The electronics giant’s rootless subsidiaries had just one purpose: to funnel much of the company’s global profits and dodge billions of dollars in U.S. tax obligations, according to the report by the Permanent Subcommittee on Investigations.
One of Apple’s Irish affiliates reported profits of $30 billion between 2009 and 2012, but because it did not technically belong to any country, it paid no taxes to any government. Another paid a tax rate of 0.05 percent in 2011 on $22 billion in earnings, according to the report. The U.S. corporate tax rate is 35 percent.
“Apple sought the Holy Grail of tax avoidance,” said Sen. Carl Levin (D-Mich.), chairman of the committee. “It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere.”
Apple is the latest high-tech giant to have its offshore accounting practices come under congressional scrutiny. And the company’s high profile — it was the most valuable company in the world as of Monday — highlights the debate over how companies use legal loopholes in the tax code to avoid paying into U.S. tax coffers.
Apple chief executive Tim Cook plans to vehemently defend the company’s record on taxes before the Senate subcommittee Tuesday morning, arguing that Apple does not break any tax laws, according to a copy of the firm’s prepared testimony.
Cook and other senior executives are set to argue that their Irish subsidiaries help the U.S. economy by funding research and development projects and assist the company’s expansion in Asia and Europe, according to the testimony.
“Apple does not use tax gimmicks,” the company wrote in the prepared testimony. The Irish subsidiaries contributed more than half of Apple’s R&D costs in 2012, the company said. Apple declined to comment and referred questions to its prepared testimony.
The Senate investigation provides a rare window into the operations of one of corporate America’s most secretive companies. The arrival of its top executives in a congressional hearing also marks a departure for a firm that has deliberately chosen to keep a minimal profile in Washington. Steve Jobs, the Apple chief executive who died in 2011, notoriously called Washington policy issues distractions from the creation of new technology. Even as its chief rivals — Google, Facebook and Amazon.com — have beefed up their lobbying operations, Apple has kept a remarkably small presence.