Apple Has Been Accused of Large-Scale Tax Avoidance

Apple, the global technology giant, is under fire from the Senate for tax avoidance on a large scale. On May 21, CEO Tim Cook appeared before the Senate Permanent Subcommittee on Investigations to defend his company's tax practices, including a 2 percent corporation tax rate deal it struck with the Irish government on two of its subsidiaries.

Apple has a number of subsidiaries in Ireland, including financial services, distribution, and manufacturing, and has been there since the 1980s.
 
In its report, the committee accused Apple of avoiding tax on $74 billion of overseas profits held offshore in the last four years, accounting for 61 percent of its earnings.
 
Appearing before the Senate, Cook claimed in his pre-written testimony that Apple is one of the United States' biggest taxpayers, contributing $6 billion to the Treasury in taxes last year at a tax rate of 30.5 percent.
 
He added that Apple did not use "tax gimmicks," such as holding its intellectual property offshore or using complex transfer pricing structures.
 
Money made outside the United States was "taxed in the local market," he said, before being transferred to Apple Operations International (AOI), registered in Ireland but controlled in the United States. Because of this, AOI is considered tax resident in either the United States or Ireland.
 
The Senate maintains, however, that Apple is one of the biggest US tax avoiders, dodging an estimated $44 billion of tax in the last four years.
 
Apple has a cash stockpile of $145 billion, but the report said that $102 billion of this is currently held offshore.
 
One of the company's tax avoidance schemes included incorporating its overseas holding companies in Ireland. US taxes are based on where the companies are incorporated, while Ireland taxes the company on the basis of where they are managed. Therefore, this enabled to make them "stateless" and exempt from the need to file a tax return anywhere.
 
The Irish government was also accused of facilitating such avoidance by the Senate committee, but defended itself, saying the issue was not a result of the country's tax regime.
 
This article first appeared on our sister site in the United Kingdom.
 

You may like these other stories...

You probably don't want to think about how many times you access the File menu in Excel 2010 or 2013. Personally I think Excel 2010 has the best possible File menu arrangement, other than having Print Preview grafted...
Following other recent high-profile hacking events, investigators discovered yesterday that hackers broke into the draft work paper files of several famous CPA firms. Revealing images of the scantily clad documents have been...
For bitcoin users, the taxman cometh. And you best know how to calculate taxes owed on what the IRS calls convertible virtual currency.In March 2014, the IRS issued Notice 2014-21, which declares virtual currency will be...

Already a member? log in here.

Upcoming CPE Webinars

Sep 18
In this course, Amber Setter will shine the light on different types of leadership behavior- an integral part of everyone's career.
Sep 24
In this jam-packed presentation Excel expert David Ringstrom, CPA will give you a crash-course in creating spreadsheet-based dashboards. A dashboard condenses large amounts of data into a compact space, yet enables the end user to easily drill down into details when warranted.
Sep 30
This webcast will include discussions of important issues in SSARS No. 19 and the current status of proposed changes by the Accounting and Review Services Committee in these statements.
Oct 23
Amber Setter will show the value of leadership assessments as tools for individual and organizational leadership development initiatives.