The subcommittee’s report estimates that Apple avoided at least $3.5bn in US
federal taxes in 2011 and $9bn in 2012 by using its tax strategy, and
described a complex set-up involving Irish subsidiaries as being a key
element of this strategy.
But Mr Cook said the Irish subsidiaries do not reduce the company’s US taxes
at all. Rather, they manage cash earned overseas. If that cash were to be
repatriated to the US, it would be subject to US taxes.
Like other multinationals, Apple chooses to keep cash overseas so as not to
pay the 35 per cent US corporate tax rate. Apple is holding $102bn of its
total $145bn in cash overseas.
Mr Cook reaffirmed Apple’s position that given current US tax rates, it has no
intention of repatriating its overseas profits to the US.
Senator Carl Levin, a Michigan Democrat and the panel’s chairman, said Apple’s
use of loopholes in the US tax code is unique among multinational
Apple uses five companies located in Ireland to carry out its tax strategy,
according to the report.
The companies are located at the same address in Cork, Ireland, and they share
members of their boards of directors.
While all five companies were incorporated in Ireland, only two of them also
have tax residency in that country.
That means the other three are not legally required to pay taxes in Ireland
because they are not managed or controlled in that country, in Apple’s view.
The report says Apple capitalises on a difference between US and Irish rules
regarding tax residency.
In Ireland, a company must be managed and controlled in the country to be a
Under US law, a company is a tax resident of the country in which it was
established. Therefore, the Apple companies are not tax residents of Ireland
nor of the US, since they were not incorporated in the US, in Apple’s view.
The spotlight on Apple’s tax strategy comes at a time of fevered debate in
Washington over whether and how to raise revenues to help reduce the federal