Apple subsidiaries “not tax-resident anywhere”

APPLE is attempting to find the “Holy Grail of tax avoidance“, according to a US Senate committee as it prepares to take testimony from the technology company’s chief executive on its offshore tax affairs.

Comprising senior politicians, the committee argued this week that while the business’s corporate structure includes three Ireland-based subsidiaries, they do not appear to by tax-resident anywhere in the world.

One of those subsidiaries, Apple Sales International, recorded pre-tax profits of $22bn (£14.4bn) in 2011, but paid only £10m in tax, equating to a rate of around 0.05%.

While the committee held Apple is “one of the US’s biggest tax avoiders”, it noted the business had not done anything illegal.

In the committee’s report, chair Carl Levin said Apple was using “gimmicks” to avoid tax.

“Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” he said. “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.”

Apple currently has around $145bn stockpiled, although the committee estimated some $102bn is held offshore.

The company said, however, it is one of the US’s biggest taxpayers, contributing $6bn to the country’s coffers in 2012.

Several large firms in the US have faced criticism for their reluctance to repatriate their foreign earnings as they face a top tax rate of 35%.

US corporation tax is one of the highest in the world at 35%. Companies, though, usually pay far less, thanks to various deductions and exemptions.

In a prepared statement, Cook defended Apple’s actions, adding: “Apple complies fully with both the laws and spirit of the laws. And Apple pays all its required taxes, both in this country and abroad.”

This side of the Atlantic, CBI president Sir Roger Carr warned politicians should steer clear of the moral element of the tax avoidance debate.

Speaking at a conference on tax and reputation at King’s College, London, Sir Roger said morality holds “no absolutes”.

He said: “As politicians pursue fairness it is important that any criticisms are grounded in fact and hasty solutions or political point-scoring do not trigger long term unintended consequences.

“Tax payments are not and should not be optional. Tax should not be viewed as a down payment on social acceptability.

“Tax should be calculated in keeping with the law of the land and interpreted by management in the course of normal accounting practice. It should be neither aggressive nor lax and respectful of corporate obligations to the society in which the company operates and serves.”