Apple legally shifted some $8.9 billion in untaxed profits from Australia to Ireland since 2002, report claims

“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.]

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34 Comments

    1. 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.

      1. 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.

        1. 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.

      1. 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.

  1. 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.

      1. 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?

    1. 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.

    2. … 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.

  2. 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. 🙂

  3. 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.

  4. 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.

  5. 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.

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