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Apple Accused of Seeking the Holy Grail of Tax Avoidance (Updated)

1. Cover, Chairman, Sen Levin, Apple Tax issue

The US Senate investigation, results of which were disclosed Monday, found that Apple employs a group of affiliate companies outside the United States to avoid paying taxes. The subcommittee's chairman, Sen. Carl Levin, D-Mich., and other panel members could hold up Apple as an example of a powerful company using its privileged position to avoid taxes while ordinary Americans must pay them. The subcommittee last fall derided executives from other technology giants over similar allegations. MAJOR REPORT UPDATE 2:08 PM EST

The subcommittee's chairman, Sen. Carl Levin is on record stating that "Apple wasn't satisfied with shifting its profits to a low-tax offshore tax haven. 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 called Apple's strategy "an egregious and really outrageous scheme that Apple has been able to orchestrate to avoid paying taxes." Levin and McCain are proposing legislation to close loopholes in the tax code.


Apple's CEO Tim Cook who is expected to testify before the committee later today is likely to stand by an earlier statement that Apple "complies fully with both the laws and the spirit of the laws," and that "Apple pays all its required taxes, both in this country and abroad." He's also likely to state that "Apple does not use tax gimmicks."


Some of the other Sources Reporting on this Issue 


Bloomberg TV Live: Follow the Committee's various testimonies on the issue of corporate taxes. Stay tuned as Apple's CEO Tim Cook and CFO Peter Oppenheimer have yet to testify (as of 11 AM EST). 


Bloomberg 1: Apple CEO Cook Talks to Congress as Steve Jobs Never Did


Bloomberg 2: Apple CEO to Take on Lawmaker Statements on Tax Avoidance


The New York Times: Apple's Web of Tax Shelters Saved It Billions, Panel Finds (includes an overview video)


The Reuters: Ireland says not to blame for Apple's low tax rate


Update: CEO Tim Cook Testifies (11:42 AM EST) and CFO Peter Oppenheimer (9:50 AM EST).


2 CEO Tim Cook at Senate Hearing

3. Apple CFO Peter Openheimer

The biggest issue pushed by Senator Levin, appears to be Apple holding monies, over one hundred billion, in three Irish Companies who signed agreements in 2008 and 2009 to shift profits away from the US. Intellectual Properties were also shifted to the Irish companies. These companies allegedly hold 100 billion and basically Apple is refusing to bring that money to the US until the US drops their tax rate. These three Irish companies don't pay any taxes on the base funds.


The Senator framed his argument in a way that made Apple a Company holding the US Government hostage until they pay the ransom of lowering the tax rate. Senator Levin was very dramatic in making the point that US Companies are making conscientious decisions to hide money or "shift" money offshore so as to not pay taxes yet receive R&D and other write-offs from the US. The more Apple's Oppenheimer, Cook and head of tax operations Philip Bullock spoke at this juncture, the more they sounded like they were on the ropes.


They were clearly uncomfortable with Levin pushing this issue of creating offshore entities that hold most of Apple's profits outside of the Americas. Apple's Oppenheimer tried to continually state that Apple was just continuing agreements in place for the last 30 years. Yet Levin made the point that the 2008 and 2009 decisions to renew the agreements were at a time when Apple's profits were exploding due to the advent of the iPhone. In other words, Apple's management made the decision to ensure that their new massive profits generated by the iPhone and other modern products outside of the Americas, were to remain in Ireland so as to avoid paying taxes in the US. Levin hammered home that Apple made the decision to selectively bring home profits from the Americas (Canada, Brazil, Mexico etc) yet shift profits outside of the Americas to the three Irish Companies Apple set up for the sole purpose of not paying US taxes.  


Senator Levin, a Democrat, earlier stated that "Closing these kinds of unjustified loopholes could provide hundreds of billions of dollars to reduce the deficit and avert damaging budget cuts."


Senator John McCain of Arizona, the panel’s top Republican stated that in the last four years, Apple has avoided paying taxes on $44 billion in income. He called Apple "one of the biggest tax avoiders in America."


Panel number two relating to Apple concluded at 1:30 PM EST.


At the end of the day, if it were Samsung being dragged before a Korean Senate hearing for tax avoidance, most of the Apple community would be calling Samsung a sneaky company showing their true colors. But it was Apple in the hot seat at today's Senate hearing concerning offshore tax issues. So what does the Apple community have to say about this issue now that Apple has spoken? Send in your comments.


PA - Bar - News Break

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First: All the money in the world can't pay the debt of the US gov. Remember to include the future unfunded liabilities. Derivatives and so on reaches in the trillions. Apple could help pay some bills for a few months.

The committee is will fully ignorant of the above fact. They want control and spend your money on their mistakes.
This is not the way it works in a household, or business, yet government brakes all the rules and tells you you cant.

Samsung, Apple I don't blame them for being capitalists. It's what drives us a a personal level to outdo ourselves
create a better future for us and others, say your family.

The fruits of ones labour should be ones own. Surely after taxes. The US gov want the steal money out of the piggy bank, money that already has been taxed.

And don't worry, they will come for your money. Just as they did in Cyprus. Apple is once again a leading example, for better or worse. Google also operates in the same way.

You are just blind. You don't even know how most of the tax payer money is used in US. It is used to bail out banks which makes profits and don't care how bad situation is in the country. Your money is also used on military that is most likely won't have any use, just to show how big * uncle Sam has.

Apple creates (any corporation hiding money) these "foreign entities" for the pure purpose of avoiding tax. Yes, if you're an American Company, you should pay taxes on all sales around the world. Apple has said that "if" the taxes would fall to a lower number that they would bring home the money. So it's a decision to hold back money purposely to avoid paying US taxes at a rate they don't agree with. It's not just Apple.

But hearing Apple at the hearing asking the government to pay a ransom, as this article framed it visually, in order to get access to their huge profits for taxes was mind boggling. Cook ranted about the good Apple is doing. Ya, right, if you don't pay taxes on your profits you can do these types of things. Tax money is to help fund government pay for things like cleaning up Oklahoma (and other disasters and update city infrastructures and unemployment etc). The tax system needs an overhaul. Apple is providing information. But in doing so, I now see Apple as just another corporate pig. I see that part of their innovation is how to avoid paying taxes, like all the other crooks.

They are not evading taxes since profits and assets made and held by foreign entities (even if those entities are controlled by US citizens) do not fall under US tax jurisdiction (The US does not claim legal ownership over all of planet Earth). They are also not hiding profits. The majority of their profits are not made in the US because the total number of countries in which Apple operates is more than the one you live in. The US government is saying that since Apple is an American company, profits made and held by all the companies and holdings around the world which Apple Inc. controls should be brought to the US (and be taxed by the US government).

Wow, intelligent insanity. I didn't realize that tax evasion had a new name: the transitional business model.

As an Apple fan, I was disgusted to hear about Apple's gamesmanship of hiding profits for the majority of their sales which are abroad. They're as crooked as Capone. My respect for Apple just fell off a cliff.

Carl Levin chose not to understand that as long as Apple does not transfer foreign made profits to the US, they are not obligated to pay US taxes on them. At the end, he was almost trying to guilt-trip Cook into bringing that cash "home" so the US government can tax it. Levin even suggested that it was wrong that Apple could unilaterally decide to leave foreign made profits outside the grasp of the US tax man. It was as if Levin was suggesting that if Tim Cook had a sister in Ireland that was in the same family business as cook, that the sister should somehow be forced to transfer her income to the US so it could be taxed. The hearing really opened my eyes into how some lawmakers in the US see the role of government and the IRS in conducting business and their failure to grasp transnational business models.

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