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Apple says $6B U.S. tax payout for 2012 equals '1 out of every 40 dollars' collected from corporations

With a year-long congressional inquiry regarding the accounting strategies of several U.S. tech companies coming to an end, Apple on Thursday issued a statement saying it paid $6 billion in taxes for fiscal 2012, representing about 2.5 percent of all collected corporate taxes combined.

Senate Subcommittee Seal

Citing people familiar with the matter, The New York Times reported that the Senate Permanent Subcommittee on Investigations is wrapping up an investigation into a number of technology companies that use specialized accounting practices to avoid U.S. taxes, which are higher than those levied in many foreign countries.

According to the sources, Apple had become the focus of the inquiry as its accountants have managed to allocate some 70 percent of taxable income overseas despite running a base of operations in the U.S. The tactics used are completely legal, though head of the investigations committee Senator Carl Levin said off-shoring income and intellectual property is hurting the U.S. budget and ultimately average Americans.

“This subcommittee has demonstrated in hearings and comprehensive reports how various schemes have helped shift income to offshore tax havens and avoid U.S. taxes,” Senator Levin said at a hearing involving testimony from Microsoft and Hewlett-Packard. “The resulting loss of revenue is one significant cause of the budget deficit, and adds to the tax burden that ordinary Americans bear.”

Senator Carl Levin

Senator Carl Levin, Chairman of the Senate Permanent Subcommittee on Investigations.
Source: U.S. Homeland Security and Governmental Affairs

As for Apple, Senator Levin said the ongoing investigation revealed the company to have deferred taxes on over $35.4 billion between 2009 and 2011. The amounts Apple does pay, however, are not insubstantial as the U.S. government collected $3.3 billion in cash taxes from the company for the 2011 fiscal year.

In its statement on Thursday, Apple said it was "one of the top corporate income taxpayers in the country, if not the largest," and noted that it "conducted all of its business with the highest of ethical standards, complying with applicable laws and accounting rules.”

For the past fiscal year, Apple said it paid "an enormous amount of taxes" to local, state and federal governments. “In fiscal 2012 we paid $6 billion in federal corporate income taxes, which is 1 out of every 40 dollars in corporate income taxes collected by the U.S. government,” according to the statement.

Apple is known to be a trendsetter, and apparently this extends into corporate accounting as well. In the 1980s the company created a method that routed income through subsidiaries in Ireland, the Netherlands and the Caribbean called the "“Double Irish With a Dutch Sandwich.” The Times said that hundreds of corporations now use a variation of that tactic, or the exact method Apple uses, to reduce tax burdens.


Apple's European headquarters in Cork, Ireland.

In the U.S., Apple was accused of sidestepping billions of dollars in taxes by moving profit and investment operations to a headquarters in Nevada to effectively avoid California's 8.84 percent state tax.

Apple is reportedly cooperating with the senate subcommittee's investigation, which is expected to yield recommendations to Congress that may have an effect on future tax code discussions.