Senate Fire: Apple’s Tax Trickery Includes Ghost Firms

The Senate’s Permanent Subcommittee on Investigations came down hard on Apple (NASDAQ:AAPL) during a hearing in Washington, accusing the iPhone maker of avoiding U.S. tax payments through a loophole allowing them to keep money and intellectual property rights offshore.

Is Apple now a once-in-a-decade buying opportunity? Click here to get your 24-page Ultimate Cheat Sheet to Apple’s Stock now!

Senator Carl Levin (D-Mich.), who heads the Subcommittee, accused Apple of purposefully using tax loopholes to avoid paying U.S. taxes. Levin pointed to Apple’s offshore affiliates including Apple Operations International, which he referred to as “ghost companies” that, through a loophole “for tax purposes, exist nowhere.” Levin also said that Apple uses, “offshore tax strategies whose purpose is tax avoidance, pure and simple.”

Senator John McCain of Arizona, the panel’s top Republican, backed up Levin’s claims. He said that in the last four years Apple has avoided paying taxes on $44 billion in income and he called the company, “one of the biggest tax avoiders in America.”

However, some lawmakers have come to Apple’s defense. Senator Rand Paul (R-Kent.) said the company was dealing with an “awful” tax code. Paul had strong words for the committee, saying “I’m offended by a $4 trillion government bullying, berating, and badgering one of America’s greatest success stories.” Apple Chief Executive Officer Tim Cook himself pointed to outdated tax policies and called for change in tax law in the face of a new global economy in a statement released by Apple on Monday.

NEW! Discover a new stock idea each week for less than the cost of 1 trade. CLICK HERE for your Weekly Stock Cheat Sheets NOW!

Apple claims that its foreign subsidiaries like Apple Operations International are completely legal operations that help fund research and development of Apple’s products, which in turn brings more money and higher-paying jobs to the U.S. Cook pointed out that Apple is one of the U.S.’s biggest taxpayers, and they expect to pay $7 billion in 2013.

Levin responded to Apple’s defense, saying, “Apple executives want the public to focus on the U.S. taxes the company has paid, but the real issue is the billions in taxes it has not paid.”

Don’t Miss: Is Apple Still the World’s Most Valuable Brand?