Apple Corp is joining Microsoft in re-registering its Irish subsidiaries as unlimited companies according to a report in the Irish Sunday Business Post online. The result is that the companies will not now have to put their accounts on public record. The consequence will be that no one will know how much profit Apple will launder through Ireland to exploit its low tax rates.
Apple has claimed that it reregistered in May ‚Äò‚Äòin the best interests of the company”. And this time there can be no doubt that the key executives in the company know exactly what is going on. It is reported that the meeting at which the decision to go unlimited was made was attended by Apple’s chief operating officer, Tim Cook, its chief financial officer, Peter Oppenheimer and its treasurer, Gary Wipfler.
Apple’s Irish subsidiaries had accumulated profits of $2.6 billion in 2004 when the last accounts were registered according to the Sunday Business Post. If these represent after tax profits then pre tax profits (assuming a 12.5% Irish tax rate) would have been $3 billion i.e. tax of about $400 million would have been paid in Ireland to that time. But if tax had been paid at the average cash paid tax rate Apple suffered in the years 2002, 2003 and 2004 (according to its US filed accounts) then the tax bill would have been charged at 39% - or $1.17 billion.
I think that rate might overstate things as Apple was not that profitable in 2002 and 2003. Let’s assume a more likely OECD average sort of rate of 30% - then the tax bill would have been $900 million on those accumulated earnings. That’s still a saving of $500 billion of tax by Apple.
Now, at September 2004 Apple was worth in total (per its accounts) just over $5 billion. 10% of that might have come from Irish tax savings. It's also worth noting that it's total retianed reserves were $2.67 billion - of which 97% were in Ireland according to the Sunday Business Post report.
Let’s also put this in another way. In 2004 Apple had pre tax profits of $383 million. And its profits in Ireland were $345 million. So 90% of Apple’s profits flow through Ireland.
Which as anyone can tell you is absurd. 90% of Apple’s added value does not take place in Ireland. So this is profit laundering on a grand scale to ensure that profits are relocated by what are without doubt entirely legal means to a place where they cannot be argued to be earned but where they can be booked at low tax rates.
This is not, in my opinion, corporate responsibility. It may be legal, but that's the only basis on which you can defend it. And in my book that's not the way to run a business.
And, this also shows yet again that the Celtic Tiger is a myth. Accounting tricks are not value added.