Apple's complex web of tax avoidance

Even as Apple became the United State's most profitable technology company, it avoided billions in taxes in the US and around the world through a web of subsidiaries so complex it spanned continents and went beyond anything most experts had ever seen, congressional investigators disclosed on Monday.

Even as Apple became the United State's most profitable technology company, it avoided billions in taxes in the US and around the world through a web of subsidiaries so complex it spanned continents and went beyond anything most experts had ever seen, congressional investigators disclosed on Monday.

The investigation is expected to set up a potentially explosive confrontation between a bipartisan group of lawmakers and Timothy 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 officials from the company's headquarters in California. But by locating them in places such as Ireland, Apple was able to, in effect, make them stateless - exempt from taxes, record-keeping laws and the need for the 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, chairman of the Senate permanent subcommittee on investigations that is holding the public hearing into Apple's use of tax havens. "Apple successfully 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."

Thanks to what lawmakers called "gimmicks" and "schemes", Apple was able to sidestep taxes on tens of billions of dollars it earned outside the US in recent years. Last year, international operations accounted for 61 per cent of Apple's total revenue.

Investigators have not accused Apple of breaking any laws and the company is hardly the only US multinational to face scrutiny for using complex corporate structures and tax havens to sidestep taxes. Still, the findings about the company were remarkable both for the enormous amount of money involved and the audaciousness of Apple's assertion that its subsidiaries are beyond the reach of any taxing authority.

"There is a technical term economists like to use for behaviour like this," said Edward Kleinbard, a law professor at the University of Southern California and a former staff director at the Congressional Joint Committee on Taxation. "Unbelievable chutzpah."

In prepared testimony expected to be delivered to the Senate committee by Mr Cook and other Apple executives, the company said it "welcomes an objective examination of the US corporate tax system, which has not kept pace with the advent of the digital age and the rapidly changing global economy".

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