US — Using an unusual global tax structure, Apple Inc has kept billions of dollars in profits in Irish subsidiaries to pay little or no taxes to any government, a Senate report on the company’s offshore tax structure said on Monday.
In a 40-page memorandum released a day before Apple CEO Tim Cook is scheduled to testify before Congress, the Senate’s Permanent Sub-committee on Investigations identified three subsidiaries that have no “tax residency” in Ireland, where they are incorporated, or in the United States, where company executives manage those companies.
The main subsidiary, a holding company that includes Apple’s retail stores throughout Europe, has not paid any corporate income tax in the last five years. The subsidiary, which has a Cork, Ireland, mailing address, received $29,9 billion in dividends from lower-tiered offshore Apple affiliates from 2009 to 2012, comprising 30% of Apple’s total worldwide net profits, the report said.
“Apple has exploited a difference between Irish and US tax residency rules,” the report said.
Apple said in a comment posted online on Monday it does not use “tax gimmicks.” It said the existence of its subsidiary “Apple Operations International” in Ireland does not reduce Apple’s US tax liability and the company will pay more than
$7 billion in US taxes in fiscal 2013.
Sub-committee staffers said on Monday that Apple was not breaking any laws and had cooperated fully with the investigation.
Tuesday’s hearing is the second to be held by Senator Carl Levin, a Michigan Democrat and chairman of the subcommittee, to shed light on the weaknesses of the US corporate tax code. Levin has sought to overhaul the code in Congress.
Lawmakers globally are closely scrutinising the taxes paid by multinational companies. In Britain, Google faces regulatory inquiries over its own tax policies, while Hewlett-Packard Co and Microsoft Corp have been called to Capitol Hill to answer questions about their own practices.
Corporations must pay the top US 35% corporate tax on foreign profits, but not until those profits are brought into the United States from abroad. This exception is known as corporate offshore income deferral.