Apple has called on the US government to cut corporate tax rates after admitting to sheltering at least $30bn of international profits in Irish subsidiaries that pay no tax at all.
By submitting your email address, you agree to receive emails regarding relevant topic offers from TechTarget and its partners. You can withdraw your consent at any time. Contact TechTarget at 275 Grove Street, Newton, MA.
Chief executive Tim Cook also revealed that Apple had struck a secret deal with the Irish government in 1980 to limit its domestic taxes there to 2%.
However, he warned he would refuse to repatriate a total of $100bn stashed offshore unless the US government reduced the 35% US rate, according to the Guardian.
Apple recently opted to return money to shareholders unhappy over Apple’s falling share price by selling billions of dollars in bonds instead of repatriating funds held overseas.
Cook was giving testimony to a panel of senior US politicians after a US Senate report said the company paid little or no tax on billions of dollars of profits stashed in Irish subsidiaries.
The report said Apple’s complex structure is the "Holy Grail of tax avoidance”.
According to the report, Apple contributed a total of $4bn to research and product development, and had pre-tax earnings of $38.7bn, which is a cost-to-profits ratio of 7:1.
Read more on tax dodging
- MPs to recall Google executives to explain tax position
- Government introduces new rules to prevent tax-avoidance
- UK government to crack down on tax-avoiding suppliers
- Government wants suppliers to reveal UK taxes
- Google is tax law compliant and key to UK growth, says Eric Schmidt
- MPs quiz Google over UK tax avoidance
By contrast, Apple’s Ireland subsidiary, Apple Sales International, assigned $4.9bn to R&D and returned $74bn in pre-tax earnings, a cost-to-profit ratio of 15:1.
The Senate report says this is evidence of Apple’s evasion strategy.
Cook said the tax rate for repatriated money should be set below 10% to persuade companies to bring it back, while standard tax for US profits should be in the "mid 20s".
"Unlike some technology companies, I am not proposing a zero rate," he said. "My proposal is that we have a reasonable tax for bringing back money from overseas.
Cook’s testimony largely confirmed the report’s findings that Apple had taken tax avoidance to a new extreme by structuring these companies so they did not incur tax liabilities anywhere.
Senate investigators allege a total of $70bn has been sheltered this way in four years.
Like Google in the UK, Apple insisted that it was acting "in the letter and the spirit of the law".
Google, which paid only £6m in corporation tax in 2012 on revenues of £395m, is among several multinationals that have come under fire over tax payments in the UK.
An independent tax professor, Richard Harvey, testified that Apple’s tax avoidance was "probably legal" and could have been much more aggressive.
The hearing comes amid increasing tensions between governments and multinationals, particularly technology groups such as Apple, Amazon and Google.