APPLE Inc used "loopholes" to avoid paying US$9 billion in US taxes in 2012, US Senator Carl Levin said yesterday at a hearing that brought the company's Chief Executive Officer Tim Cook to Washington to defend the strategies.

"Apple executives want the public to focus on the US taxes the company has paid, but the real issue is the billions in taxes it has not paid," said Levin, a Michigan Democrat. Apple employs "offshore tax strategies whose purpose is tax avoidance, pure and simple," he said.

Yesterday's hearing was called to air accusations the iPhone manufacturer has created a web of offshore entities to avoid paying billions of dollars in US taxes.

Apple, in written testimony, denied any wrongdoing and said the company was one of the largest taxpayers in the US, having paid US$6 billion last year.

Cook and two other executives - including Chief Financial Officer Peter Oppenheimer - appeared before the Permanent Subcommittee on Investigations. The panel, led by Levin, in a report on Monday said Apple's subsidiaries include three entities that have no home country for tax purposes.

In the last four years, Apple has avoided paying taxes on US$44 billion in income, said Senator John McCain of Arizona, the panel's top Republican. He called the company "one of the biggest tax avoiders in America."

Three entities set up in Ireland hold 60 percent of Apple's profits and claim to be tax residents "nowhere in the world," McCain said. "It's completely outrageous."

Not all lawmakers supported summoning Apple executives to the hearing. Senator Rand Paul, a Kentucky Republican, said Apple was dealing with an "awful" tax code.

"I'm offended by the tone and tenor of this hearing," Paul said. "I'm offended by a US$4 trillion government bullying, berating and badgering one of America's greatest success stories."

"I'm offended by the spectacle of dragging in executives from a company that is not doing anything illegal," Paul said. "If anyone should be on trial here it should be Congress. I frankly think the committee should apologize to Apple."

Apple's cash is largely held in US banks in dollar-denominated assets, segregated into a portion that can be used for domestic operations and a portion that can be used only for international investments, the company said. The company doesn't use foreign subsidiaries or gimmicks to avoid US taxes, the testimony said.

The company also said the Irish subsidiaries, which are cost-sharing arrangements, have helped fund Apple's research and development activities and taken on risks, leading to bigger profits and higher-paying jobs in the US.

Apple also said it supports a broader overhaul of the US tax system.