Apple Defends Funnelling Money Into Jersey, Claims its Not Tax Avoidance

By Tom Pritchard on at

Apple was a big fan of Ireland, because Ireland let it get away with paying barely any tax. Then the EU found out and Apple got sent to the naughty step, even though its teams of lawyers are appealing to prove the naughty step is cruel and unjustified. Well the recently unveiled Paradise Papers revealed that it has another tax friend in the form of Jersey.

See back in 2015 Ireland actually changed its tax laws, though it gave companies with existing tax deals the option to maintain those deals until 2020. Leaked documents from offshore law firm Appleby (that name can not be coincidental) revealed that it was around this time Apple got in touch to see what other options were available. The firm then began processing a change in residency, moving Apple's Irish subsidiaries to the Channel island of Jersey. You know, the one with the cows and the potatoes.

This helped it eliminate damn near all of the corporate tax it was supposed to pay in the US. The company apparently made it appear as though its subsidiaries were being operated from California, which is handy for Apple since the US lets corporations defer taxes from foreign units indefinitely. In the US Apple would also have to pay around 35 per cent tax on its profits, but since 70 per cent of it came from overseas (where the company sells most of its stuff) that rate ended up being between two and five per cent - whatever the local taxation rate actually was.

Apple defended itself though, insisting that the move didn't actually decrease the amount of tax it made in any country (though it sounds as though it stopped it from increasing the amount it paid in Europe). Apple claims that it decided to hold taxes in Jersey "specifically to ensure that tax obligations and payments to the US were not reduced," and that it actually paid billions of dollars of US tax to establish that subsidiary in the first place.

Apple also insisted that it pays lots of taxes, the best taxes, saying its "worldwide effective tax rate is 24.6 per cent, higher than average for US multinationals." Though I'm sure the IRS is just thrilled that this money would be going to foreign treasuries, and not the US.

Apple released a very long press release defending its actions, which probably aren't that dissimilar from other large multi national corporations. Or royal families. It's also worth pointing out that its actions seem to be totally legal. The US has rules in place about how much tax needs to be paid, and if Apple's complying then anything government don't like requires a change in the law.

Much like the controversial tax reform plan proposed by the Trump administration, which promises to cut corporate tax from 35 to 20 per cent - while imposing a minimum taxation rate on foreign earnings without the option for deferral.

But if you don't like it as is, don't buy from companies known to avoid tax. Particularly when they charge a 63 per cent mark up on their latest overpriced phone. [Engadget]

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