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21 May, 2013 13:07

Apple accused of $74bn US tax evasion

Apple accused of $74bn US tax evasion

Apple, the US tech company is facing a government investigation after it was accused of evading billions of dollars in US taxes by using Ireland as a tax haven.

The investigation has uncovered a sophisticated scheme involving the creation of an international web of subsidiaries, reports the New York Times. 

The US Senate in a report blamed Ireland of being a tax haven for the computer maker. In particular the US government condemned Apple’s Irish tax arrangements, which in its view allow the company to lawfully avoid billions in US taxes.

Irish Deputy Prime Minister Eamon Gilmore said the issue with the two Irish subsidiaries allegedly helping Apple to avoid US taxes arose from other jurisdictions and not the Irish tax system, adding the Irish tax system is "very transparent".

The reports claim the computer maker has shielded around $74 billion in profits over the past four years from the US tax authorities through subsidiaries including two in Ireland. According to the Senate, Apple instead of taking a traditional path of opening accounts in offshore zones, created a chain of subsidiaries, which had no signs of physical presence. 

These companies officially registered in offshore zones like Ireland had no staff apart from top executives. Each of these companies being an offshore entity was free from taxes as well as the obligation to file tax returns.

"Apple wasn't satisfied with shifting its profits to a low-tax offshore tax haven. Apple successfully 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," said Senator Carl Levin, chairman of the US Senate Permanent Subcommittee on Investigations which is holding Apple's hearing.

Apple has so far denied claims of tax evasion in its testimony saying that the current legislation "has not kept pace with the advent of the digital age and the rapidly changing global economy." The tech giant argues that as 61 percent of the company's revenue last year came from international sales, foreign funds are needed for expansion, promotion and competition. 

The iPad and iPhone maker claims that the US system claims too much from the business – 35 percent of the income, hence the company has to keep much of its funds abroad. In 2012 Apple contributed nearly $6 billion in taxes to the US economy. 

Apple has become the latest target of the Senate committee led by Democrat Carl Levin and Republican John McCain on investigating tax avoidance by US multinational companies. 

Other global companies are also in tax avoidance disputes. Google, Starbucks and Amazon are among them, and they have also fallen under suspicion of the UK parliament, which is currently checking their tax integrity.