US Congress excoriates Apple's tax-avoidance shenanigans

Cook to defend 'an American success story' – and billions in unpaid taxes – on Tuesday


A US Senate investigation has found that Apple avoided billions of dollars in taxes through a complex scheme of subsidiaries scattered around the globe, some with no employees and run by top execs back in its Cupertino headquarters.

"Apple wasn't satisfied with shifting its profits to a low-tax offshore tax haven," said Senator Carl Levin, The New York Times reports. "Apple sought the holy grail of tax avoidance. It has created offshore entities holding tens of billions of dollars while claiming to be tax resident nowhere."

Levin is a Democrat from Michigan, but the Apple excoriation was bipartisan. "Apple claims to be the largest US corporate taxpayer," said Arizona Republican John McCain, "but by sheer size and scale, it is also among America's largest tax avoiders."

McCain also said that Apple is "purposefully depriving the American people of revenue" by using a "byzantine" tax structure, according to ABC News.

According to the NYT, in 2011 one of Apple's subsidiaries, located in Ireland, paid a mere 0.05 per cent in tax on $22bn in revenues. Another subsidiary did not even file tax returns – anywhere. The NYT reports that group "paid almost nothing on $30 billion in profits since 2009."

Also according to the NYT, the investigators from the rather ominously named Senate Permanent Subcommittee on Investigations, which Levin chairs, say that Apple's tax strategy moved "at least $74 billion" out of the reach of the IRS between 2009 and 2012.

Apple's cash reserves stood at over $145bn as of its last financial report, about $100bn of which is held offshore.

The investigators' findings come one day before Apple CEO Tim Cook is scheduled to appear at a hearing of the Subcommittee, and on Monday Apple released the text of the statement he will deliver at that hearing. Needless to say, Apple defines its tax activities in terms somewhat less harsh than do Levin and McCain.

"Apple ... employs tens of thousands of Americans, creates revolutionary products that improve the lives of tens of millions of Americans, and pays billions of dollars annually to the US Treasury in corporate income and payroll taxes," Cook will tell his inquisitors.

"Apple complies fully with both the laws and spirit of the laws," the statement reads. "And Apple pays all its required taxes, both in this country and abroad."

That statement goes on to describe Apple as a "powerful engine of job creation in the US," one that "pays an extraordinary amount in US taxes," "does not use tax gimmicks," and is "an American success story."

Concerning the Irish question specifically, the statement says, "Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US to avoid US tax, nor does it use revolving loans from [Controlled Foreign Corporations] to fund its domestic operations."

So what's the problem, then? We'll learn more at Tuesday's hearing, most likely, after Monday's traditional "Let's fight it out in the press first" dueling press releases, statements, and leaks.

But one thing is certain through all this back-and-forth: the US corporate tax code – hell, the entire US tax code – is broken. Riddled with loopholes, obfuscated in thousands of pages of legalese, and larded with well-paid-for special-interest exemptions, the tax-law morass makes the Augean stables – the clean-up of which having been Hercules' fifth labor – look as immaculate as a surgically sterilized operating room.

In fact, this entire corporate-tax dust-up – about which Google Eric Schmidt has also weighed in – is a prelude to the real battle: modifying the tax code to make it more business-friendly – or, as Cook will tell the Subcommittee on Tuesday, "to dramatically [simplify] the US corporate tax system."

To that end, Cook will tell the hearing that a new tax code should:

• Be revenue neutral;
• Eliminate all corporate tax expenditures;
• Lower corporate income tax rates; and
• Implement a reasonable tax on foreign earnings that allows free movement of capital back to the US.

Referring to Apple's use of "stateless" subsidiaries to avoid US taxes, one tax-law expert told the NYT, "There is a technical term economists like to use for behavior like this. Unbelievable chutzpah." ®

Similar topics


Other stories you might like

  • NASA's InSight doomed as Mars dust coats solar panels
    The little lander that couldn't (any longer)

    The Martian InSight lander will no longer be able to function within months as dust continues to pile up on its solar panels, starving it of energy, NASA reported on Tuesday.

    Launched from Earth in 2018, the six-metre-wide machine's mission was sent to study the Red Planet below its surface. InSight is armed with a range of instruments, including a robotic arm, seismometer, and a soil temperature sensor. Astronomers figured the data would help them understand how the rocky cores of planets in the Solar System formed and evolved over time.

    "InSight has transformed our understanding of the interiors of rocky planets and set the stage for future missions," Lori Glaze, director of NASA's Planetary Science Division, said in a statement. "We can apply what we've learned about Mars' inner structure to Earth, the Moon, Venus, and even rocky planets in other solar systems."

    Continue reading
  • The ‘substantial contributions’ Intel has promised to boost RISC-V adoption
    With the benefit of maybe revitalizing the x86 giant’s foundry business

    Analysis Here's something that would have seemed outlandish only a few years ago: to help fuel Intel's future growth, the x86 giant has vowed to do what it can to make the open-source RISC-V ISA worthy of widespread adoption.

    In a presentation, an Intel representative shared some details of how the chipmaker plans to contribute to RISC-V as part of its bet that the instruction set architecture will fuel growth for its revitalized contract chip manufacturing business.

