Apple paid no corporate taxes in the UK last year, and a tax rate of just 2 percent on overseas profits, in a series of loopholes that lessen the companies international tax burden, according to a Financial Times report. Apple was able to pull this off by way of tax deductions from share awards to employees that offset the taxes owed, and the sheltering of money into offshoots in countries with lower-tax rates, such as the British Virgin Islands, the FT report said. Apple's actions are completely legal, the report said, but they might bring the company under even more scrutiny over its tax practices.
In May, Apple CEO Tim Cook testified before a US Senate panel, defending the taxes the company pays, while also calling for tax reforms. At the hearing, Cook said that "Apple pays all its required taxes, both in this country and abroad." Apple has been accused of avoiding billions of dollars in taxes by Senate lawmakers. The company admits that about $100 billion in overseas profits haven't been taxed in the US, but insists that it does not break any tax laws. In the US, Apple faces a corporate tax rate of about 35%, while in the UK — where the company operates three subsidiaries: Apple UK, Apple Retail UK, and Apple Europe — the tax rate is nearly 24 percent. In its offshore operations, Apple pays tax rates of about 2 percent, the FT said.
Amazon, Facebook, Google face UK tax scrutiny too
According to The Telegraph, while what Apple is doing isn't against the law, it's still angering lawmakers. UK Prime Minister David Cameron said last week that companies using such elaborate schemes to avoid higher tax rates should "wake up and smell the coffee." Cameron has also called for a UK investigation into the tax practices of Amazon, Netflix, Starbucks, and the Microsoft-owned Skype, The Telegraph said. Facebook has come under fire in the UK for "disingenuous" accounting. And Google has faced flack for its tax practices in the UK as well.