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  • Senate Panel Claims Apple Created Offshore Subsidiaries to Avoid Paying U.S. Taxes


    Shortly after Apple published the full testimony which CEO Tim Cook plans to give to the Permanent Subcommittee on Investigations in the U.S. Senate, the government body issued its own findings on the company’s offshore tax practices, saying subsidiaries were used to purposefully avoid paying billions of dollars in domestic taxes. According to the subcommittee’s report, Apple moved billions in profits out of the U.S. to affiliate corporations, such as Apple Operations International in Ireland, where the effective tax rate is less than 2%. As of right now, the Cupertino California company has $102 billion in offshore accounts.

    Of the three foreign subsidiaries that Apple claims aren’t tax resident in any nation, primary affiliate AOI generated a net income of $30 million between 2009 and 2012 according to the Senate report. The other main Irish subsidiary, Apple Sales International, directed roughly $74 billion in profits away from the U.S. over the same period of time and paid a negligible amount in international taxes. An example of this would include the fact that ASI generated $22 billion in 2011 and paid out $10 million in taxes, which is a rate of 0.05%. According to chairman of the panel Senator Carl Levin (D-Mich.):

    Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven. 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.
    The Senator’s website outlines the probe into Apple’s tax practices, three of which are expected to be discussed in tomorrow’s hearing:

    • Using a so-called cost sharing agreement to transfer valuable intellectual property assets offshore and shift the resulting profits to a tax haven jurisdiction.
    • Taking advantage of weaknesses and loopholes in tax law and regulations to “disregard” offshore subsidiaries for tax purposes, shielding billions of dollars in income that could otherwise be taxable in the United States.
    • Negotiating a tax rate of less than 2 percent with the government of Ireland – significantly lower than that nation’s 12% statutory rate – and using Ireland as the base for its extensive network of offshore subsidiaries.
    Senator John McCain (R-Ariz.) had the following to say regarding the matter:

    Apple claims to be the largest U.S. corporate taxpayer, but by sheer size and scale, it is also among American’s largest tax avoiders, A company that has found remarkable success by harnessing American ingenuity and the opportunities afforded by the U.S. economy should not be shifting its profits overseas to avoid the payment of U.S. tax, purposefully depriving the American people of revenue.
    Apple for its part stated that the Irish subsidiaries are cost-sharing arrangements which helped fund research and development, eventually leading to new U.S. jobs and bigger profits. The statement also noted that Apple paid $6 billion in taxes last year, making it one of the largest taxpayers in the U.S.

    As of right now, the senate subcommittee is slated to further detail its arguments against Apple in a hearing tomorrow, which itself is part of a broader probe into how other multinational corporations use offshore affiliates to reduce tax burdens. Those following the issue should expect a testimony from CEO Tim Cook, CFO Peter Oppenheimer, and Tax Operations Head Phillip Bullock.

    Both arguments seem quite compelling so we’ll have to wait for a decision as the decision affects not only Apple but several tech giants.

    Source: Bloomberg, Senator Carl Levin
    This article was originally published in forum thread: Senate Panel Claims Apple Created Offshore Subsidiaries to Avoid Paying U.S. Taxes started by Akshay Masand View original post
    Comments 29 Comments
    1. infamous12550's Avatar
      infamous12550 -
      Good for you Apple. F*ck the government. They are vultures.
    1. trevorrawson's Avatar
      trevorrawson -
      I'm on Apple's side of this one...it's their money.
    1. thazsar's Avatar
      thazsar -
      Duh!?!? Isn't every major corporation doing this?

      ...and what about all the employees in Apple Stores that Apple has to pay taxes on. Until recently, Microsoft and Samsung didn't have dedicated storefronts employing tons of people that require taxing.

      The government is just being greedy and looking for handouts since they blew all their money supporting lazy people!
    1. vinaygoel2000's Avatar
      vinaygoel2000 -
      So using your brain to find loopholes in law is illegal now? That's what lawyers get paid for.
    1. thazsar's Avatar
      thazsar -
      Oops...I recant...Samsung isn't US-based.

