Another way Apple beats Microsoft -- in sketchy tax dodges

When it comes to paying taxes, Apple certainly thinks different, using sketchy tax dodges and phantom offshore companies to avoid paying tens of billions of dollars in U.S. taxes, says the U.S. senate. Competitors like Microsoft have used similar tactics, but not nearly to the extent that does Apple. This is one more example of the way that Apple polishes a shiny public image, but acts in private in a less-than-stellar manner.

A senate report by the investigations subcommittee of the Senate Homeland Security and Governmental Affairs Committee says that Apple has set up a "complex web" of offshore companies in order to avoid paying billions of dollars in U.S. taxes.

The committee charges that Apple used loopholes in tax laws to create offshore companies in Ireland that can sidestep paying taxes in both countries. The company then shifts billions of dollars to those phantom companies. In doing so, it has avoided paying tens of billions of dollars in taxes, says the committee.

Michigan Senator Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations, is holiding a hearing today on the way that Apple uses those tax havens. He said of Apple's tactics:

"Apple wasn't satisfied with shifting its profits to a low-tax offshore tax haven. 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."

Apple isn't the only technology company to resort to these kinds of tax dodges. Google and Microsoft indulge in similar behavior. Google, for example, avoided paying $2 billion in taxes in 2011 by moving $9.8 billion in revenues into a Bermuda shell company, Bloomberg reported back in December. And a the Senate committee chaired by Levin said back in September that Microsoft avoided paying at least $6.5 billion in taxes using offshore tax dodges.

But Apple has taken the practice to new heights, avoiding paying tens of billions of dollars, according to the senate committee. According to the New York Times, Edward Kleinbard, a law professor at the University of Southern California in Los Angeles and a former staff director at the Congressional Joint Committee on Taxation, described Apple's moves this way:

"There is a technical term economists like to use for behavior like this: Unbelievable chutzpah."

This kind of behavior should surprise no one. Apple has long had two personalities. Its public one is that of a company that empowers individuality and creativity with its technology, freeing people to live more fulfilling lives. But its private one is much darker. Its famous "Think Different" campaign, for example, linked its products to freethinkers and rebels, including the Dalai Lama. Yet Apple has cooperated with the Chinese authoritarian government to ban people in China from downloading apps related to the Dalai Lama. The New York Times reported back in 2010:

Apple's iTunes service still forbids Chinese users from downloading certain applications that refer to the Dalai Lama and the Uighur activist Rebiya Kadeer.

And when Steve Jobs returned to Apple in 1997, he closed the company's philanthropic arm. (Under Tim Cook, it has since been reinstated.)

So don't be surprised by Apple's breathtaking chutzpah in avoiding paying taxes. The company is only continuing its long tradition of similar behavior.

Copyright © 2013 IDG Communications, Inc.

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