“US tech giant Apple has shifted an estimated $8.9 billion in untaxed profits from its Australian operations to a tax haven structure in Ireland in the last decade, an investigation by The Australian Financial Review has found,” Neil Chenoweth reports for The Australian Financial Review. “Last year Apple reported pretax earnings in Australia of only $88.5 million after it sent an estimated $2 billion of income from its Australian sales to Ireland via Singapore, where Apple negotiated a secret tax deal in 2009.”
“The Financial Review has obtained 10 years worth of financial accounts for Apple Sales International, the secretive Irish company at the heart of Apple’s international tax arrangements, which reveal the mark-up Apple charges for intellectual property on its products around the world,” Chenoweth reports. “Apple Sales International has reported more than $US100 billion ($112 billion) of profits in the last five years. Its accounts show it has paid less than 50¢ in tax on every $1000 of income.”
Chenoweth reports, “The company was the focus of a scathing report last May by the US Senate’s Committee on Homeland Security and Government Affairs, Permanent Subcommittee on Investigations.”
MacDailyNews Take: The US Senate’s “investigation” found no evidence that Apple did anything illegal.
Scathing.
Chenoweth reports, “In the four years from 2010 to 2013 Apple’s Australian arm, Apple Pty Ltd, reported to ASIC total sales of $20 billion and pre-tax profits of $387 million. The Financial Review analysis shows that Apple’s Australian arm paid an estimated $7.2 billion in profits to Apple Sales International in Ireland for “intangibles” over the same time frame. (Apple Sales International reports marketing, research and other expenses in Ireland.) In 2012 an estimated $2.3 billion was diverted tax-free to Apple Sales International, and $2 billion last year. In total, from 2002 to 2013, an estimated $8.9 billion of Australian income has been shifted to Ireland.”
“Apple Sales International and its parent, Apple Operations International, pay no tax in Ireland, according to Irish law, because they are managed and controlled in California. They pay no US tax either because US law disregards where a company is managed and only looks at where a company is legally registered,” Chenoweth reports. “Thus none of the profits which Apple moves to Ireland from Australia and elsewhere are taxable… There is no suggestion by the Financial Review that this arrangement is anything but proper within Australian tax laws.”
Read more in the full article here.
MacDailyNews Take: Legal.
Once again, if you do not like the laws, work to change them, but do not wrongly chastise Apple, implicitly or explicitly, for following the rule of law.
[Thanks to MacDailyNews Readers “Fred Mertz” and “James W.” for the heads up.]
Related articles:
Obama tax rhetoric on Apple, other companies’ offshore profits falls short of action – February 5, 2014
Not in Taxes anymore: On site at Apple’s famous Irish ‘headquarters’ – November 2, 2013
Senators Levin, McCain say Ireland faces questions even as Apple tax loophole tightened – October 16, 2013
Ireland to close Apple’s tax loophole, but leave bigger one open – October 15, 2013
U.S. SEC ends review of Apple taxes, overseas cash – October 5, 2013
Obama, world leaders push big companies like Apple, Google to pay more taxes – September 6, 2013
G20 think tank OECD proposes blueprint for global crackdown on tax avoidance – July 19, 2013
Apple again faces scrutiny after paying no UK corporate taxes for 2012 – July 1, 2013
Bloomberg News’ awful reporting on Apple’s U.S. corporate taxes – May 30, 2013
Thomas Sowell on Apple, corporate taxes, and ‘the road to serfdom’ – May 28, 2013
Former Senator Sununu: Congress wrote the tax laws, so why blame Apple for obeying them? – May 28, 2013
Taxing Apple just taxes you – May 24, 2013
Don’t tax Apple, tax its shareholders – May 24, 2013
If Apple paid more tax, we might pay less or something – May 22, 2013
Apple CEO Tim Cook pounds another nail into the Keynesian coffin – May 22, 2013
Apple CEO Cook makes no apology for company’s tax strategy – May 22, 2013
