Home Technology We Know How Apple Inc. (AAPL) Saved Billions In Taxes: Senate Panel

We Know How Apple Inc. (AAPL) Saved Billions In Taxes: Senate Panel

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A Senate investigations in the tax amount paid by Apple Inc. (NASDAQ:AAPL) found that the iPhone maker uses numerous affiliate companies located outside the United States to save billions of dollars in U.S. income taxes.

We Know How Apple Inc. (AAPL) Saved Billions In Taxes: Senate Panel

As per the report filed by the Senate Permanent Subcommittee, the Cupertino based company has stashed about $102 billion of its $145 billion in cash overseas. The report also revealed that an Irish subsidiary, despite having earnings of $22 billion in 2011, paid a meager 10 million in taxes.

According to the estimates of the subcommittee, Apple saved at least $3.5 billion in taxes in 2011 and $9 billion in 2012, compared to $2.5 billion of taxes the company actually paid in 2011 and $6 billion in 2012.

Apple Inc. (AAPL)’s special twist:

The accounting tricks used by the most valuable company are all legal and have been used by other large organizations too for similar reasons. However, the report found that Apple Inc. (NASDAQ:AAPL) has a special twist that raises questions about the loopholes in the U.S. tax code.

As per the report, Apple Inc. (NASDAQ:AAPL) is taking advantage of the different tax rules in the US and Ireland. Apple Inc. (NASDAQ:AAPL) has five companies located in Ireland to carry the tax strategy. Not revealing the tax residency in any country is a unique strategy followed by Apple.

Apple denying the assertions

On Tuesday, CEO Tim Cook, chief financial officer and company’s tax chief are scheduled to meet the subcommittee to testify and explain the company’s tax strategy.

The iPhone maker denied the claims leveled against it in the testimony that was made public on Monday, saying it employs tens of thousands of Americans and have been paying huge amount of taxes, and have paid about $6 billion in fiscal 2012. In the testimony, the company said that it complies with both “the laws and the spirit of the laws” and pays all the taxes both in US and abroad.

Apple Inc. (NASDAQ:AAPL) denied the assertion made by the committee that the company transfers its intellectual property rights overseas and then sell products from there to the US to save on taxes.

However, the company admits that given the current U.S. tax rates, it has no plans to repatriate the overseas profits into the US. Apple Inc. (NASDAQ:AAPL) also said that it is in support of a comprehensive tax reform, which will be good for the economic growth and enhance the competitiveness of the US companies globally.

The recent tax evasion actions have come at a time when the authorities are working hard to come up with a solution to reduce the federal deficit. Democrats have continuously been complaining about the organizations that are using tax heavens and holding substantial cash outside the U.S. to avoid home taxes.

Republicans, on the other hand, plan to reduce the corporate tax rate of 35 percent, hoping the move will inspire the companies to invest at home.

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Aman Jain
Personal Finance Writer

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