Apple avoids paying a heap of tax

Apple is going to explain to the US government how it managed to keep billions of dollars in profits in Irish subsidiaries to pay little or no taxes to any government.

Apple CEO Tim Cook is going to show up before Congress to explain how the company avoided paying so much tax. The Senate’s Permanent Subcommittee on Investigations identified three subsidiaries that have no “tax residency” in Ireland, where they are incorporated, or in the United States, where company executives manage those companies.

The main subsidiary, a holding company that includes Apple’s retail stores throughout Europe, has not paid any corporate income tax in the last five years.

Apparently the subsidiary, which is supposed to be based in Cork, received $29.9 billion in dividends from lower-tiered offshore Apple affiliates from 2009 to 2012, comprising nearly a third of Apple’s total worldwide net profits.

Congress claims that Apple has exploited a difference between Irish and US tax residency rules, something that Apple has sort of denied.

It claimed that it did not use “tax gimmicks” and the existence of its subsidiary “Apple Operations International” in Ireland does not reduce Apple’s US tax liability. Jobs’ Mob will pay more than $7 billion in US taxes in fiscal 2013.

Reuters wanted to make it clear that the Senate does not think that Apple is breaking any laws and had cooperated fully with the investigation.

But it does appear that they think that there are loopholes which need to be closed, something which is being done in the UK too.

Corporations must pay the top US 35 percent corporate tax on foreign profits, but not until those profits are brought into the United States from abroad. This exception is known as corporate offshore income deferral.