Paradise Papers: Apple’s Money Move 


 

Over the weekend what has been dubbed the “Paradise Papers” were released. The International Consortium of Investigative Journalists (ICIJ) and 95 of their media partners explored more than 13 million leaked files, making it a global instigation into the offshore activities of some of the world’s most influential companies and people; exposing a number of ways in which they have avoided paying tax using artificial structures.

Apple has found itself in the spotlight after the papers were released; revealing the company had moved the firm holding most of its untaxed offshore cash (~$250 billion) to a tiny island off the coast of France, Jersey, a known tax haven. The move in cash came after the US and numerous European governments, in 2013, began to crack down on the tax strategy Apple has used since the 1980’s; that being the arrangement referred to as the “double Irish”, which took advantage of Ireland’s tax policies.

“U.S. multinational firms are the global grandmasters of tax avoidance schemes that deplete not just U.S. tax collection but the tax collection of most every large economy in the world,” former corporate lawyer, now a professor of tax law at the University of Southern California, Edward Kleinbard told the ICIJ.

“Double Irish” allowed Apple to funnel all its sales outside the US, making up about 55 percent of its revenue, through Irish subsidiaries that were effectively stateless for taxation purposes, incurring very little tax. Instead of paying the US corporate tax rate of 35 percent, or the Irish rate of 12.5 percent, Apple was often able to reduce its foreign tax payments on profits made outside the US to less than 5 percent. The European Commission managed to calculate the rate of tax for one of Apple’s Irish companies had been just 0.005 percent one year. According to the ICIJ, after Ireland’s tax laws begun to come under heavy scrutiny, Apple subsequently revamped its overseas subsidiaries to take advantage of the tax laws on the island of Jersey.

Apple released a statement addressing risen issues in which the company stated it had followed the law and its changes did not reduce their tax payments in any country.

“The debate over Apple’s taxes is not about how much we owe but where we owe it. 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,” Apple said.

The Paradise Papers are compiled of corporate records spanning decades from the global offshore law firm Appleby and corporate services provider Estera, which split from Appleby last year. Appleby has been around for more than 100 years, and according to the ICIJ the company has for many years helped their clients by setting up offshore entities, such as shell companies and trusts.

In a statement Appleby has said they are firm that nothing done was illegal.

“There is no wrongdoing. It is a patchwork quilt of unrelated allegations with a clear political agenda and movement against offshore,” the company said

Some US Senators accused Apple of exploiting the gap between the two nations’ tax laws; creating a “byzantine tax structure” that was inexcusable.

Republican senator John McCain said: “Apple claims to be the largest US corporate taxpayer, but by sheer size and scale it is also among America’s largest tax avoiders … [they] should not be shifting its profits overseas to avoid the payment of US tax, purposefully depriving the American people of revenue.”

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