Apple Denies Tax ‘gimmicks’ as Pressure Mounts

WASHINGTON – Apple denied Tuesday using “gimmicks” to dodge taxes and said it welcomes a review of US fiscal laws after a Senate investigation found it used offshore loopholes to save billions in taxes.

Apple, in a statement ahead of a hearing in Washington on strategies to shift profits to minimize taxes, argued that it “carefully manages its foreign cash holdings to support its overseas operations in the best interests of its shareholders.”

An investigation by the Senate panel found the US tech giant avoided paying taxes on tens of billions of dollars in profits through a complex network of subsidiaries, many with “no declared tax jurisdiction.”

Apple said in its statement it “welcomes an objective examination of the US corporate tax system, which has not kept pace with the APPLE2advent of the digital age and the rapidly changing global economy.”

The California maker of iPhones and iPads said it “pays an extraordinary amount in US taxes” and is “likely the largest corporate income tax payer in the US, having paid nearly $6 billion in taxes to the US Treasury” in the past fiscal year.

“Apple does not use tax gimmicks. Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands.”

Apple said it “has substantial foreign cash because it sells the majority of its products outside the US,” with 61 percent of Apple revenue coming from overseas last year.

The statement added that Apple supports “comprehensive reform of the US corporate tax system” even though “it would likely result in Apple paying more US corporate tax.”

The Senate investigation, set to be discussed at a hearing Tuesday, stopped short of accusing the US tech giant of anything illegal, but two lawmakers on the panel said the tax strategies call for new scrutiny.

“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” Senator Carl Levin, head of the Senate Permanent Subcommittee on Investigations, said in a statement Monday.

“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.”

Levin said Tuesday’s hearing, which will include chief executive Tim Cook and other Apple executives, would “highlight that gimmick and other Apple offshore tax avoidance tactics.”

Republican Senator John McCain, another panel member, cited “the highly questionable tax strategies that corporations like Apple use to avoid paying taxes in America.”

“The proper place for the bulk of Apple’s creative energy ought to go into its innovative products and services, not in its tax department,” McCain said in a statement.

The two senators said they were proposing measures to close these loopholes used by Apple and other multinationals to shield offshore income from US taxes.

An analysis by the activist group Citizens for Tax Justice produced similar conclusions.

It said it found “Apple has paid almost no income taxes to any country on its $102 billion in offshore cash holdings,” and that “this cash hoard reflects profits that were shifted, on paper, out of countries where the profits were actually earned into foreign tax havens.”


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