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. 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.

  2. 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.

    1. 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.

  3. 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.

    1. 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).

  4. 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.

  5. 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!

  6. 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.

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