At long last Apple is receiving high profile attention for its tax avoidance, which is probably the biggest such activity in the world. As the FT reports this morning:
US congressional investigators on Monday accused Apple of avoiding paying billions in taxes around the world by exploiting loopholes and using Irish subsidiaries that are not tax residents of any country.
The Senate permanent subcommittee on investigations released a 40-page report on Apple's international tax structure ahead of a hearing that will shine a harsh political spotlight on the US technology group.
“Apple sought the Holy Grail of tax avoidance,” said Carl Levin, the Democrat who chairs the panel and will lead the hearing. “It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere.”
The accusation, almost inevitably, focuses on the use of an intermediary state for making sales - Ireland in this case - and the subsequent stockpiling of wholly unproductive cash in a tax haven. The sums involved are staggering: the company has more than $100 billion in tax havens in cash, in turn a part of $1.9 trillion stashed by US companies in this way.
Now this is, without doubt, incentivised by the US tax system which only taxes profits in the US when repatriated to that country, which then encouarges US companies to abuse the law in other states, hide cash in tax havens and bolster their balance sheets tax free with money for which they have no use, bar boosting executive share option based pay, which this process fuels towards the stratosphere (and which no doubt explains it, in large part since it clearly has little or no shareholder benefit as they can't access these funds).
What's Apple's solution? Tim Cook of Apples is apparently one of many CEOs lobbying for large US companies to be allowed to bring this cash back into the US tax free.
I sincerely hope the US resists that temptation. Rewarding the world's largest companies for their tax abuse, their use of tax havens, and their flagrant abuse of the law in many countries by seeking to avoid the tax they owe in those laces by the use of what are glaringly obviously tax driven and otherwise artificial commercial structures would be a reward to those seeking to undermine the rule of law, democracy and our way of life, as I have already argued this morning.
That's why the US has to also resist the pernicious calls to legitimise the unacceptable to advance the wealth of a few at cost to the world at large.
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I have just read Tim Cooks’s testimony to be given today. Interesting (unelievable?) points that Apple claim:
– Apple complies fully with both the laws and spirit of the laws.
– US effective tax rate in 2012 was 30.5%
– It is (likely )the largest US corporate tax payer
– It pays US tax on foreign investment earnings, including from Ireland.
– Foreign earnings are taxed in the country where they are earned.
– Apple does not use tax gimmicks
– It does not move intellectual property into tax havens.
– It does not have money in Caribbean tax havens.
– Since 1980, Apple Ireland pays a R&D support fee for international sales (it says to support R&D jobs in the US, instead of movingthem to a low cost jurisdiction!)
– The existence of Apple Ireland does not reduce US tax.
– Cash is kept offshore to support retail store expansion and investment in specialist tooling for suppliers
That is not possible if it achieves the rate it does
This is absolutely shocking, and executives and professionals should be arrested for this white collar crime.
Do you think the uk should do the same. Not sure if you saw worstalls blog where he got the tax rules badly wrong., but the uk allows uk companies to bring cash back from Ireland tax free…..
I oppose those rules
I’m sure what Apple are calling for has a name already…
Money laundering
Richard, the irony is that Apple probably pays the highest rate of corporate income tax in the US, much higher than in the UK. According to the reports: ‘Levin said the repercussions would be significant: “There are going to be some shockwaves, I believe, going through Europe when countries in Europe see Ireland not even implementing their own tax rate but working out a deal with Apple for a 2% rate instead of a 12% tax rate which Ireland is supposed to have.”’
Basically, for a fee Ireland is helping Apple to cheat the whole world, including the UK that helped to bail it out! Surely, we have to look more closely at Apple’s UK tax arrangements and how much the UK is cheated through the Irish ruling.
You have identified the key part of Apple’s defence, which is what they are doing results in more jobs in the US and more tax in time when profit are eventually repatriated. Apple has supposedly already provided for the tax payable when part of the foreign earnings are brought home (though not paid it as cash tax) which is why the effective rate looks high. Though I just checked and the statement says the 30.5% rate in FY2012 is cash tax paid.
How can one watch the Subcommittee’s hearing? It should be very illuminating even from a UK perspective.
It may be televised on the parliament tv site
Lies, damned lies and Apple’s testimony on tax?
Mr Murphy,
Over 50% of American households own stocks directly, and since $AAPL is one of the most widely held stock among retail investor, it is fair to assume that close to every other American owns some $AAPL.
Furthermore, 80% of Americans are members or beneficiaries of an occupational retirement savings scheme. Again, since $AAPL is the most widely held public stock among institutional investors, it is fair to assume that 4 in 5 Americans indirectly owns $AAPL.
Looking at the long term performance of $AAPL, the indisputable conclusion is that Apple has done more to secure the long-term welfare of Americans than any government ever has, or ever will.
That’s the bottom of it, and that is all that Americans and their elected representatives care about.
But as Peston pointed out today Apple’s behaviour is bizarre as it is impossible for shareholders to benefit from it in the long term
Why have a pension in an over inflated stock that can’t pay a return to the value it claims in its accounts?
Or is Apple conning them all?