    While Intel invested in RISC-V chip designer SiFive in 2018, the semiconductor titan's intentions with RISC-V evolved last year when it revealed that the contract manufacturing business key to its comeback, Intel Foundry Services, would be willing to make chips compatible with x86, Arm, and RISC-V ISAs. The chipmaker then announced in February it joined RISC-V International, the ISA's governing body, and launched a $1 billion innovation fund that will support chip designers, including those making RISC-V components.

    Continue reading
  • FBI warns of North Korean cyberspies posing as foreign IT workers
    Looking for tech talent? Kim Jong-un's friendly freelancers, at your service

    Pay close attention to that resume before offering that work contract.

    The FBI, in a joint advisory with the US government Departments of State and Treasury, has warned that North Korea's cyberspies are posing as non-North-Korean IT workers to bag Western jobs to advance Kim Jong-un's nefarious pursuits.

    In guidance [PDF] issued this week, the Feds warned that these techies often use fake IDs and other documents to pose as non-North-Korean nationals to gain freelance employment in North America, Europe, and east Asia. Additionally, North Korean IT workers may accept foreign contracts and then outsource those projects to non-North-Korean folks.

    Continue reading
  • Google opens the pod doors on Bay View campus
    A futuristic design won't make people want to come back – just ask Apple

    After nearly a decade of planning and five years of construction, Google is cutting the ribbon on its Bay View campus, the first that Google itself designed.

    The Bay View campus in Mountain View – slated to open this week – consists of two office buildings (one of which, Charleston East, is still under construction), 20 acres of open space, a 1,000-person event center and 240 short-term accommodations for Google employees. The search giant said the buildings at Bay View total 1.1 million square feet. For reference, that's less than half the size of Apple's spaceship. 

    The roofs on the two main buildings, which look like pavilions roofed in sails, were designed that way for a purpose: They're a network of 90,000 scale-like solar panels nicknamed "dragonscales" for their layout and shimmer. By scaling the tiles, Google said the design minimises damage from wind, rain and snow, and the sloped pavilion-like roof improves solar capture by adding additional curves in the roof. 

    Continue reading
  • Pentester pops open Tesla Model 3 using low-cost Bluetooth module
    Anything that uses proximity-based BLE is vulnerable, claim researchers

    Tesla Model 3 and Y owners, beware: the passive entry feature on your vehicle could potentially be hoodwinked by a relay attack, leading to the theft of the flash motor.

    Discovered and demonstrated by researchers at NCC Group, the technique involves relaying the Bluetooth Low Energy (BLE) signals from a smartphone that has been paired with a Tesla back to the vehicle. Far from simply unlocking the door, this hack lets a miscreant start the car and drive away, too.

    Essentially, what happens is this: the paired smartphone should be physically close by the Tesla to unlock it. NCC's technique involves one gadget near the paired phone, and another gadget near the car. The phone-side gadget relays signals from the phone to the car-side gadget, which forwards them to the vehicle to unlock and start it. This shouldn't normally happen because the phone and car are so far apart. The car has a defense mechanism – based on measuring transmission latency to detect that a paired device is too far away – that ideally prevents relayed signals from working, though this can be defeated by simply cutting the latency of the relay process.

    Continue reading
  • Google assuring open-source code to secure software supply chains
    Java and Python packages are the first on the list

    Google has a plan — and a new product plus a partnership with developer-focused security shop Snyk — that attempts to make it easier for enterprises to secure their open source software dependencies.

    The new service, announced today at the Google Cloud Security Summit, is called Assured Open Source Software. We're told it will initially focus on some Java and Python packages that Google's own developers prioritize in their workflows. 

    These two programming languages have "particularly high-risk profiles," Google Cloud Cloud VP and GM Sunil Potti said in response to The Register's questions. "Remember Log4j?" Yes, quite vividly.

    Continue reading
  • Rocket Lab is taking NASA's CAPSTONE to the Moon
    Mission to lunar orbit is further than any Photon satellite bus has gone before

    Rocket Lab has taken delivery of NASA's CAPSTONE spacecraft at its New Zealand launch pad ahead of a mission to the Moon.

    It's been quite a journey for CAPSTONE [Cislunar Autonomous Positioning System Technology Operations and Navigation Experiment], which was originally supposed to launch from Rocket Lab's US launchpad at Wallops Island in Virginia.

    The pad, Launch Complex 2, has been completed for a while now. However, delays in certifying Rocket Lab's Autonomous Flight Termination System (AFTS) pushed the move to Launch Complex 1 in Mahia, New Zealand.

    Continue reading
  • Alibaba Cloud adds third datacenter in Germany
    More Euro-presence than any other Chinese company, but still nowhere near Google or AWS

    Alibaba has pulled ahead of its Chinese rivals in Europe with the opening of a third datacenter in Germany.

    The company said the Frankfurt datacenter serves cloud computing products to Europe and "adheres to the highest security standards and the strict compliance regulations set out in the Cloud Computing Compliance Controls Catalog (C5) in Germany."

    The addition brings Alibaba Cloud to a network of 84 availability zones in 27 regions worldwide. The company's first European cloud center arrived in Frankfurt in 2016.

    Continue reading

Biting the hand that feeds IT © 1998–2022