A few hours after Apple released testimony defending itself against allegations that it avoided taxes by shifting assets offshore, a Senate probe has concluded that it employed elaborate and extensive measures to exploit loopholes in the tax code. In a hearing tomorrow, the Senate Permanent Subcommittee on Investigations will examine numerous accusations, including claims that Apple created offshore subsidiaries in Ireland but did not declare a tax residence in either, paying no corporate taxes in either Ireland or the US for years.
"Apple claims to be the largest US corporate taxpayer, but by sheer size and scale, it is also among America's largest tax avoiders," said Senator John McCain (R-AZ), referencing Apple's testimony, in which it said it had paid $6 billion in taxes during 2012. "I have long advocated for modernizing our broken and uncompetitive tax code, but that cannot and must not be an excuse for turning a blind eye to the highly questionable tax strategies that corporations like Apple use to avoid paying taxes in America."
"Apple claims to be the largest US corporate taxpayer, but by sheer size and scale, it is also among America's largest tax avoiders."
Senator Carl Levin (D-MI), who has long sought to crack down on tax avoidance, said that 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. We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed."
Tim Cook will give his testimony tomorrow at the Senate hearing, at which point he will likely be questioned on the ethics of Apple's behavior. The probe does not allege that Apple's behavior was illegal, but it hopes to show the need for closing gaps and loopholes that allow for companies to drastically cut their tax rates. The report, for example, alleges that Apple avoids around $10 billion in taxes a year by sending its funds offshore. In its testimony, Apple denied that its Irish companies were meant to cut the company's tax bill, saying they were meant to enhance its international presence.