Apple has called for US corporate tax rates to be slashed after it admitted sheltering at least $30bn (£20bn) of international profits in Irish subsidiaries that pay no tax at all.
In a dramatic display of how threats from multinational corporations are driving down taxes across the world, chief executive Tim Cook warned Congress that he would refuse to repatriate a total of $100bn stashed offshore unless it acted to slash the 35% US rate.
So let's look at this kindly. Apple is saying what it wants as a reward for its tax abuse is a tax cut.
And now let's look at this candidly: Apple's willing to hold the US to ransom.
What did Margaret Hodge say about Google?
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
$900m tax paid on all overseas profits. Overseas profits account for 60% of total profits, so about $25bn.
So less than 4% effective tax rate.
It seems like they’re comparative Boy Scouts within the US compared to the globe-trotting tax dodging adventures.
What are you referring to?
Apple were brought to the hearing to account for their US-based operations, but actually their domestic activity seems to be fairly in order, paying about 30% effective tax on profits, and no implication (disclaimer: that I’ve seen) that they’ve profit shifted overseas. There’s a repatriation issue that’s causing money to sit relatively unused in a pile, but the US should be able to deal with that on it’s own as it’s a fairly unique feature of their tax law.
However, when you look at their activity outside the US it’s a totally different story. In its efforts to get to the bottom of the profit repatriation problem the US has with Apple the committee has exposed the system Apple uses to pay a less than 4% effectvie corporation tax on all profits earned overseas, which are being funnelled mainly to Ireland. A enlightening, if fawning, article is up at Business Insider: http://www.businessinsider.com/how-apple-reduces-what-it-pays-in-taxes-2013-5
The repatriation issue may prove to be a small catch (though still very relevant to the US) compared to the scale of the transfer pricing issue that Apple are exploiting between China, Ireland and Europe. Ireland, AOI and ASI are the biggest story here, and it’s amazing (and horrifying) what Apple have been able to do there.
That’s my take anyway, the repatriation issue has been swinging about for years and was well known about already.
Hundreds of thousands of SMEs evade the obligation to pay each year, altogether . Fact
I’m slightly optimistic after the Apple revelations. It’s possible that we might look back on this moment as the point when reform of the OECD framework for tax residence became inevitable.
The current treaty system for determining where an entity should be taxed has been exposed as totally inadequate for dealing with modern multinational groups. That’s not a bad thing eh?
If OECD reform follows
@ Alex: You are totally wrong that the OECD sets the rules for tax residence and you are not the only person who makes this fundamental error.
Tax residence is set solely by domestic law not by the OECD, this should be pretty clear from a cursory glance at Art 4.
Art 4 determines the residence of a person for the purposes of a double tax treaty and doesn’t directly affect the domestic law status of that person.
It is a fundamental principle of the OECD Model Convention that a person may only be resident in one of the contracting states for the purposes of a treaty. Art 4 does no more than allocate a person to one or the other of the parties to a tax treaty.
The fact that certain countries, including UK for companies, provide in their domestic law that where a person is not a resident for tax treaty purposes, then that person will be regarded as non resident for domestic purposes, has nothing to do with the OECD.
Agreed