Apple slams story of cash hidden in Jersey to reduce taxes, calls itself 'largest taxpayer...
In a rare blog posting, Apple listed a series of inaccuracies in the "Paradise Papers" tax story reported by the International Consortium of Investigative Journalists, while outlining its business in Cork, Ireland; emphasizing that the company is the "largest taxpayer in the world" and repeating that it "pays every dollar it owes in every country around the world."
Apple's 6,000 employees in Cork, Ireland include customer support, sales, finance, logistics and manufacturing
The Guardian report specifically noted that "Apple has done nothing illegal," but in an homage to 2016 election reporting said the story is "likely to raise fresh questions for the technology company, which has been forced to defend its tax affairs."
The report also stated that Apple had "defended the new arrangements and said they had not decreased the company's tax payment anywhere in the world," adding a company statement that "the debate over Apple's taxes is not about how much we owe but where we owe it."
Steve Jobs' 1980 visit to Apple's new facility in Cork, Ireland
The company noted that its presence in Ireland dates back to 1980, when "Steve Jobs looked for a base to expand outside the US. The facility in Cork, Ireland started with 60 employees and now has over 6,000. Apple's innovation and investment supports a further 12,000 jobs across Ireland. And across Europe, Apple supports more than 1.5 million jobs."
It then expand upon the situation, explaining that "when Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the United States."
Apple's statement added, "Since then, all of Apple's Irish operations have been conducted through Irish resident companies. Apple pays tax at Ireland's statutory 12.5 percent."
The changes made "did not reduce our tax payments in any country," Apple said. "In fact, our payments to Ireland increased significantly and over the last three years we've paid $1.5 billion in tax there -- 7 percent of all corporate income taxes paid in that country. Our changes also ensured that our tax obligation to the United States was not reduced."
It stated, "when a customer buys an Apple product outside the United States, the profit is first taxed in the country where the sale takes place," which would include local sales taxes or VAT, as well as the property taxes and payroll taxes Apple pays as part of its retail business in various countries.
"Then Apple pays taxes to Ireland, where Apple sales and distribution activity is executed by some of the 6,000 employees working there," the company stated. "Additional tax is then also due in the US when the earnings are repatriated. Apple's worldwide effective tax rate is 24.6 percent, higher than average for US multinationals."
It explained that "under the current international tax system, profits are taxed based on where the value is created. The taxes Apple pays to countries around the world are based on that principle. The vast majority of the value in our products is indisputably created in the United States -- where we do our design, development, engineering work and much more -- so the majority of our taxes are owed to the US."
The European Union sought to impose higher taxes on Apple in Ireland, claiming that Irish tax law constituted "illegal state aid." However, that effort was an attempt by the EU to tax holdings that are reserved for paying taxes to the US, and the dispute was with the EU and Ireland, not a legal issue with Apple.
That effort triggered the Obama Administration's Department fo the Treasury to issue a statement of concern regarding the possibility that "any repayments ordered by the [EU] Commission will be considered foreign income taxes that are creditable against U.S. taxes owed by the companies in the United States.
"If so, the companies' U.S. tax liability would be reduced dollar for dollar by these recoveries when their offshore earnings are repatriated or treated as repatriated as part of possible U.S. tax reform. To the extent that such foreign taxes are imposed on income that should not have been attributable to the relevant Member State, that outcome is deeply troubling, as it would effectively constitute a transfer of revenue to the EU from the U.S. government and its taxpayers."
"At Apple we follow the laws, and if the system changes we will comply. We strongly support efforts from the global community toward comprehensive international tax reform and a far simpler system, and we will continue to advocate for that."
It concluded, "Apple believes comprehensive international tax reform is essential, and for many years has been advocating for simplification of the tax code. Reform that allows a free flow of capital will accelerate economic growth and support job creation. A coordinated legislative effort internationally will remove the current tug of war between countries over tax payments and ensure certainty of law for taxpayers."
Apple's 6,000 employees in Cork, Ireland include customer support, sales, finance, logistics and manufacturing
'Nothing illegal,' but 'raises fresh questions' Apple is 'forced to defend'
Earlier today, AppleInsider reported, based on an article by the Guardian citing the ICIJ's Paradise Papers investigation, that Apple has "shifted a holding firm to Jersey [in the UK Channel Islands] to protect $252B from taxation."The Guardian report specifically noted that "Apple has done nothing illegal," but in an homage to 2016 election reporting said the story is "likely to raise fresh questions for the technology company, which has been forced to defend its tax affairs."
The report also stated that Apple had "defended the new arrangements and said they had not decreased the company's tax payment anywhere in the world," adding a company statement that "the debate over Apple's taxes is not about how much we owe but where we owe it."
