Maybe this is where reform should be focused to prevent such legal abuse. Could put big dent in debt number. If Apple is doing it, you know there are a lot more doing same! CLOSE THE LOOPHOLES AND IMPOSE PENALTIES!!! Consumers need to know what companies are doing this so we can make intelligent choices to buy their products or not.
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Panel: Apple uses firms outside US to avoid taxes
Published - May 20 2013 04:55PM EST
MARCY GORDON, AP Business Writer
WASHINGTON (AP) — Apple Inc. employs a group of affiliate companies located outside the United States to avoid paying billions of dollars in U.S. income taxes, a Senate investigation has found.
The world's most valuable company is holding overseas some $102 billion of its $145 billion in cash, and an Irish subsidiary that earned $22 billion in 2011 paid only $10 million in taxes, according to the report issued Monday by the Senate Permanent Subcommittee on Investigations.
The strategies Apple uses are legal, and many other multinational corporations use similar tax techniques to avoid paying U.S. income taxes on profits they reap overseas. But Apple uses a unique twist, the report found. The company's tactics raise questions about loopholes in the U.S. tax code, lawmakers say.
The spotlight on Apple's tax strategy comes at a time of fevered debate in Washington over whether and how to raise revenues to help reduce the federal deficit. Many Democrats complain that the government is missing out on collecting billions because companies are stashing profits abroad and avoiding taxes. Republicans want to cut the corporate tax rate of 35 percent and ease the tax burden on money that U.S. companies make abroad. They say the move would encourage companies to invest at home.
Apple CEO Tim Cook, the company's chief financial officer and its tax chief are scheduled to testify and explain the company's tax strategy at a hearing by the subcommittee Tuesday.
Apple spokesmen didn't immediately respond to a request for comment Monday on the subcommittee report.
The company has made clear that given current U.S. tax rates, it has no intention of repatriating its overseas profits to the U.S.
The subcommittee also has examined the tax strategies of Microsoft Corp., Hewlett-Packard Co. and other multinational companies, finding that they too have avoided billions in U.S. taxes by shifting profits offshore and exploiting weak, ambiguous sections of the tax code. Microsoft has used "aggressive" transactions to shift assets to subsidiaries in Puerto Rico, Ireland and Singapore, in part to avoid taxes. HP has used complex offshore loan transactions worth billions while using the money to run its U.S. operations, according to the panel.
The subcommittee's report estimates that Apple avoided at least $3.5 billion in U.S. federal taxes in 2011 and $9 billion in 2012 by using the strategy. The company, based in Cupertino, Calif., paid $2.5 billion in federal taxes in 2011 and $6 billion in 2012.
Apple uses five companies located in Ireland to carry out its tax strategy, according to the report. The companies are located at the same address in Cork, Ireland, and they share members of their boards of directors. While all five companies were incorporated in Ireland, only two of them also have tax residency in that country. That means the other three aren't legally required to pay taxes in Ireland because they aren't managed or controlled in that country, in Apple's view.
The report says Apple capitalizes on a difference between U.S. and Irish rules regarding tax residency. In Ireland, a company must be managed and controlled in the country to be a tax resident. Under U.S. law, a company is a tax resident of the country in which it was established. Therefore, the Apple companies aren't tax residents of Ireland nor of the U.S., since they weren't incorporated in the U.S., in Apple's view.
The subcommittee said Apple's strategy of not declaring tax residency in any country could be unique among corporations.
"Apple wasn't satisfied with shifting its profits to a low-tax offshore tax haven," Sen. Carl Levin, D-Mich., the subcommittee's chairman, said in a statement. "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."
Sen. John McCain of Arizona, the panel's senior Republican, said that while Apple claims to be the biggest U.S. corporate taxpayer, it is also "among America's largest tax avoiders." He said the company is "purposefully depriving the American people of revenue" by using a "byzantine" tax structure.
The subcommittee report also noted that Apple has been setting aside billions for tax bills it may never pay. As previously reported by The Associated Press, the overlooked asset that Apple has been building up could boost Apple's profits by as much as $10.5 billion. However, Apple has been lobbying to change U.S. law so it can erase its tax liabilities in a less conspicuous fashion.
In its second quarter ended March 31, Apple posted its first profit decline in ten years. Net income was $9.5 billion, or $10.09 a share, down 18 percent from $11.6 billion, or $12.30 a share, in the same period a year ago. Revenue increased 11 percent, to $43.6 billion.
Apple said in April that it will distribute $100 billion in cash to its shareholders by the end of 2015. The company is expanding its share buyback program to $60 billion, the largest buyback authorization in history, and is raising its dividend by 15 percent, to $3.05 a share.
In Monday's regular trading session, Apple's stock rose $9.67, or 2.23 percent, to close at $442.93.
President Barack Obama has proposed using the tax code to encourage companies to move jobs back to the U.S. and discourage them from shifting jobs abroad. Many in both parties say they want to overhaul the entire tax code, but there are vast differences in how they would do so.
The subcommittee's inquiry and hearing are intended to shine a light on "offshore tax-avoidance tactics" by Apple, Levin said at a news conference Monday. Companies' use of such loopholes has the effect of raising the taxes of ordinary Americans and increasing the federal deficit, he said.
McCain called Apple's strategy "an egregious and really outrageous scheme that Apple has been able to orchestrate to avoid paying taxes."
