Apple’s Web of Tax Shelters Saved It Billions, Panel Finds

ROTTENEven as Apple became nation’s most profitable technology company, it avoided billions in taxes in United States and around the world through a web of subsidiaries so complex it spanned continents, went beyond anything most experts had ever seen, the Congressional investigators disclosed on Monday. Investigation is expected to set up a potentially explosive confrontation between a bipartisan group of the lawmakers and Timothy D. Cook, Apple’s chief executive, at a public hearing on Tuesday. Congressional investigators found that some of Apple’s subsidiaries had no employees and were largely run by top officials from company’s headquarters in Cupertino, Ca. But by officially locating them in places like Ireland, Apple was able to, in effect, make them stateless, exempt from the taxes, record-keeping laws and need for subsidiaries to even file tax returns anywhere in the world. “Apple wasn’t satisfied with shifting its profits to a low-tax offshore tax haven,” said Senator Carl Levin, a Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations that is holding the public hearing Tuesday into Apple’s use of tax havens. “Apple successfully sought holy grail of tax avoidance. It has created offshore entities holding tens of bill. of dollars while claiming to be tax resident nowhere.” Thanks to what lawmakers called “gimmicks” and “schemes,” Apple was able to largely sidestep the taxes on tens of billions of dollars it earned outside United States in recent years. Last year, international operations accounted for 61% of Apple’s total revenue. Investigators have not accused Apple of breaking any laws and the company is hardly the only American multinational to face scrutiny for using complex corporate structures and the tax havens to sidestep taxes. Recent months, revelations from European authorities about tax avoidance strategies used by Google, Starbucks, Amazon have all stirred public anger, spurred European governments, as well as the Organization for Economic Cooperation and Development, Paris-based research organization for world’s richest countries, to discuss measures to close the loopholes. Still, findings about Apple were remarkable both for enormous amount of money involved and audaciousness of the company’s assertion that its subsidiaries are beyond the reach of any taxing authority. “There is a technical term the economists like to use for behavior like this,” said Edward Kleinbard, law professor at University of Southern California in Los Angeles and former staff director at Congressional Joint Committee on Taxation. “Unbelievable chutzpah.” While Apple’s strategy is unusual in scope, effectiveness, it underscores how riddled with loopholes American corporate tax code has become. At the same time, it shows how difficult it will be for Washington to overhaul the tax system (…..)

Link: http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html

Acerca de ignaciocovelo
Consultor Internacional

5 Responses to Apple’s Web of Tax Shelters Saved It Billions, Panel Finds

  1. Professor Uziel Nogueira says: NYT readers are (correctly) confused by Apple’s imbroglio. However, one underlying aspect of it is not being addressed. Apple is the evolutionary result of US capitalism. Apple is only American in name and certain aspects of its operation.

    http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html

  2. Kathy: It seems that capitalism as practiced under the US merely results in less capitalists. We used to have laws against monopolies and trusts.

    http://www.nytimes.com/2013/05/21/business/apple-avoided-billions-in-taxes-congressional-panel-says.html

  3. (…..) The taxation of global income has proven an especially thorny problem, in part because it is so difficult to define objectively, and in part because it’s so difficult to harmonize the tax codes of different nations. Still, the difficulty of the task is no reason to shrink from it. As the exposure of Apple’s stunning tax strategies shows, Americans have already paid a high price for their current flawed tax code.

    http://www.washingtonpost.com/opinions/apple-is-shifting-its-tax-burden/2013/05/21/a3a81404-c24f-11e2-9fe2-6ee52d0eb7c1_story.html

  4. (…..) Yet lurking behind yesterday’s kabuki dance is a seminal issue, if only our debauched political culture can tackle it head on. That issue is this: The fate of companies and countries in a global age now diverge. The success of U.S.-based multinationals no longer assures the prosperity of American workers. If our schools leave much of our workforce unprepared, or our health-care system leaves costs uncompetitively out of control, these firms can find the next tranche of talent and services they need in Singapore or China or New Zealand. American-born executives at the helm of such firms are uncomfortable talking about this on the record. But in private they’ve told me the truth: These trends may be a pity for their country, but they’re not really a problem for their business. This is the depressing disconnect Congress should be chewing on — not sideshows like one firm’s tax planning. Yet broader tax incentives, if properly designed, might offer a step in the right direction. Ralph E. Gomory, an octogenarian former head of research at IBM who turned policy crusader, put it as follows when we spoke for my 2009 book “The Tyranny of Dead Ideas”: Companies want profits; countries want gross domestic product. In the old days, profits and GDP mostly went together in America for U.S.-based firms; nowadays, profits are increasingly found elsewhere, and that’s costing America some GDP. The answer, says Gomory, is to reward the kind of behavior we want and, thus, “realign the interests of companies with those of the country.” Only in America is there a laissez-faire attitude toward this question. Gomory believes that we should adjust corporate tax rates according to the value added by the workers of corporations operating in the United States. A company with high value added per U.S. employee would pay a low tax rate, and those with low value added per U.S. employee would pay a high rate. This would encourage companies with high-value-added jobs to locate their operations in the United States. Under an approach like this, of course, Apple might be looking at a tax cut, not a tongue-lashing. The moral of the story? Making Apple out to be rotten gets senators great press while solving precisely nothing.

    http://www.washingtonpost.com/opinions/matt-miller-not-a-rotten-apple/2013/05/22/885f1bb4-c2dd-11e2-8c3b-0b5e9247e8ca_story_1.html

  5. (…..) Globalisation has made us increasingly interdependent. These international corporations are the big beneficiaries of globalisation – it is not, for instance, the average American worker and those in many other countries, who, partly under the pressure from globalisation, has seen his income fully adjusted for inflation, including the lowering of prices that globalisation has brought about, fall year after year, to the point where a fulltime male worker in the US has an income lower than four decades ago. Our multinationals have learned how to exploit globalisation in every sense of the term – including exploiting the tax loopholes that allow them to evade their global social responsibilities (…..) The problem of multinational corporate tax avoidance is deeper, and requires more profound reform, including dealing with tax havens that shelter money for tax-evaders and facilitate money-laundering. Google and Apple hire the most talented lawyers, who know how to avoid taxes staying within the law. But there should be no room in our system for countries that are complicitous in tax avoidance.


    Why should taxpayers in Germany help bail out citizens in a country whose business model was based on tax avoidance and a race to the bottom – and why should citizens in any country allow their companies to take advantage of these predatory countries? To say that Apple or Google simply took advantage of the current system is to let them off the hook too easily: the system didn’t just come into being on its own. It was shaped from the start by lobbyists from large multinationals.

    Companies like General Electric lobbied for, and got, provisions that enabled them to avoid even more taxes. They lobbied for, and got, amnesty provisions that allowed them to bring their money back to the US at a special low rate, on the promise that the money would be invested in the country; and then they figured out how to comply with the letter of the law, while avoiding the spirit and intention. If Apple and Google stand for the opportunities afforded by globalisation, their attitudes towards tax avoidance have made them emblematic of what can, and is, going wrong with that system.

    http://www.guardian.co.uk/commentisfree/2013/may/27/globalisation-is-about-taxes-too

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