SEC clears Apple tax strategy, despite 'Holy Grail of tax avoidance' claim

SEC clears Apple tax strategy, despite 'Holy Grail of tax avoidance' claim

Summary: The technology giant brushed off claims it had the "Holy Grail of tax avoidance" by senior U.S. politicians. Now the U.S. Securities and Exchange Commission has the company's back.

Tim Cook testifies to the U.S. Senate (Image: via live stream)

The U.S. government has yet to find anything untoward about the state of Apple's tax affairs, four months after chief executive Tim Cook and other senior staff were grilled by a Senate subcommittee on the matter.

In a letter, dated September 5 and addressed to Apple chief financial officer Peter Oppenheimer, the U.S. Securities and Exchange Commission (SEC) said it completed its review of the company's latest filing (via AllThingsD), and would not be taking action at this time.

Over the past year, Apple and other technology companies have been under pressure from U.S., U.K., and European tax authorities over reports that they do not pay the full amount of tax in the jurisdictions they operate. 

As per SEC rules, Apple must disclose its finances, its taxes, and its tax arrangements quarterly and at other times with the U.S. government.

In May, Apple was singled out by the U.S. Senate Permanent Subcommittee on Investigations, in which Cook had to fend off some tough questioning from the panel of politicos.

Sen. Carl Levin (D-MI), the committee's chair, said Apple was "exploiting" a tax loophole in U.S. tax code. He claimed: "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."

While tax evasion is a federal crime in the U.S. and other jurisdictions, tax avoidance remains an unchecked loophole in many Western states.

Ahead of the questioning, Apple released a statement claiming it "does not use tax gimmicks." 

The iPhone and iPad maker took to multiple pages to trumpet its contribution to the U.S. economy, as well as others in which the company has major offices, such as in Ireland, in which it stated it paid close to $6 billion in taxes to the U.S. Treasury for the fiscal year of 2012.

The company generates close to two-thirds of its revenue from non-U.S. markets and keeps the vast majority of it in those markets for local investments. Cook said the cash would not be repatriated, citing the U.S.' tax rate of 35 percent on all incoming transfers.

In the September letter, the SEC has yet to find anything wrong with Apple's tax arrangements. But the ordeal isn't over for the company yet. Should the investigation take a broader swipe at the technology industry's tax arrangements — legal or otherwise — Washington could be in for a lengthy battle with Silicon Valley. 

Topic: Apple

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      • By the way, notice the language: "... the cash would not be repatriated..."

        Apple's abroad cash never had anything to do with USA's soil, so it can not be "repatriated". It could be "imported", if company will decide so.
        • Apple pays taxes from all of their money they earn in USA, they are the ...

          ... biggest corporate tax payer.

          Every penny that is supposed to be taxed is taxed. No movements of money to offshore tax heavens, not fake patent licensing deals (where companies move their patents abroad to and license them from themselves, inflating expenses and thus paying less taxes) -- NONE of that.

          The money that Apple earns abroad is different story; there is no law that would force any company to move their money from one country to another, so earnings abroad have nothing to do with taxes in USA until the company would want to import the profit to USA.

          Zack is originally from UK, where tabloid journalism was born. So it is not wonder that he has decided to include totally irrelevant quote about "grail" from clueless (which was obvious from the beginning) senator for the sake of click baiting. I am explaining, not really complaining, though, because media business is not in that great shape for media to being able to be classy.
  • Clearly we need to remove ...

    1. The Government.
    2. APPL and similar American IT corporations.
    3. Watchdogs.
    3. The legal profession.

    ... then we can really get started.
  • Just following others lead in taxes.

    Microsoft does it.
    Google does it.
    Cisco does it.

    The U.S. Government needs to change laws first so there are no legal loopholes.
    • Ain't gonna happen...

      This Congress can't even agree on laws to pass, let alone laws to change. One House is really big on law(s) it wants to repeal or defund, but that's another matter.

      In short, eliminating loopholes is as likely as the two major parties linking arms in Congress and singing Kumbaya in perfect harmony. I'm not holding my breath...
      • I agree

        so why complain about apple, or any company following the laws as written? I utilize every tax break (loophole) available to me as a middle class tax payer. Who doesn't?
        • Utilize?

          Sorry, I missed the memo that must have stated, "rather than utilizing use we will now utilize utilize.
  • Grandstanding

    Politicians will use newsworthy companies like Apple in order to advance their profile and their political careers. How can a politician combat tax attorneys, investors and accountants who work for big corporations like Apple and devote their entire careers to interpreting tax laws and saving the company money?

    Ultimately, it is easier to decipher the selfish motivations of a single grandstanding politician in these types of headlines.
    • It's really sad

      that when the politicians' grandstanding against newsworthy companies doesn't pan out, it doesn't end up backfiring and publicly making them look like fools. I wish it did.
      Jacob VanWagoner
  • Gordon is a Moron. Oh no, its David.

    Of course it is fine, they are thieving off those dickhead Brits.
    And politicans are turning a blind eye, but for what?

    Corrupt or a compete moron, you decide.
  • SEC clears Apple tax strategy

    One more example of why our government sucks!
    They do not even understand the millions of laws that they have put on the books for their WEALTHY lobbying friends. Then they spend millions of everyones dollars to question the laws they created, only to be WRONG! Hmm, we have tax lawyers the can read, and government that can't?
  • Unfair playing field!!

