US: Apple Defends Tax Practices, Calls for Corporate Tax Reform

Near the top of the business headlines is the battle that Congress has started to wage with Apple Inc. (NASDAQ: AAPL) over the taxes it pays. By some measures, the company barely pays taxes at all. Among the evaluations of the Apple showdown with Capital Hill, one comes from CNN Money:

Apple executives are set to defend the company’s tax practices and call for corporate tax reform on Capitol Hill Tuesday amid harsh criticism following a Senate investigation.

A report released Monday by Senators John McCain, R-Arizona, and Carl Levin, D-Michigan, charged that Apple “has used a complex web of offshore entities – including three foreign subsidiaries the company claims are not tax resident in any nation – to avoid paying billions of dollars in U.S. income taxes.”

The report says Apple relies on a number of unusual accounting tactics along with a handful of subsidiaries in Ireland – where it has negotiated a tax rate of less than 2% – to reduce its tax bill. The U.S. corporate tax rate stands at 35%.

And The Wall Street Journal says on findings about Apple’s tax practices:

Apple used technicalities in Irish and American tax law to pay little or no corporate taxes on at least $74 billion over the past four years, according to the Senate panel’s findings. The investigation found no evidence that Apple did anything illegal. Aides to the subcommittee said they have never seen a company use a subsidiary that didn’t owe corporate income taxes to any country.

Apple didn’t dispute that entities it set up didn’t pay corporate taxes but denied they were designed to avoid taxes. The company said it pays local taxes on overseas earnings and U.S. taxes on investment income generated at its Irish subsidiaries.