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Wednesday, May 22, 2013

Daily Report: Apple\'s Tax Practices Under Scrutiny

Apple avoided billions in taxes in the United States and around the world through a web of subsidiaries that went beyond anything most experts had ever seen, Congressional investigators disclosed on Monday.

The investigation set up a potentially explosive confrontation on Tuesday between a bipartisan group of lawmakers and Timothy D. Cook, Apple's chief executive, at a public hearing into Apple's use of tax havens. Bits is live-blogging the hearing.

As Nelson D. Schwartz and Charles Duhigg report in The New York Times on Tuesday, Congressional investigators found that some of Apple's subsidiaries had no employees and were largely run from the company's headquarters in Cupertino, Calif. But by officially locating them in places like 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, a Michigan Democrat who is chairman of the Senate Permanent Subcommittee on Investigations, which is holding the hearing Tuesday. “Apple successfully sought the holy grail of tax avoidance.”

Because of what lawmakers called “gimmicks” and “schemes,” Apple was able to largely sidestep taxes on tens of billions of dollars it earned outside the United States in recent years. Last year, international operations accounted for 61 percent of Apple's total revenue.

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