Apple CEO Tim Cook charms Capitol Hill – May 22, 2013
Rush Limbaugh: ‘High-tech lynching: Senate attempts to crucify Apple’ – May 21, 2013
Nobody on U.S. Senate committee laid a glove on Apple CEO Tim Cook – May 21, 2013
Senator Rand Paul: Senate committee ‘should apologize to Apple for bullying one of America’s greatest success stories’ (with video) – May 21, 2013
Ireland: We have no special tax rate deal with Apple – May 21, 2013
Apple prepares for Washington onslaught: CEO Tim Cook isn’t taking any chances with senators looking to grandstand – May 21, 2013
Watch Apple CEO Tim Cook’s live testimony before U.S. Senate, starting at 9:30am EDT – May 21, 2013
U.S. Senate investigation found no evidence that Apple did anything illegal in avoiding taxes – May 20, 2013
Apple pays under 2% on overseas profits and it’s entirely legal – November 5, 2012
Google, Apple, eBay shouldn’t pay taxes – people should pay taxes – November 25, 2012
So how much did Apple really pay in taxes? – November 1, 2012
Apple’s showdown with the U.S. government over taxes on offshore cash – July 13, 2012
Apple‘s $74 billion tops list of U.S. tech companies’ overseas cash – July 9, 2012
Apple’s dividend move puts spotlight on foreign cash holdings, repatriation tax reform – March 20, 2012
Apple: Good start; and what about the overseas cash? – March 19, 2012
Apple’s foreign cash hoard piles up: $54 billion and rapidly growing – January 11, 2012
Senator John McCain eyes Apple’s $54 billion overseas cash pile – November 3, 2011
Google joins Apple in push for U.S. repatriation tax holiday – October 3, 2011
Apple lobbies Obama for tax holiday, wants to bring overseas bounty home – August 24, 2011
U.S Senate Democrat Schumer allies with Apple, other multinationals on repatriation tax talks – June 21, 2011
U.S. companies push for tax break on foreign cash – June 20, 2011
Apple, Oracle, Duke Energy, others organize lobbying blitz for tax holiday – February 17, 2011
Yawn
I second that emotive.
good, I’m all for those who earn their money to keep it.
Here, here. Now that these politicians see the holes in the system they created they can start closing them….
Apple, as a company, wants to avoid double taxation of its profits. Apple is already subject of USA’s profits tax (even though it is “deferred” when the money are still abroad), so it makes no sense to pay much of profits tax elsewhere.
That is not what Apple is doing. Since Apple is not repatriating the profits it is untaxed profit (or taxed at a much lower rate). All legal of course otherwise so many companies would not be doing this.
I did not write that Apple was repatriating profits, it does not do those tricks. I talked about deferred profit tax, which only accumulates on profits from sales abroad, not domestic.
Me too and for the post below screw the NSA and IRS.
power to the people, right on.
I was agreeing with Botvinnik and lost my place here in posting. In other words, I agree with him on this one. Good for Apple and anyone else who can avoid idiotic tax schemes legally.
tax schemes legally anywhere.
good, I’m all for those who earn their money to keep it.
But they don’t let you launder your profits through Ireland to avoid taxes, do they?
laundered, unlaundered, starched, dry-cleaned, mercerized…I really don’t give a rat’s ass: I am still all for those who earn their money keep it.
MDN bloggers… Hope you guys look good in orange. Wow! The IRS no doubts has an interest on your interpretation of proper conduct when it comes to taxes. Look for a complete IRS audit of your business and personal affairs within the next few months.
NSA already has video of my “personal affairs.”
Actually we’ve all seen it on YouTube. Hey, whatever you want to do. You’re an adult. It’s a free country. I’ve seen just about everything out here in California. But that is a first for me. Are all those animals yours?
just the female ones.
I welcome them with open arms. As a small corporation I don’t have access to profit sharing with a multinational entity. That said I feel I pay way more than I should so maybe they’ll give me a refund.
… you to pay what you owe. According to the law.
