Apple's secret tax bolthole revealed
The world's most profitable firm has a secretive new structure that
would enable it to continue avoiding billions in taxes, the Paradise
Papers show.
They reveal how Apple sidestepped a 2013 crackdown on its
controversial Irish tax practices by actively shopping around for a tax
haven.
It then moved the firm holding most of its untaxed offshore cash, now $252bn, to the Channel Island of Jersey.
Apple said the new structure had not lowered its taxes.
It said it remained the world's largest taxpayer, paying about $35bn
(£26bn) in corporation tax over the past three years, that it had
followed the law and its changes "did not reduce our tax payments in any
country".
The Paradise Papers is the name for a huge leak of financial documents that is throwing light on the world of offshore finance.
Up until 2014, the tech company had been exploiting a loophole in tax
laws in the US and the Republic of Ireland known as the "double Irish".
This allowed Apple to funnel all its sales outside of the Americas -
currently about 55% of its revenue - through Irish subsidiaries that
were effectively stateless for taxation purposes, and so incurred hardly
any tax.
Instead of paying Irish corporation tax of 12.5%, or the US rate of
35%, Apple's avoidance structure helped it reduce its tax rate on
profits outside of the US to the extent that its foreign tax payments
rarely amounted to more than 5% of its foreign profits, and in some
years dipped below 2%.
The European Commission calculated the rate of tax for one of Apple's Irish companies for one year had been just 0.005%.
Apple came under pressure in 2013 in the US Senate, when CEO Tim Cook was forced to defend its tax system.
Angry that the US was missing out on a huge amount of tax,
then-Senator Carl Levin told him: "You shifted that golden goose to
Ireland. You shifted it to three companies that do not pay taxes in
Ireland.
These are the crown jewels of Apple Inc. Folks, it's not right."
These are the crown jewels of Apple Inc. Folks, it's not right."
Mr Cook responded defiantly: "We pay all the taxes we owe, every
single dollar. We do not depend on tax gimmicks... We do not stash money
on some Caribbean island."
After the EU announced in 2013 that it was investigating Apple's
Irish arrangement, the Irish government decided that firms incorporated
there could no longer be stateless for tax purposes.
In order to keep its tax rates low, Apple needed to find an offshore
financial centre that would serve as the tax residency for its Irish
subsidiaries.
In March 2014, Apple's legal advisers sent a questionnaire to
Appleby, a leading offshore finance law firm and source of much of the
Paradise Papers leak.
It asked what benefits different offshore jurisdictions - the British
Virgin Islands, Bermuda, the Cayman Islands, Mauritius, the Isle of
Man, Jersey and Guernsey - could offer Apple.
The document asked key questions such as was it possible to "obtain
an official assurance of tax exemption" and could it be confirmed that
an Irish company might "conduct management activities… without being
subject to taxation in your jurisdiction".
They also asked whether a change of government was likely, what
information would be visible to the public and how easy it would be to
exit the jurisdiction.
Leaked emails also make it clear that Apple wanted to keep the move secret.
One email sent between senior partners at Appleby says: "For those of
you who are not aware, Apple [officials] are extremely sensitive
concerning publicity. They also expect the work that is being done for
them only to be discussed amongst personnel who need to know."
Apple chose Jersey, a UK Crown dependency that makes its own tax laws
and which has a 0% corporate tax rate for foreign companies.
BBC
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