      Quote Originally Posted by vinaygoel2000 View Post
      So using your brain to find loopholes in law is illegal now? That's what lawyers get paid for.
      It is in a Socialist society!
    1. jwil736's Avatar
      jwil736 -
      lol gotta love these people that say good for Apple... Let me guess... you think you pay too much in taxes? Or maybe your on welfare collecting food stamps and cash assistance.... Yeah! Stick it to the man!
      Don't you realize, if these large corporations are evading taxes it just brings the deficit even farther in the hole and more taxes get added to tax paying individuals? Why not think about it? Maybe you'd be paying less taxes if these corporations paid more? Or maybe we could get out of the trillions of debt the US is in.
      Did you pay tax when you bought your iphone/ipod/ipad/mac? Apple is just supposed to be the middle person giving the government the sales taxes YOU paid! And then pay taxes on their income!!
    1. GAIAStevef's Avatar
      GAIAStevef -
      So Corporations are people, legally, but yet if a "person" does this it's called tax fraud, and they go do jail ?

      Am I missing something somewhere ?
    1. vinaygoel2000's Avatar
      vinaygoel2000 -
      Quote Originally Posted by jwil736 View Post
      lol gotta love these people that say good for Apple... Let me guess... you think you pay too much in taxes? Or maybe your on welfare collecting food stamps and cash assistance.... Yeah! Stick it to the man!
      Don't you realize, if these large corporations are evading taxes it just brings the deficit even farther in the hole and more taxes get added to tax paying individuals? Why not think about it? Maybe you'd be paying less taxes if these corporations paid more? Or maybe we could get out of the trillions of debt the US is in.
      Did you pay tax when you bought your iphone/ipod/ipad/mac? Apple is just supposed to be the middle person giving the government the sales taxes YOU paid! And then pay taxes on their income!!
      If you think that if apple was to pay more taxes the government will lower taxes then you must be naive. Government will simply increase government spending with that extra money. Taxes will not go down no matter how many billions of dollars of taxes are paid.
    1. RandyTG's Avatar
      RandyTG -
      Apple, Google and other companies that utilize these practices are doing so as a way to tell the US Government that they need to change the way they tax US companies that create income overseas. Apple has told the government in the recent past that they will bring all of the money they hold in foreign banks here to the US IF the government changes the tax laws that govern companies like Apple. They aren't trying to avoid paying taxes, they just don't want to have to pay more than they should and that is why they do what they do with their foreign earned money. But of course the government ignores what they have been told by many of these companies and instead put together useless committees to ask these companies why they are cheating the government out of tax revenue.
    1. hogcia's Avatar
      hogcia -
      Screw the government, they can't manage money anyway!
    1. dsg's Avatar
      dsg -
      how about stopping the tax breaks for oil companies first rather than go after companies who do pay some taxes, Oil companies make millions in the first three months of the year and however much they make rest of the year
    1. kosher1's Avatar
      kosher1 -
      I would do it over and over again.

      Hey! Is Apple the ONLY one doing this?

      No. They just want their taxes. Greedy govt.
    1. snoozkewl's Avatar
      snoozkewl -
      No Way, you mean kinda like Mitt Romey does !?
    1. Rcworship's Avatar
      Rcworship -
      Quote Originally Posted by jwil736 View Post
      lol gotta love these people that say good for Apple... Let me guess... you think you pay too much in taxes? Or maybe your on welfare collecting food stamps and cash assistance.... Yeah! Stick it to the man!
      Don't you realize, if these large corporations are evading taxes it just brings the deficit even farther in the hole and more taxes get added to tax paying individuals? Why not think about it? Maybe you'd be paying less taxes if these corporations paid more? Or maybe we could get out of the trillions of debt the US is in.
      Did you pay tax when you bought your iphone/ipod/ipad/mac? Apple is just supposed to be the middle person giving the government the sales taxes YOU paid! And then pay taxes on their income!!
      First, evading tax does not change the deficit. Overspending increases (and increases...) the deficit. The problem is the US gov't tax system and "tax the rich" system. The top 5% of earners pay over 80% of taxes anyways, how much more do you want? Our deficit is definitely, however, caused partially by the overspending gov't handing out to all the people not wanting to work.

