A U.S. Senate subcommittee accused Apple of avoiding to pay billions in taxes globally by exploiting legal loopholes and use of subsidiaries in Ireland that are not tax residents of any country. U.S. senators published a 40-page report on the international tax structure used by Apple on taxes before a hearing Tuesday that would put Apple in a very bad position.
“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,” said Senator Carl Levin, who heads the panel and will chair the subcommittee hearings.
Apple used a highly developed system to escape paying taxes by exploiting tax loopholes, according to the report. The American company has avoided paying taxes in the last four years in the United States of about $44 billion. There are, however, no indications that Apple would have done anything illegal in trying to reduce its tax contributions, the report said.
“This is the definition of a tax loophole, technically something which may be in compliance with the law but violates the spirit of the law,” said Carl Levin.
Specialists of the committee said that the most surprising findings include the use of subsidiaries in Ireland, through which Apple profit is mostly funneled. One of these, Apple Sales International has paid virtually no tax on sales of $74 billion dollars between 2009 and 2012. In 2011, the subsidiary has paid $10 million in taxes for $22 billion worth of profit, a rate of 0.05%. AOI, another Apple subsidiary, had an income of $30 billion in the last four years, but did not file an income tax return because of another loophole: the company has no physical presence or employees in the U.S., however, it holds board meetings in this country.
“I have never seen anything like this, we don’t know of anyone who has seen anything like this,” said Levin. In addition, the investigation revealed that Apple has entered into a special agreement with Ireland to pay a tax of 2%, well below the 12% charged by Ireland. In a statement prepared for Tuesday’s hearing, Apple has denied the use of “tax gimmicks” to reduce its tax obligations and stated that it is the largest taxpayer of U.S. companies.
Apple is the third large U.S. in the technology sector under scrutiny by the Senate, after Microsoft and Hewlett-Packard. Apple investigation could trigger discussions on the structure of the U.S. tax code. Congress and the White House are debating a reduction of the 35% tax rate for companies.
Also talks could be resumed at the international level to limit tax avoidance practices. The theme will be included on the agenda of the next summit of G8 members.
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