategy has given “new meaning” to its old slogan, “Think Different.”

He notes that 95% of Apple’s R&D takes place in the United States.

Updated

The hearing is beginning. Chairman Carl Levin is giving his opening statement.

He’s discussing the decline of corporate tax revenue as a share of total revenue the government brings in each year due to the use of offshore tax havens.

“Despite the immense impact of these offshore tax havens” on the federal deficit, “few Americans” see their impact. The point of the hearings is to show “the damage it does to our fiscal and economic health.”

“Apple is a success story… I carry an iPhone in my pocket,” he says. “What may not be known” is its complex use of tax havens. “More and more intellectual property is the dominant source of value in the economy. It is also highly mobile.”

“Apple’s tax avoidance strategy comes in two parts.” First, offshoring intellectual property. Second, making sure that once this is offshore, it remains free from U.S. taxes.

He is now outlining the subsidiary arrangements described by investigators yesterday. Apple subsidiaries exploit the difference between U.S. and Irish law to designate itself a tax resident “nowhere.” Levin argues that since the Irish subsidiaries are “functionally” controlled by stateside headquarters, they should be subject to U.S. tax law.

Apple’s primary method of offshoring intellectual property is through cost-sharing agreements. “I use the term ‘cost-sharing’ with some skepticism,” he says. All of the money being shared belongs to apple, and all of the signatories were Apple employees. “The intellectual property… was generated in the United States,” but the profits go to Ireland.

He now mentions Apple’s “quiet” arrangement with Ireland to pay “almost no income tax.”

The difference between ASI’s costs and earnings, he explains, was close to $70 billion, money that U.S. taxpayers see no chunk of.

Looking ahead to Apple’s prepared testimony, Levin notes: “Apple executives want to focus on the taxes it has paid, but the real issue is the billions that Apple has not paid.”

Updated

It should be a lively subcommittee hearing room, from early indications.

Good morning, this is Jim Newell in Washington. We’re here for this morning’s exciting new Apple public unveiling! Except no iPhones or iPads or dingdongs or anything will be unveiled, sadly. It will be Apple CEO Tim Cook appearing at a hearing before the Senate permanent subcommittee on investigations, about the company’s very special tax practices.

Congressional investigators released findings on Monday showing that Apple uses a “highly questionable” tax minimization strategy of impressive complexity. Several subsidiaries set up by the company, according to investigators, have few or no employees. Located in Ireland, these subsidiaries allowed the company to exist effectively “nowhere” in certain cases.

As the Guardian’s Dominic Rushe wrote yesterday:

During its investigations, the subcommittee found that Apple considers three key subsidiaries, all based in Ireland, to have no tax jurisdiction at all. One of those Irish affiliates, Apple Sales International (ASI), reported sales income of $74bn over four years but paid hardly any tax. In 2011 ASI had pre-tax earnings of $22bn but paid just $10m in tax, a rate of 0.05%.

Apple denies many of the subcommittee’s sweeping allegations, and its strategy heading into this morning’s hearing appears to be one of an ally to those questioning the insanity of the corporate tax code. The company’s prepared testimony says that Apple “welcomes an objective examination of the US corporate tax system