    See, this is why we have anti-trust laws! As opposed to the absolute witch hunt that was perpetrated upon Microsoft, with the purpose of inhibiting its valid use of resources, its competition successfully avoids paying its "fair share" and dues towards society. I'd like to point out that Microsoft, by contrast, pays thousands of dollars in taxes every year! Not only that, but it contributes heavily towards our politicians at every level of government. A model corporate citizen! One day, appreciation will be shown.
    • Huh?

      Did you read the article? Apple pays near six BILLION dollars a year in U.S. taxes alone.

      Of course they aren't paying U.S. taxes on money made in other countries, they pay taxes in those countries.
  • I Can't Wait

    For Sen. Carl Levin (D-MI) to apologize standing tall from his soapbox. That's about as likely as the liberal media printing a correction!
  • "Ain't Fair"

    Is in the eyes of the beholder. As yourself a simple question; is it fair to have adeduction for mortgage interest? For investment advice? A safe deposit box?

    I'll bet you all sad "of course".

    Tax strategies are the result of the government writing laws and doing a poor job or intentionlly allowing exceptions. The use of loopholes is NOT tax evasion but, avoidance that is a natural goal of any tapayer. Anyone denying it either is lying or certifiable.

    For multinationals it is very difficult to avoid making errors in tax compliance; navigagating the greatly different tax regimes around the world is all but impossible. Having done international planning and compliance or more thasn a decade I can attest to the fact.

    The US tax regime is one of the worst, most repressive and complex out there and most companies do whatever tey can to stay clear of them including some ery interesting ones that will not touch the shore in any tax manner. So, rather than blaming the companies following the law and then getting bashedby the very officials responsible for its creation, blame the oficials and the country for refusing to follow the OECD tax model that most counties do that when used reduces the chance for tax loopholes as ther laws are more in sync. Also, bring the US corporate rate down to a competitve level that will reduce the incentive to try to forum shop the taxes.

    Again, consider yourself. All other things equal (social, amenities, life, et.) if offered the same job either in California or say Washington Stage or New Hampshire, which would you choose? California has one of the highest income tax rates (up there with NY) while WA and NH have no income tax. Plusen NH has no sales tax. Think about the savings by moving to NH as well as the lower cost of living and that you can simply travel to Boston from tim to time. For say a $100,000 earner, that is about $10,000 more left in your pocket to invest in retirement, a BMW, ability to fund a charity,or otherwise.

    If it is not fair for cororations to minimize taxes, likewise it is unfair for individuals to try or to allow such a great % of the public who use the same services as us to not berequired to pay a fair share by exemption.
    • Is it fair?

      " is it fair to have adeduction for mortgage interest? For investment advice? A safe deposit box?

      I'll bet you all sad "of course"."

      I said "nope." It's not fair that one person chose to hold debt on a building intended for residence and gets a tax break for it, while another person decided it's not worth it and pays an equivalent amount of money in rent but does not get a tax break for it. Not to mention that the tax break is subsidizing the payment to a company that is already wealthy and has no need of the subsidy. As for everything else, similar reasoning goes into it. My choice to invest in the Bank of Sealy and Simmons shouldn't be penalized when someone else gets a tax break for their choice to take the risk of getting ripped off.

      "Tax strategies are the result of the government writing laws and doing a poor job or intentionlly allowing exceptions. The use of loopholes is NOT tax evasion but, avoidance that is a natural goal of any tapayer. Anyone denying it either is lying or certifiable."

      Exactly right. It's a great case for tax reform.
      Jacob VanWagoner
  • Corruption Get Expensive

    Washington needs more and more tax revenues to spend on GSA junkets, presidential golf trips and general walking around money for the beautiful people. Welcome to the Aristocracy.
    Paul LaFaver
  • I wish

    I wish we could all use Apple's "tax strategies" for ourselves. Until then, we the serfs and peasants must complain about the lack of justice and lament that we don't have the tools to get that justice.
    Jacob VanWagoner
  • "Offshore Profits" and no taxes

    Simple solution=repeal their patents. Pay no taxes? Get no patent protection. Simple. Evade your taxes, lose your property--and do hard prison time. Shareholders lose all.
    When domestic third party payment processing entities acting in the name of and on behalf of domestically run corporations deposit domestically produced and domestically consumed revenues in off-shore accounts in tax haven domains (none of which is auditable by the IRS as per neo-con laws thanks to the Reagan to Bush-era anti-regulation neo-conspirators) the only alternative is to crash their party--big time!

  • Apple is not really "cleared".

    Note: The SEC is not the one who makes decisions about what is a legal tax strategy. All it has the power to police is that Apple is correctly reporting what it is doing. It is up to the IRS to decide if they want to charge Apple with tax evasion. Of course, the IRS only judges if Apple follows the law, not if the law is unfairly biased to allow large corporations and the rich to avoid taxes.

    All those who seem comfortable with Apple's limited tax payments should remember that someone has to finance the government. When those with deep pockets like Apple find massive tax avoidance strategies, that means the rest of us have to pay more taxes to finance the government. Let's not forget that the US military protects Apple, the State Department negotiates with foreign governments to protect Apple's intellectual property. Wouldn't it be nice if Apple paid for that?