Apple CEO faces US Senate panel over tax avoidance charges

Apple Inc tried to find the ''Holy Grail of tax avoidance'', a US Senate committee claimed on Monday, as chief executive Tim Cook is scheduled to appear before the committee today to answer questions on the company's offshore businesses.

Even as Apple became the nation's most profitable technology company, it avoided billions in taxes in the United States and around the world through a web of subsidiaries so complex it spanned continents and went beyond anything most experts had ever seen, Congressional investigators disclosed.

The development comes even as other American multinational giants like Google, Amazon and Starbucks are under investigation by UK parliamentarians for tax avoidance in that country.

A common thread is the use of Ireland as something of a tax haven. The US Senate committee on Monday argued that Apple's complex structure includes three Irish-based subsidiaries that appear not be a tax resident anywhere in the world.

According to the committee, one of those Irish affiliates, Apple Sales International, reported pre-tax profits of $22 billion in 2011 but paid just $10 million in tax, a rate of 0.05 per cent.

''Apple wasn't satisfied with shifting its profits to a low-tax offshore tax haven,'' said senator Carl Levin, the subcommittee's Democratic chairman. ''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.

''We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed.''

Senator John McCain echoed that view, attacking Apple's ''highly questionable tax strategies''.

Cook released a statement on Monday defending his company's actions.

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

Earlier he told the Washington Post, ''If you look at it today, to repatriate cash to the US, you need to pay 35 per cent of that cash. And that is a very high number. We are not proposing that it be zero. I know many of our peers believe that … but I think it has to be reasonable.''

The iPhone-maker has $102.3 billion in cash outside the US. To pay a dividend, Apple is borrowing $17 billion at home rather than risk huge tax bills, which could be up to $9 billion, by bringing its foreign money into the US.

Congressional investigators found that some of Apple's subsidiaries had no employees and were largely run by top officials from the company's headquarters in Cupertino, California. But by officially locating them in places like Ireland, Apple was able in effect to make them stateless - exempt from taxes, record-keeping laws and the need for the subsidiaries to even file tax returns anywhere in the world.

Overall, Apple's tax avoidance efforts shifted at least $74 billion from the reach of the Internal Revenue Service between 2009 and 2012, the investigators said. That cash remains offshore, but Apple, which paid more than $6 billion in taxes in the United States last year on its American operations, could still have to pay federal taxes on it if the company were to return the money to its coffers in the United States.