      Also, apple is not withholding the taxes we pay for our products. That money is set aside and paid probably quarterly. What we are discussing is tax from revenue and strait up profits! Yeah, apple has some unbelievable profit margins...
    1. mtrem's Avatar
      mtrem -
      F*ck the gov't!! To hell with these f*uckin inefficient thieves! Taxes are illegal! I hope the world revolts and overthrows F*cking gov't leeches! Privatize everything! GOOD FOR YOU APPLE! I hope the gov't loses.. always!
    1. sheon's Avatar
      sheon -
      lol all these ******* people defending Apple

      **** U APPLE pay ur ******* taxes like the rest of us folks

      Apple is just greedy as **** ******* company
    1. Slimz's Avatar
      Slimz -
      Quote Originally Posted by Rcworship View Post
      First, evading tax does not change the deficit. Overspending increases (and increases...) the deficit. The problem is the US gov't tax system and "tax the rich" system. The top 5% of earners pay over 80% of taxes anyways, how much more do you want? Our deficit is definitely, however, caused partially by the overspending gov't handing out to all the people not wanting to work.

      Also, apple is not withholding the taxes we pay for our products. That money is set aside and paid probably quarterly. What we are discussing is tax from revenue and strait up profits! Yeah, apple has some unbelievable profit margins...
      This is not even close to accurate. US PIRG (One of the most powerful pro-consumer groups in the world.) released a statement last month that said corporation tax evading raises our deficit by more than $150 billion annually. Romney even talked about it during his campaign. Multinational corporations are not included in the top 1% that is such a big topic. That is income tax paying US Citizens only.

      Secondly, no one is exempt from taxes, and US taxpayers, which is every single one of us, have to be subsidized by increases in our taxes to pay for what the corporations do not. Oil companies, major tech companies, they all do it. It's a major, major problem. If you don't understand that, I'd suggest a simple economics course to understand why. The corporations take billions of dollars overseas, and the middle class is the one that pays for it. Welcome to a country run by multinational corporations.

      I hope Apple eats a bullet. But they won't, just like the oil companies.
    1. Carvensno's Avatar
      Carvensno -
      Theres 2 sides to these stories. I saw this one dateline or one of those shows. Yes these companies are filtering money thru 12-14 countries to cycle there money thru and they are costing us between 50-75 billion in lose taxes to the government. BUT our government has created these loop holes and is legal for them to do. NOW guess who created these loop holes??? Your elected officials that you voted for congress and HOR And why were these loop holes created? because these congress and HOR officials are on the boards with these top companies. And guess what happens now that they created these loop holes and keep them open? There pockets are getting super fat with money!!! Go figure????? HUH????? Our government elected officials don't give a crap about the people, there only there for themselves to have power and control and why?? GREED!!!!!

      Also in that show talking about googles money? the last country to goto is Ireland in some small town to a address of a small office with about 10 employees. thats where there money trail ends.
    1. 5kylar's Avatar
      5kylar -
      Well I look at it this way. The whole world seems to be going to hell anyways, at least Apple can make a few cool phones with their hoarded cash I don't fully understand taxes and how they work, but I have a pretty good idea. Honestly, I'd be inclined to believe that even if Apple paid all that money they supposedly owe, it would likely find it's way anywhere except the taxpayers wallets. I also find the fact that the government is b!tching about loopholes in the laws it created to be a bit much, if they don't like companies exploiting them, then close them. Well that's my 2 cents.
    1. tridley68's Avatar
      tridley68 -
      Quote Originally Posted by infamous12550 View Post
      Good for you Apple. F*ck the government. They are vultures.
      You sir are totally correct as if these jerks do not do the same thing themselves.