Irish subsidiaries moving to Jersey did not reduce tax payments
In a rebuttal titled "The facts about Apple's tax payments," the iPhone maker flatly outlined that "the changes Apple made to its corporate structure in 2015 were specially designed to preserve its tax payments to the United States, not to reduce its taxes anywhere else. No operations or investments were moved from Ireland."Steve Jobs' 1980 visit to Apple's new facility in Cork, Ireland
The company noted that its presence in Ireland dates back to 1980, when "Steve Jobs looked for a base to expand outside the US. The facility in Cork, Ireland started with 60 employees and now has over 6,000. Apple's innovation and investment supports a further 12,000 jobs across Ireland. And across Europe, Apple supports more than 1.5 million jobs."
It then expand upon the situation, explaining that "when Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the United States."
Apple's statement added, "Since then, all of Apple's Irish operations have been conducted through Irish resident companies. Apple pays tax at Ireland's statutory 12.5 percent."
The changes made "did not reduce our tax payments in any country," Apple said. "In fact, our payments to Ireland increased significantly and over the last three years we've paid $1.5 billion in tax there -- 7 percent of all corporate income taxes paid in that country. Our changes also ensured that our tax obligation to the United States was not reduced."
"Apple is the largest taxpayer in the world"
The company also emphasized that rather than evading taxation anywhere, "Apple is the largest taxpayer in the world, paying over $35 billion in corporate income taxes in the last three years. Apple pays taxes in every country where we sell our products."Apple's worldwide effective tax rate is 24.6 percent, higher than average for US multinationals
It stated, "when a customer buys an Apple product outside the United States, the profit is first taxed in the country where the sale takes place," which would include local sales taxes or VAT, as well as the property taxes and payroll taxes Apple pays as part of its retail business in various countries.
"Then Apple pays taxes to Ireland, where Apple sales and distribution activity is executed by some of the 6,000 employees working there," the company stated. "Additional tax is then also due in the US when the earnings are repatriated. Apple's worldwide effective tax rate is 24.6 percent, higher than average for US multinationals."
Dispute is over who gets Apple's tax payments
Apple's statement took issue with the idea that it is "untouched by the United States," noting that it "pays billions of dollars in taxes to the US at the statutory 35 percent rate on investment income from its overseas cash." It also added that "Apple's effective tax rate on foreign earnings is 21 percent -- a figure easily calculated from public filings. This rate has been consistent for many years."It explained that "under the current international tax system, profits are taxed based on where the value is created. The taxes Apple pays to countries around the world are based on that principle. The vast majority of the value in our products is indisputably created in the United States -- where we do our design, development, engineering work and much more -- so the majority of our taxes are owed to the US."
The European Union sought to impose higher taxes on Apple in Ireland, claiming that Irish tax law constituted "illegal state aid." However, that effort was an attempt by the EU to tax holdings that are reserved for paying taxes to the US, and the dispute was with the EU and Ireland, not a legal issue with Apple.
That effort triggered the Obama Administration's Department fo the Treasury to issue a statement of concern regarding the possibility that "any repayments ordered by the [EU] Commission will be considered foreign income taxes that are creditable against U.S. taxes owed by the companies in the United States.
"If so, the companies' U.S. tax liability would be reduced dollar for dollar by these recoveries when their offshore earnings are repatriated or treated as repatriated as part of possible U.S. tax reform. To the extent that such foreign taxes are imposed on income that should not have been attributable to the relevant Member State, that outcome is deeply troubling, as it would effectively constitute a transfer of revenue to the EU from the U.S. government and its taxpayers."
Tax reform should "ensure certainty of law for taxpayers"
Apple added, "we understand that some would like to change the tax system so multinationals' taxes are spread differently across the countries where they operate, and we know that reasonable people can have different views about how this should work in the future."At Apple we follow the laws, and if the system changes we will comply. We strongly support efforts from the global community toward comprehensive international tax reform and a far simpler system, and we will continue to advocate for that."
It concluded, "Apple believes comprehensive international tax reform is essential, and for many years has been advocating for simplification of the tax code. Reform that allows a free flow of capital will accelerate economic growth and support job creation. A coordinated legislative effort internationally will remove the current tug of war between countries over tax payments and ensure certainty of law for taxpayers."
Comments
The questionnaire leak alone paints a picture which will make everyone in PR at Apple squirm.
This is going to be like quicksand in the sense that any move to defend itself will probably make things worse. Just like this statement has done. I can see it being torn apart line by line for deliberately trying to distract from the reality that the leaks have put onto the table.
iPhone X sales are off the charts and more to come from other products. This is “damage control” from the iKnockoff paid media.