JUST BECAUSE SISSY SAYS SO DOESN'T MAKE IT SO...BUT HE THINKS IT DOES!!!!! JUST BECAUSE MC1 SAYS SO DOESN'T MAKE IT SO!!!!!
Maybe this is where reform should be focused to prevent such legal abuse. Could put big dent in debt number. If Apple is doing it, you know there are a lot more doing same! CLOSE THE LOOPHOLES AND IMPOSE PENALTIES!!! Consumers need to know what companies are doing this so we can make intelligent choices to buy their products or not.
Thanks! I'll be sure to buy more Apple products! Anything I can do to defund the police state.
enjoy your overpriced iPhoney....now you know where your money really goes It's not an issue of defunding the government.....it's a matter of unburdening the taxpayers and future taxpayers.
JUST BECAUSE SISSY SAYS SO DOESN'T MAKE IT SO...BUT HE THINKS IT DOES!!!!! JUST BECAUSE MC1 SAYS SO DOESN'T MAKE IT SO!!!!!
enjoy your overpriced iPhoney....now you know where your money really goes It's not an issue of defunding the government.....it's a matter of unburdening the taxpayers and future taxpayers.
Unburdening taxpayers comes from stopping spending.
Your calls for ending loopholes is a demand that the government gets every cent they ask for.
That isn't helping.
You once again side with the government over the people.
Within the Constitution, the Founders gave power to the Congress to levy taxes as necessary. The Founding Fathers never had an issue with taxes. On the contrary, the founding generation waged the American Revolution because they felt that they were not properly represented in the British Parliament. The legislative branch established in the Constitution, however, properly represents every American. We vote for who represents us. Therefore when Congress raises taxes, they are doing the job we voted for them to do.
Conservatives today consistently associate tax hikes with liberal policies. So, according to Republicans, the Founders are liberals. James Monroe, our fifth President, once said, “To impose taxes when the public exigencies require them is an obligation of the most sacred character, especially with a free people.” It most certainly applies today.
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Kenneth Galbraith
Box, what did I tell you about misleading people with your ignorance? You always talk about taxing the rich. The founders never believed labor(income tax) should be taxed. Taxing production makes you a slave. Now taxing profit? That's a different story.
Box, what did I tell you about misleading people with your ignorance? You always talk about taxing the rich. The founders never believed labor(income tax) should be taxed. Taxing production makes you a slave. Now taxing profit? That's a different story.
Cic is speaking for the founding fathers again... Somehow he actually thinks his OPINION of the tax system is relevant.
Cicero believes in the Constitution... Not the US Constitution, but the one he imagines in his mind.
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Kenneth Galbraith
Cic is speaking for the founding fathers again... Somehow he actually thinks his OPINION of the tax system is relevant.
Cicero believes in the Constitution... Not the US Constitution, but the one he imagines in his mind.
The income tax wasn't instituted permenately until the passage of the 16th Amendment in 1913. I think that it makes pretty clear the founders beliefs on income tax. If the founders believed in income tax, Congress wouldn't have passed an Amendment to the Constitution to levy a direct tax onto the individual.
DUHHHHHHHHH!!!
Amendment XVI The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration.
The income tax wasn't instituted permenately until the passage of the 16th Amendment in 1913. I think that it makes pretty clear the founders beliefs on income tax. If the founders believed in income tax, Congress wouldn't have passed an Amendment to the Constitution to levy a direct tax onto the individual.
The founders DID believe in taxation, unlike your selfish group who only believes in yourself. That form of taxation varied in our early history. Knowing that our country would evolve the founding fathers included Amendments to the Constitution as part of that process. DUHHHHHHHHH!!!
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Kenneth Galbraith
The founders DID believe in taxation, unlike your selfish group who only believes in yourself. That form of taxation varied in our early history. Knowing that our country would evolve the founding fathers included Amendments to the Constitution as part of that process. DUHHHHHHHHH!!!
Did you just really make the leap suggesting the founding fathers agreed with the direct income tax over 100 years after the Constitution was ratified, becuase they had written a clause in the Constitution for amendments?
Did you just really make the leap suggesting the founding fathers agreed with the direct income tax over 100 years after the Constitution was ratified, because they had written a clause in the Constitution for amendments?
Is that what you read??? Of course not (and you know it). Cissy just loves a straw man. He sets em up and knocks em down...
The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness. John Kenneth Galbraith
History of the US Tax System -------------------------------------------------------------------------------- The federal, state, and local tax systems in the United States have been marked by significant changes over the years in response to changing circumstances and changes in the role of government. The types of taxes collected, their relative proportions, and the magnitudes of the revenues collected are all far different than they were 50 or 100 years ago. Some of these changes are traceable to specific historical events, such as a war or the passage of the 16th Amendment to the Constitution that granted the Congress the power to levy a tax on personal income. Other changes were more gradual, responding to changes in society, in our economy, and in the roles and responsibilities that government has taken unto itself. http://www.policyalmanac.org/economic/archive/tax_history.shtml
JUST BECAUSE SISSY SAYS SO DOESN'T MAKE IT SO...BUT HE THINKS IT DOES!!!!! JUST BECAUSE MC1 SAYS SO DOESN'T MAKE IT SO!!!!!
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