How Apple avoided paying taxes on $44B of offshore income

An investigation by the U.S. Senate has turned up some creative maneuvers used by Apple to avoid paying taxes on $44 billion of international income over the past four years.

Yesterday, a bipartisan Senate subcommittee released a lengthy report detailing Apple’s tactics, which put the spotlight on Apple’s Irish subsidiaries, Apple Operations International and Apple Sales International. The report describes Ireland as a “tax haven” for Apple.

Even though billions of dollars flow through the Irish subsidiaries — in 2011, the subcommittee claims Apple held 64 percent of total income in Ireland — they apparently qualify as non-tax residents. Apple pays less then 2 percent of corporate sales tax for AOI and ASI in Ireland (far below the country’s typical 12 percent tax rate), and it hasn’t had to pay any taxes to the U.S.

Apple isn’t alone in how it manages it offshore finances, but just like the recent scathing New York Times report which detailed its other tax avoidance tactics, the subcommittee is using Apple to demonstrate the wider problem of elaborate international tax holdings. While the subcommittee doesn’t call Apple’s tactics illegal, it seems to be raising a moral argument about such extreme self-serving tax strategies.