Feeds

US Congress excoriates Apple's tax-avoidance shenanigans

Cook to defend 'an American success story' – and billions in unpaid taxes – on Tuesday

Secure remote control for conventional and virtual desktops

A US Senate investigation has found that Apple avoided billions of dollars in taxes through a complex scheme of subsidiaries scattered around the globe, some with no employees and run by top execs back in its Cupertino headquarters.

"Apple wasn't satisfied with shifting its profits to a low-tax offshore tax haven," said Senator Carl Levin, The New York Times reports. "Apple sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere."

Levin is a Democrat from Michigan, but the Apple excoriation was bipartisan. "Apple claims to be the largest US corporate taxpayer," said Arizona Republican John McCain, "but by sheer size and scale, it is also among America's largest tax avoiders."

McCain also said that Apple is "purposefully depriving the American people of revenue" by using a "byzantine" tax structure, according to ABC News.

According to the NYT, in 2011 one of Apple's subsidiaries, located in Ireland, paid a mere 0.05 per cent in tax on $22bn in revenues. Another subsidiary did not even file tax returns – anywhere. The NYT reports that group "paid almost nothing on $30 billion in profits since 2009."

Also according to the NYT, the investigators from the rather ominously named Senate Permanent Subcommittee on Investigations, which Levin chairs, say that Apple's tax strategy moved "at least $74 billion" out of the reach of the IRS between 2009 and 2012.

Apple's cash reserves stood at over $145bn as of its last financial report, about $100bn of which is held offshore.

The investigators' findings come one day before Apple CEO Tim Cook is scheduled to appear at a hearing of the Subcommittee, and on Monday Apple released the text of the statement he will deliver at that hearing. Needless to say, Apple defines its tax activities in terms somewhat less harsh than do Levin and McCain.

"Apple ... employs tens of thousands of Americans, creates revolutionary products that improve the lives of tens of millions of Americans, and pays billions of dollars annually to the US Treasury in corporate income and payroll taxes," Cook will tell his inquisitors.

"Apple complies fully with both the laws and spirit of the laws," the statement reads. "And Apple pays all its required taxes, both in this country and abroad."

That statement goes on to describe Apple as a "powerful engine of job creation in the US," one that "pays an extraordinary amount in US taxes," "does not use tax gimmicks," and is "an American success story."

Concerning the Irish question specifically, the statement says, "Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US to avoid US tax, nor does it use revolving loans from [Controlled Foreign Corporations] to fund its domestic operations."

So what's the problem, then? We'll learn more at Tuesday's hearing, most likely, after Monday's traditional "Let's fight it out in the press first" dueling press releases, statements, and leaks.

But one thing is certain through all this back-and-forth: the US corporate tax code – hell, the entire US tax code – is broken. Riddled with loopholes, obfuscated in thousands of pages of legalese, and larded with well-paid-for special-interest exemptions, the tax-law morass makes the Augean stables – the clean-up of which having been Hercules' fifth labor – look as immaculate as a surgically sterilized operating room.

In fact, this entire corporate-tax dust-up – about which Google Eric Schmidt has also weighed in – is a prelude to the real battle: modifying the tax code to make it more business-friendly – or, as Cook will tell the Subcommittee on Tuesday, "to dramatically [simplify] the US corporate tax system."

To that end, Cook will tell the hearing that a new tax code should:

• Be revenue neutral;
• Eliminate all corporate tax expenditures;
• Lower corporate income tax rates; and
• Implement a reasonable tax on foreign earnings that allows free movement of capital back to the US.

Referring to Apple's use of "stateless" subsidiaries to avoid US taxes, one tax-law expert told the NYT, "There is a technical term economists like to use for behavior like this. Unbelievable chutzpah." ®

Boost IT visibility and business value

More from The Register

next story
'Stop dissing Google or quit': OK, I quit, says Code Club co-founder
And now a message from our sponsors: 'STFU or else'
Ex US cybersecurity czar guilty in child sex abuse website case
Health and Human Services IT security chief headed online to share vile images
Don't even THINK about copyright violation, says Indian state
Pre-emptive arrest for pirates in Karnataka
The police are WRONG: Watching YouTube videos is NOT illegal
And our man Corfield is pretty bloody cross about it
Felony charges? Harsh! Alleged Anon hackers plead guilty to misdemeanours
US judge questions harsh sentence sought by prosecutors
Oz biz regulator discovers shared servers in EPIC FACEPALM
'Not aware' that one IP can hold more than one Website
Apple tried to get a ban on Galaxy, judge said: NO, NO, NO
Judge Koh refuses Samsung ban for the third time
prev story

Whitepapers

Top 10 endpoint backup mistakes
Avoid the ten endpoint backup mistakes to ensure that your critical corporate data is protected and end user productivity is improved.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Backing up distributed data
Eliminating the redundant use of bandwidth and storage capacity and application consolidation in the modern data center.
The essential guide to IT transformation
ServiceNow discusses three IT transformations that can help CIOs automate IT services to transform IT and the enterprise
Next gen security for virtualised datacentres
Legacy security solutions are inefficient due to the architectural differences between physical and virtual environments.