OK, the tax law is an evil unto itself, but the IRS does not ask that you pay so much as a cent more than that set of laws says. Those laws are skewed to give the biggest potential payers the biggest actual loopholes, but you need a tax lawyer to make use of them.
@Paul, the IRS is not going to come after someone for saying “pay as little tax as you can get away with”. That’s the American Way. They might tell their computers to check your math for errors, but if you’ve paid what you owe – you are clear. Now … the NSA … different story.
Nothing illegal going on. This is just fodder for bloggers and iHaters to drum up hits and negative comments from the vast pool of idiot iHaters.
I am thinking that with as much mumbo jumbo that the article contained, the author wants to tax, tax, tax, cause it should.
You know, tax the money made here, the money moved here, the money moved away from here, and any money we can think of later… LOL
If Austraila gave Apple tax incentives, and Apple used them…. how horrible. Then the tax paid income was moved out of austraila so they could not continue to tax it some more.
Ireland collects little tax because the money comes in and goes out, like a bank. It was NOT created there, so there is no sales tax or income tax.
So, if anyone with the facts can make a very simple case for Apple to pay more taxes, please come forth. The US could not do it. 🙂
Get it straight! AAPL has a right – nay- an obligation to pay as little tax as is LEGAL! And they do.
‘Don’t like it? Change the law.
Your right MDN change the laws.
I’m sure the writer of piece when he’s doing his own personal taxes this year asks his accountant NOT to find the best deal for him. I’m sure he says the the accountant: “Ignore the damn deductions, Ignore the tax free pension savings incentives! Get me the highest tax rate possible ! …. I want to pay MORE to big government because I know they spend SOOOO WISELY…. “.
yeah.
Unlike some people on this forum, I am not a tax hater, nor do I see taxation as “stealing.” I see taxation as my contribution to supporting the necessary governance, defense, public infrastructure, and legal system of this country. The key word is “necessary.” I do not want or expect government to do everything for me or attempt to right all wrongs or inequities in society. In addition, I expect tax money to be spent efficiently with a minimum of waste and a maximum of positive, intended effect.
I am willing to pay my fair share of taxes to support the necessary functions of the government. Indeed, I see this as my patriotic duty. That said, I am generally OK with people and corporations attempting to legally minimize their tax burden as long as their efforts meet the letter and intent of the law. There should be a level playing field.
The U.S. cannot control international tax law. We can only attempt to craft our own laws in a manner that meets our taxation objectives while also positioning our country favorably in terms of attracting and retaining jobs. Our current laws are clearly flawed and should be reformed.
Perfectly legal. The Australian government could legislate for this, but its current political leadership on both sides is lacking long-term vision.
The government shouldn’t complain about perfectly legal tax loopholes until they have a legislative agenda to close them.
I think the real gist of the article is to point out that – using Apple as one example but it is more broadly applicable – the existing tax regimes seem to have enabled some multinational companies not to pay any tax at all, or virtually none. They aren’t saying it’s illegal, they’re questioning whether it is reasonable.
This means that Apple has not paid a “normal” level of tax in Australia based upon the billions of dollars of income it has earned there. Nor has it paid tax in Singapore and only pays an almost non-existent amount of tax in Ireland. Further, it pays no tax on this income in the USA unless it chooses to repatriate those funds. I wouldn’t have a problem with Apple being taxed on that repatriation since it obviously hasn’t given any away in tax anywhere else….
While all the above is legal, is it appropriate that a company which generates large amounts of profit in a country does not contribute back to the running of that country in the same proportion as locally based companies. Certainly, their employees have no choice but to do so via Income Tax, Sales Tax, etc.
The idea of a company paying the appropriate corporate tax rate for the country in which the actual income is generated seems like a fair rule to me. Once it has done that, it should be able to send all remaining profits back to its parent without further penalty, individuals and business alike should only be taxed once. Transferring profits for intangibles like intellectual property that represent an overwhelming majority of the profit to other countries, while legal, just doesn’t feel right.
