Executives from Apple were called before the U.S. Senate Permanent Subcommittee on Investigations on Tuesday to respond to accusations of elaborate tax avoidance practices through a trio of subsidiaries based in Ireland. Apple Chief Executive Tim Cook told the committee that he was there of his own free will, compelled to appear because he wanted to personally give his side of the story.
Apple's headquarters in Cork, Ireland, via Flickr user Sigalakos.
Though some such as U.S. Sen. Carl Levin (D-Mich.) portrayed Apple's tax strategy as "unique," at least in scope, the tax shelter practice known by attorneys as the "Double Irish" is also utilized by tech companies Google and Yahoo.
Google has moved foreign profits through Ireland and the Netherlands, allowing to avoid about $2 billion in income taxes a year, according to Bloomberg. But unlike Apple, which manages its Irish subsidiary in the U.S., Google goes one step further and manages its Irish branch through Bermuda ? a British territory that has no corporate income tax.
Yahoo, too, is said to deposit its profits in an Irish subsidiary. Like Apple, Yahoo says its Irish arm is not a tax resident to avoid corporate income taxes. But Yahoo also employs a strategy similar to Google and claims its tax residency offshore, in the Cayman Islands.
Unlike Google or Yahoo, Apple does not hold money on a Caribbean Island or have a bank account in the Cayman Islands.
Apple executives made it a point to differentiate themselves from those types of strategies in their official testimony this week. Specifically, the company noted it does not hold money on a Caribbean island, or have a bank account in the Cayman Islands.
With Tuesday's hearing, the U.S. Senate subcommittee took issue with current incompatibilities between U.S. and Irish tax laws. In Ireland, only companies that are managed and controlled in Ireland are considered tax residents. And in the U.S., tax laws are based on where a company is incorporated, rather than where it is managed and controlled.
Companies like Apple, Google and Yahoo have incorporated their subsidiaries in Ireland and managed those operations elsewhere to avoid corporate income taxes. But while Google and Yahoo manage their Irish subsidiaries overseas, Apple has instead controlled its operations from the company's corporate headquarters in Cupertino, Calif.
Wednesday's report from Bloomberg also noted that Yahoo has funneled hundreds of millions of dollars in profits through a Dutch bookkeeper's suburban home office. That money is then passed on to subsidiaries located in Mauritius and Switzerland.
Apple and Google, along with Amazon, were also faced with tax scrutiny in a report from the U.K. last year, which noted numerous companies take advantage of low tax rates in Ireland. A government investigation found that Amazon did not pay any British corporation tax in 2010 or 2011 by switching its European headquarters to Luxembourg.