Senate report says Apple avoided billions in taxes

PanARMENIAN.Net - Using an unusual global tax structure, Apple Inc has kept billions of dollars in profits in Irish subsidiaries to pay little or no taxes to any government, a Senate report on the company's offshore tax structure said on Monday, May 20, according to Reuters.

In a 40-page memorandum released a day before Apple CEO Tim Cook is scheduled to testify before Congress, the Senate's Permanent Subcommittee on Investigations identified three subsidiaries that have no "tax residency" in Ireland, where they are incorporated, or in the United States, where company executives manage those companies.

The main subsidiary, a holding company that includes Apple's retail stores throughout Europe, has not paid any corporate income tax in the last five years.

The subsidiary, which has a Cork, Ireland, mailing address, received $29.9 billion in dividends from lower-tiered offshore Apple affiliates from 2009 to 2012, comprising 30 percent of Apple's total worldwide net profits, the report said.

"Apple has exploited a difference between Irish and U.S. tax residency rules," the report said. Apple said in a comment posted online on Monday it does not use "tax gimmicks." It said the existence of its subsidiary "Apple Operations International" in Ireland does not reduce Apple's U.S. tax liability and the company will pay more than $7 billion in U.S. taxes in fiscal 2013.

Subcommittee staffers said on Monday that Apple was not breaking any laws and had cooperated fully with the investigation.

Tuesday's hearing is the second to be held by Senator Carl Levin, a Michigan Democrat and chairman of the subcommittee, to shed light on the weaknesses of the U.S. corporate tax code. Levin has sought to overhaul the code in Congress.

Lawmakers globally are closely scrutinizing the taxes paid by multinational companies. In Britain, Google faces regulatory inquiries over its own tax policies, while Hewlett-Packard Co and Microsoft Corp have been called to Capitol Hill to answer questions about their own practices.

In submitted testimony ahead of Tuesday's hearing, Apple said any tax reform should favor lower corporate income tax rates regardless of revenue, eliminate tax expenditures and implement a "reasonable tax on foreign earnings that allows free movement of capital back to the U.S."

"Apple recognizes these and other improvements in the U.S. corporate tax system may increase the company's taxes," it said.

Large U.S. companies boosted their offshore earnings by 15 percent last year to a record $1.9 trillion, avoiding hefty tax bills by keeping the profits abroad, according to research firm Audit Analytics.

Apple also uses two conventional offshore tax practices typical of multinational companies' tax-avoidance strategies, the report said.