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Apple accused of 'highly questionable' billion-dollar tax avoidance scheme

Apple accused of 'highly questionable' billion-dollar tax avoidance scheme

Senators claim Apple has avoided paying billions in US tax by creating offshore entities that are not tax resident anywhere

Dominic Rushe in New York; The Guardian, Monday 20 May 2013 17.00 EDTt

Apple uses a "highly questionable" web of offshore entities to avoid paying billions in US income taxes, a Senate committee alleged on Monday.

The complex arrangement includes three subsidiaries, based ostensibly in Ireland, which appear not to be designated as tax resident anywhere, the committee said. A source on the committee called them "iCompanies – I for imaginary, invisible".

Tim Cook, the CEO of Apple, will answer the accusations at a hearing convened by the bipartisan permanent subcommittee on investigation in Washington on Tuesday. Apple vehemently denied the charges ahead of the meeting.

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 wasn't satisfied with shifting its profits to a low-tax offshore tax haven," said senator Carl Levin, the subcommittee's Democratic chairman.

"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. We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed."

Senator John McCain, the subcommittee's ranking Republican member, said: "I have long advocated for modernizing our broken and uncompetitive tax code, but that cannot and must not be an excuse for turning a blind eye to the highly questionable tax strategies that corporations like Apple use to avoid paying taxes in America.

"The proper place for the bulk of Apple's creative energy ought to go into its innovative products and services, not in its tax department."

Apple released Tim Cook's statement to the committee before the meeting. In it, he robustly defended the company, denying charges that the company uses tax gimmicks and pointing out that the company has created 600,000 jobs in the US and paid $6bn in taxes to the US Treasury in 2012. Cook also defends the Irish subsidiaries, which he says now employ more than 4,000 people.

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

"Apple welcomes an objective examination of the US corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy. The company supports comprehensive tax reform as a necessary step to promote growth and enable American multinational companies to remain competitive with their foreign counterparts in both domestic and international markets," Cook said.

Cook called for an overhaul of US corporate tax laws that should be "revenue neutral" for corporations. But critics charge his solutions are likely to exacerbate the issue.

"This is one of the most profitable companies in the world, and it has been acting like a back-alley thief trying to pick the pocket of American taxpayers," said Frank Clemente, campaign manager of pressure group Americans for Tax Fairness. He said a free repatriation would be "another mugging of the American people".

The committee will report more details of its findings at Tuesday's hearing. The news comes as Apple, Google, Starbucks and others face mounting criticism of their tax avoidance schemes in the UK.

Last week Margaret Hodge, the chair of the public accounts committee in the UK parliament, rounded on Google northern Europe boss Mark Brittin during a hearing on the search firm's tax accounting. "You are a company that says you 'do no evil'. And I think that you do do evil." She said the group's approach to tax in the UK was "devious, calculated and, in my view, unethical".

"Given the intensity of the debate, not just in the UK but also in America and elsewhere, international tax law could almost certainly benefit from reform," Google chairman Eric Schmidt told the Observer at the weekend.

by Anonymousreply 1705/22/2013

Buy a Mac!

by Anonymousreply 105/20/2013

In terms of complete, unadulterated greed -- they give Big Pharma a run for the money (so to speak.)

by Anonymousreply 205/21/2013

Apple chief calls on US government to slash US corporate tax

Tim Cook warns Congress that he would refuse to repatriate $100bn stashed offshore unless US severely reduced its 35% tax rate

by Anonymousreply 305/21/2013

Keep voting for Rethuglicans and DINO's, fools!

by Anonymousreply 405/21/2013

Now even more reason to hate Apple and their idiotic devotees.

by Anonymousreply 505/21/2013

The good old boys in Congress will hold hearings and make lots of noise about this. Then they will go to dinner with the crooks from big business who pay them millions of dollars. It doesn't matter which party they are in...NOBODY in congress will do a fucking thing to help the voters but they will all do EVERYTHING they can to help themselves and their billionaire buddies.

by Anonymousreply 605/21/2013

There was a "data dump" earlier this year giving financial details of THOUSANDS of very wealthy people who have sheltered squillions offshore. It was covered extensively on the CBC and I think the BBC as well. But the US MSM - nary a peep!

These people and corporations are basically traitors, in spirit if not by the letter of the law.

by Anonymousreply 705/21/2013

Criticize Apple as much as you like, but McCain and Levin are only using them for the publicity. Apple paid 1/40 of all taxes paid to the federal government. Why aren't company such as GE who paid nothing testifying? Oh yes, they don't grab attention of the public.

by Anonymousreply 805/21/2013

Tax avoidance is legal. Congress writes the tax laws. End of discussion.

by Anonymousreply 905/21/2013

Legal is not the same as right or ethical. Discussion continues.

by Anonymousreply 1005/21/2013

It isn't against the law to do this. They need to change the law

by Anonymousreply 1105/21/2013

Exactly, R9. If you don't want a loophole in the statute you wrote, remove it -- until & unless you do, you have no basis on which to criticize those who use it. The matter is entirely within the control of Congress yet, instead of eliminating the loopholes they created, they devote all their time & energy to whining that the damn things are being used.

If a corporation did not avail itself of all legal tax strategies, it would be derelict in its fiduciary duty to its shareholders. The fault lies with Congress, not with taxpayers who obey the tax code & do what it tells them to do (no less & no more).

by Anonymousreply 1205/21/2013

Corporations own Congress.

by Anonymousreply 1305/21/2013

R13, if that were true, there would be none of these stupid "investigations". Or maybe they're just for show, & poor Mr. Cook drew the short straw this time, so he's the scapegoat in the current kangaroo court?

by Anonymousreply 1405/21/2013

I always laugh when I see young hipsters who bend over backwards to seem "green" and "local" showing their true colors by supporting a corporation that dodges taxes and uses (virtual) slave labor in China.

by Anonymousreply 1505/22/2013

R15 isn't a day under 60.

by Anonymousreply 1605/22/2013

[quote]Now even more reason to hate Apple and their idiotic devotees.

It's Google, too, boo.

by Anonymousreply 1705/22/2013
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