Apple, Congress in tax row

A memorandum by the Senate released a day before Tuesday's congressional hearing identified three Apple subsidiaries having no tax residency in Ireland where they were incorporated or in the US where company executives managed those firms.

It said the main subsidiary, which was a holding company including Apple's retail stores across Europe, had not paid any corporate tax in the past five years.

The Senate added Apple had exploited weaknesses in the current tax system and had not broken any laws and had fully cooperated with the investigation. "Apple has exploited a difference between Irish and US tax residency rules," the report said.

Tax reform needed

Corporations must pay the top 35-percent corporate taxes on foreign profits, but not until those earnings are brought into the US from abroad. The exception is known as corporate offshore income deferral.

Tuesday's hearing is to shed more light on the weaknesses of the US corporate tax code and comes at a time as lawmakers across the globe are closely scrutinizing the taxes paid or not paid by multinational companies.

Apple said any tax reform should favor lower corporate income tax rates regardless of revenue, eliminate tax expenditures and implement a "reasonable tax on foreign earnings that allows free movement of capital back to the US."

Ireland said Tuesday it was not to blame for the low rate of tax paid by Apple's subsidiaries. "Those taxes are not issues that arise from the Irish taxation system," Irish Deputy Prime Minister Eamon Gilmore told national broadcaster RTE.

hg/hc (AP, Reuters, dpa)