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Wednesday, May 22, 2013

Live Blog: Apple and Corporate Taxes

In his statement to the Senate panel, Mr. Cook made several questionable assertions. Here are some examples:

1) “We don't rely on tax gimmicks.” The precise definition of the word “gimmick” may be debatable, but Apple's use of two Irish entities, which it claims are stateless (and help it sidestep $10 billion per year in taxes, according to the Congressional report) would seem to qualify.

2) “We don't move its intellectual property into offshore tax havens.” Apple's intellectual property is held by its Irish subsidiary, Apple Operations International, which has no employees or physical presence in Ireland, has received $30 billion in income since 2009 and paid no income tax to any government for the past five years, according to Congressional investigators. Ireland is not on the official list of tax havens compiled by the Organization for Economic Cooperation and Development, but it is offshore and Apple's special deal with the country allowed the company to enjoy rates lower than some companies that shelter income in the Caribbean. What's more, Apple's unique agreement hinges on its ability to take advantage of a wrinkle in Irish tax law that allows it to avoid Irish taxes by holding a fraction of its ownership in a shell company called Baldwin Holdings Ltd. in the British Virgin Islands.

3) “We don't stash money on some Caribbean island.” While perhaps true, this is not necessarily a strong defense. The tens of billions of dollars that Apple does not pay taxes on because they are classified as “permanently invested offshore” are actually held in New York banks. They are managed by Braeburn Capital, a subsidiary Apple opened in Reno, Nev., to avoid some state taxes in California and other states.

4) “These foreign earnings are taxed in the jurisdiction where they are earned.” Apple booked more than $74 billion in sales from dozens of countries around the world to its subsidiary Apple Sales International over the last four years. Although the subsidiary is based in Ireland, Apple accountants and corporate executives contend that, for tax purposes, it is not a resident of any country.

â€" David Kocieniewski

- David Kocieniewski