Apple reportedly diverted AUD$8.9bn in Australian sales income to Irish ‘tax haven’

6 Mar 20143 Shares

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Image via albund/Shutterstock

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An investigative report by the Australian Financial Review reveals how, over the course of a decade, Apple shifted almost AUD$9bn in untaxed profits from its Australian operations to Ireland-based Apple Sales International.

The ‘iTax’ report by Neil Chenoweth is based on 10 years worth of financial accounts for Apple Sales International, which hasn’t filed financial reports in Ireland since 2003 though it extracts the majority of Apple’s sales profits outside of the US, claiming this as payment for intellectual property and intangibles.

Australia’s Corporations Law required the company to file annual financial statements from 2000 until 2009 with the Australian Securities and Investments Commission, and this is reportedly the first time Apple revealed the Irish subsidiary’s earnings.

Shifting profits for preferable tax rates

According to the Australian Financial Review, Australians spent AUD$26.7bn on Apple products from 2002 to 2013, and operating costs in Australia were AUD$2.1bn. Apple is reported to have paid AUD$193m in tax to the Australian Tax Office during this period, while shifting AUD$8.9bn in income to Apple Sales International.

According to its accounts, Apple Sales International has earned more than US$100bn in profit over the past five years and has paid less than US$0.50 in tax for every US$1,000 of income.

Accounts from 2009 state that the company is not tax resident in any jurisdiction, but that the average tax rate for all jurisdictions in which it operates is about 4pc. However, though the company reported pre-tax earnings outside the US of US$4bn in 2009, just US$3.65m was paid in tax – significantly lower than the US$160m that would equate to 4pc.

Legal loopholes

Last summer, a 40-page memo from US senators Carl Levin and John McCain noted how the California-headquartered tech giant side-stepped paying billions in US income tax through a complex web of offshore entities, including its three subsidiaries in Ireland.

This report highlighted a loophole wherein Irish law requires no tax to be paid by these companies because they are managed and controlled from California, while the US requires no tax be paid because the companies are not legally registered there.

New laws enacted by the Irish Government moved to close this gap in legislation, but Apple is still permitted to choose where it is tax resident, such as Bermuda (where there is no corporate tax) or Singapore, where it also has a favourably low-tax deal in place.

Earlier this week, Apple’s chief financial officer Peter Oppenheimer – who is the likely architect of Apple’s canny tax strategy – will retire at the end of September. However, it is not expected that his successor Luca Maestri will make any changes to these processes.

Australian currency image by albund via Shutterstock

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Elaine Burke is managing editor of Siliconrepublic.com

editorial@siliconrepublic.com