Angry and bruised Apple dismisses allegations in Paradise Papers and says it pays all its taxes globally.
Apple has lashed out at allegations in the Paradise Papers that indicate it used offshore accounts to reduce its tax bill, claiming it pays every cent of tax it owes in every country around the world, including Ireland.
Among the allegations are claims that Apple sought to shift money from Ireland to a new tax haven in Jersey to avoid paying billions in taxes.
‘No operations or investments were moved from Ireland’
The Paradise Papers, a trove of documents unearthed by the International Consortium of Investigative Journalists (ICIJ) involving hundreds of journalists around the world, claim to reveal the extent of alleged money shifting by the ultra-rich, enabling them to pay little or no tax, leaving the burden for societal upkeep to ordinary working people.
However, tech giant Apple, which has already locked horns with the European Commission (EC) over an alleged unpaid €13bn tax bill, has bridled at allegations that it engaged in the activities outlined in the Paradise Papers.
Both Apple and the Irish Government are currently appealing the EC’s judgement in Europe’s highest courts.
According to the revelations in the Paradise Papers, the tech giant allegedly chose Jersey in the Channel Islands as a new haven to avoid paying taxes following the crackdown on the so-called ‘double Irish’ tax loophole in Ireland. The papers claim that this practice enabled it to allegedly pay less than 5pc corporate tax compared with the standard 12.5pc Irish rate and the 35pc US rate. After the 2013 EU judgement, the Irish Government closed the loophole.
Following this, according to the BBC, Apple is alleged to have sought guidance from Appleby, the legal firm at the centre of the Paradise Papers scandal, on which Channel Islands jurisdiction would best suit. Jersey, which has a zero percent corporate tax rate, was allegedly chosen.
The documents allege that two Apple subsidiaries – Apple Operations International, which holds most of Apple’s $252bn overseas war chest, and Apple Sales International – were managed in Jersey between 2015 and 2016.
Apple says it pays its taxes worldwide in full
Apple has angrily dismissed the allegations.
“Apple believes every company has a responsibility to pay its taxes and, as the largest taxpayer in the world, Apple pays every dollar it owes in every country around the world,” it said in a statement. “We’re proud of the economic contributions we make to the countries and communities where we do business.”
‘When Ireland changed its tax laws in 2015, Apple made changes to its corporate structure to comply. Since then, all of Apple’s Irish operations have been conducted through Irish resident companies. Apple pays tax at Ireland’s statutory 12.5pc’
The California tech company labelled the claims by the ICIJ as inaccurate.
“The changes Apple made to its corporate structure in 2015 were specially designed to preserve its tax payments to the United States, not to reduce its taxes anywhere else. No operations or investments were moved from Ireland.
“Far from being ‘untouched by the United States,’ Apple pays billions of dollars in taxes to the US at the statutory 35pc rate on investment income from its overseas cash.
“Apple’s effective tax rate on foreign earnings is 21pc – a figure easily calculated from public filings. This rate has been consistent for many years.”
Before the Paradise Papers became public, Apple said it had already responded to queries from the ICIJ and The New York Times.
It said it provided the following statement: “The debate over Apple’s taxes is not about how much we owe, but where we owe it. As the largest taxpayer in the world, we’ve paid over $35bn in corporate income taxes over the past three years, plus billions of dollars more in property tax, payroll tax, sales tax and VAT. We believe every company has a responsibility to pay the taxes they owe and we’re proud of the economic contributions we make to the countries and communities where we do business.
“Under the current international tax system, profits are taxed based on where the value is created. The taxes Apple pays to countries around the world are based on that principle. The vast majority of the value in our products is indisputably created in the United States — where we do our design, development, engineering work and much more – so the majority of our taxes are owed to the US.
“When Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the United States. The changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and, over the last three years, we’ve paid $1.5bn in tax there – 7pc of all corporate income taxes paid in that country. Our changes also ensured that our tax obligation to the United States was not reduced.
“We understand that some would like to change the tax system so multinationals’ taxes are spread differently across the countries where they operate, and we know that reasonable people can have different views about how this should work in the future. At Apple, we follow the laws and if the system changes, we will comply. We strongly support efforts from the global community toward comprehensive international tax reform and a far simpler system, and we will continue to advocate for that.”
More taxes than other US multinationals
The tech giant reaffirmed that when an Apple product is bought outside the US, the profit is first taxed in the country where it is sold and then Apple pays taxes in Ireland, where sales and distribution activity is executed by some of the 6,000 employees. Additional tax is also then due in the US when the earnings are repatriated.
The company said that its worldwide effective tax rate is 24.6pc, higher than average for US multinationals.
Apple said that it keeps cash overseas because that’s where it sells most of its products, and has earmarked $36bn to cover US deferred taxes as well as the $35bn it has paid in the last three years.
As well as the 6,000 employees in Cork, Apple estimates that its economy supports more than 1.5m jobs.
“When Ireland changed its tax laws in 2015, Apple made changes to its corporate structure to comply. Since then, all of Apple’s Irish operations have been conducted through Irish resident companies. Apple pays tax at Ireland’s statutory 12.5pc.
“As part of these changes, Apple’s subsidiary, which holds overseas cash, became resident in the UK Crown dependency of Jersey, specifically to ensure that tax obligations and payments to the US were not reduced. Since then, Apple has paid billions of dollars in US tax on the investment income of this subsidiary.
“There was no tax benefit for Apple from this change and, importantly, this did not reduce Apple’s tax payments or tax liability in any country.”
Updated, 9.13am, 7 November 2017: This article was updated to correct an erroneous reference to the Panama Papers.