If governments around the world substituted a national sales tax (VAT) for all production (income) taxes all doubt over where taxes are accrued/paid is eliminated. If the product did not sell in a particular jurisdiction there would be no taxes owing to that jurisdiction except for the sales tax collected.
But no. those that feel corporations and the wealthy should pay a disportioncate amount of tax want taxes based on income, not consumption.
It is the very concept of taxing production that leads to special interest loopholes/exemptions, etc that makes the world's tax system inherently unfair to all, and horribly complex to the point that NOBODY, not even the IRS in the US, can correctly complete a tax return.
In my opinion the only entities that should pay taxes are those that have the right to vote. The US fought for independence from Great Britain over the issue of taxation without representation.
What leaks????? Apple's rebuttal specifically states that when the move the Jersey was made Apple notified Ireland, the EU and the US. Seems to me that Apple's move was fully transparent and there was no attempt to hide its actions.
Ah, a logical response, not an emotional response. I love it. You are entirely correct, the US tax system was created when international sales were not as extensive as they are today. It is a relic of pre WWII economies and does not reflect the world economic zone that we live in today.
Eliminating the philosophy of taxing production (income taxes in all of its various forms) in favor of consumption taxes (national sales tax/VAT) eliminates all issues of how much and to whom the taxes are owed. If one country wishes a higher sales tax than another, then so be it. Eliminating production taxes reduces the cost of production. PRODUCTION TAXES ARE A COST OF DOING BUSINESS that is not created in a vacuum. ALL BUSINESS COSTS are passed on to the consumer in the form of higher prices.
In the US elimination of production taxes will reduce the retail price of US made products by about 25% (yes its that high when you take into account all the various taxes paid that are based on profits). A national sales tax of 25% brings the retail cost of a US made product, consumed in the US back up to its starting point. Its a zero sum game.
A national consumption tax also eliminates PERSONAL income taxes and eliminates the need for special, tax deferred, restricted use, retirement savings accounts that penalize those that haven't the financial capability/flexibility to salt monies away for 40+ years for retirement.
In that regard, Apple says, and let's be clear on this, 'initial sales' are 'off the charts'. In the earnings call TC simply described them as 'very strong'.
Sales might end up off the charts but any evaluation of that will have to wait until September next year as the current offering is all we are going a to have (in the phone segment) until then and that is all that really counts.
On the subject at hand, the devil is in the details. When TC said, and not too long ago, Apple didn't have its cash stashed away on some Caribbean island, he obviously didn't count on the Paradise Papers possibility. Now, rightly or wrongly, people will look at that claim and use it against him.
He is making a rod for his own back.
From a moral perspective, I believe witholding payment of taxes until such a time is 'right' for the company, is wrong. As is the idea that a company itself, can determine how much to make available for taxation. Especially if that same option is not open to competitors.
You can be sure that some here will roll out the shareholder argument and that Apple must do all it can to maximise it's return to shareholders, even if it means employing questionable accounting practices. That is missing the point entirely.
This is happens every couple of years: documents get leaked, companies and individuals get exposed (and in this case, there’s nothing here on Apple that we didn’t already know), the press boils the public into a frenzy, and the governments do nothing to close the loopholes. Why? Because politicians are using the exact same loopholes to avoid paying taxes to the people they’re elected to serve.
As much as you would like this to result in the downfall of Apple, I’m afraid it won’t. Apple is probably the most conservative company when it comes to accounting. They assume that all the tax they avoid (yes, that is what they’re doing) does not belong to them and so it is still counted as a liability. If they had to pay it tomorrow, it wouldn’t make a ripple on the balance sheet, and tomorrow everyone will move onto something else … until next year’s leak.
What I have noticed is that every time this happens, there is less outrage, fewer calls for heads on pikes, less of an impetus to do anything about it. Corporate tax avoidance is fading into the background of public consciousness. In that regard, it is enjoying the same fading shock value as mass shootings, but in my book, legal tax avoidance is far less serious.
When you do your own taxes do you ever decide late in the year to add more money to a tax deferred account or perhaps time your sale of assets to defer taxes by 1 year? If not, you're a fool. The tax laws lay out what is permissible. Taking advantage of every possibility to reduce or defer taxes within those boundaries is the only smart thing to do.
Also those in power also make full use of these loopholes.
It would need an borderless, international effort to change the rules and that's never gonna happen... until 'merica takes over the world of course.
I suspect Avon B7 doesn’t grok that this is a tax deferral issue. Many seem to believe Apple is somehow avoiding taxes rather than merely deferring them. You’d think he be up to speed; the guy comments on pretty much every AI article, has been around for years... but some folks never catch on, and that betrays an ulterior motive/agenda.