All the above having been said, it’s up to governments to enact laws which close such loopholes as well to enter into international agreements to ensure their enforcement, both to ensure that the tax is paid but also to protect individuals and business from being taxed more than once.
Now for a little subtly and actual research
http://pando.com/2014/03/06/stick-wrong-end-of-over-the-apple-dodging-taxes-story/
The report seems to ignore the 10% Goods & Services Tax (GST) which Apple adds on to everything it flogs in Australia! in addition to any tax it may pay on profits.
GST is paid by consumers, so unless they were going to save that money and not spend it if they couldn’t by am Apple product it would have gone to the governed anyway.
It’s the profits part that’s the problem. Apple is reducing it’s declared profit by sending a large chunk of it to a shell company in Ireland to pay for “intangibles” that aren’t actually generated by the Irish company but which the local laws there have allowed to be assigned to it via a piece of paper.
In reality, the IP, etc is generated by the R&D performed primarily in the USA, the local marketing is performed in Australia as is the logistics function, the retail planning and execution, etc.
But if Apple were to pay the USA unit for the IP and licensing, Apple would be forced to pay taxes on it in the USA.
As I said previously, it’s not illegal but it doesn’t reflect the reality of how the business is done and doesn’t feel right. So it’s up to governments to set up the tax laws to better reflect the taxation of economic activity in the places it occurs. Apple, like any person or business has the right to minimize their tax as long as it’s legal.
Legality and fairness are unfortunately two different things. All corporations are wrong to abuse their power. Pay for the resources and infrastructure you use. Apple in this instance doesn’t appear to have done so.
… and what’s more, the real owners of the company are NOT benefitting from Apple’s tax avoidance games. Cook’s stock buyback didn’t raise the stock price. R&D funding hasn’t produced significant amazing new products except the marginally successful fingerprinter on the iPhone 5S. Apple continues to hoard cash instead of returning it to shareholders or wowing the world with amazing new products. Sorry, but when a corporation has this much money, expectations are higher. Deliver products or deliver profits, but don’t just play cash hoarding games. Pathetic, Apple. Absolutely pathetic. We thought Apple was cut from different cloth, now it’s just another corporation.
your apple bashing is just silly.
Because it’s responsible to shareholders Apple HAS to order its accountants to legally take all tax advantages. Not doing so Apple could be sue by shareholders, Cook, the CFO could be fired by the board for incompetence.
It’s the politicians business to fix the tax code, it’s Apple’s responsibility to adhere to the law (which it has done).
The funniest thing is that the politicians get all hot and bothered about this,
BUT,
when everyone points out that the laws and loopholes the politicians passed are the root of the problem, they fall silent.
The reality is that no politician (in the US anyway) can afford to piss off the lobby groups since they will not get enough money to be re-elected.
This type of profit centre shifting by ANY company is immoral. One of the major problems of modern society and the over-proliferation of lawyers, is the mindset of “if it isn’t illegal,l it’s OK to do”. That’s just lawyer bullshit.
It’s not just a case of any one country changing their laws, it requires international co-operation on a huge scale to close these loopholes. That takes years to identify the problem and many more to get these complex laws in many counties changed. As for Botvinnik and his ilk, how would things be for you and everyone else, if nobody paid taxes? Apple may or may not be guilty here, we don’t really know yet, but this type of behaviour by any company is not OK. If Apple is doing this, how can it point fingers at Google, Samsung et al, if it is also behaving in unscrupulous (albeit different) and supposedly “legal”, ways? Samsung is a prime example of a company that seems to many people to be acting immorally, yet it appears to be breaking few if any laws. Apple can’t have it both ways, it either acts morally as well as legally and gets our unstinting support, or it plays in the shady end of business and gets a reputation like Samsung and Google. Multinationals that stoop to this behaviour deserve to be royally shafted!
I live in Australia and that’s money that could have gone to my government……..IM GLAD APPLE HAS THE MONEY because god knows our shitty government can’t handle money.