Apple Inc. is suspected of using loopholes in the U.S. tax code to evade billions of dollars in taxes. A Senate panel believes the company used overseas accounts to stash their profits abroad to avoid paying taxes in the U.S. A detailed report by the Senate Permanent Subcommittee on Investigations, released on Monday, accuses the company of the evasion malpractices.
Apple’s argument against the accusations is that the U.S. has a high tax rate to which the company complies with, as well as providing employment to thousands of Americans. Therefore, it should not be forced to shift their profits made abroad to the U.S. to fulfill tax duties.
The Senate Permanent Subcommittee on Investigations reports that Apple is holding $102 billion of its $145 billion in cash overseas. However, Apple’s tax strategies are legal. The company used unclear rules within the tax code to minimize their tax liability. Lawmakers understand that many multi-national companies use such tactics to minimize their tax liability.
Apple CEO Tim Cook is expected to explain the company’s tax strategy to the Senate Permanent Subcommittee on Investigations. In a time when the government is taking aggressive steps to limit tax evasion conducted through stashing money in overseas bank accounts, tax evasion by large multi-national corporations is also under the scanner. Clamping down on tax fraud will also be beneficial in increasing revenue.
Republicans in Congress have a different solution. They want to reduce the 35 percent corporate tax rate to encourage investment at home, which they also suggest would bring down other offshore tax scams.
Apple is not alone. The Senate Permanent Subcommittee on Investigations has also examined the tax strategies of Microsoft and Hewlett-Packard, among others. The subcommittee has found many top companies avoiding billions in taxes by shifting profits overseas and exploiting loopholes in the tax code.