Apple accused of avoiding paying UK $700 million in taxes
A new report from a tax watchdog claims that between Apple and other major IT firms, the UK may have lost almost $3 billion in tax revenue in 2021 alone.
Apple's new UK headquarters is in London's iconic Battersea Power Station
Apple has long been in an ongoing dispute with the European Union over its tax arrangements in Ireland, but now a new study says it has benefited from UK tax laws too. A UK charity called TaxWatch effectively argues that the laws of Britain and other countries do not correctly account for multinational earnings.
"Current international tax rules generally work on the basis that profits are allocated based on where value is created," its report says, "which is not necessarily the same as the location of customers."
"Global businesses can organise the structure and activities of each of their subsidiaries to move sales, costs and thereby profits and losses between different jurisdictions," it continues. "This enables them to leverage differences in tax rates and laws between the countries within which their subsidiaries operate."
Calling this type of tax avoidance "profit shifting," TaxWatch says it is "recognised as a major problem in the OECD [ Organization for Economic Cooperation and Development]."
TaxWatch then attempts to demonstrate the scale of the issue by working through the most recently available finance figures from seven large technology firms:
- Adobe
- Amazon
- Apple
- Alphabet (Google)
- Cisco
- Meta (Facebook)
- Microsoft
TaxWatch is hampered by how companies, including Apple, do not necessarily report their UK revenues. It therefore stresses that its figures and conclusions are illustrative rather than precise.
"At no point do we suggest that the figures presented here are accurate and an exact answer to how much profit these companies make in the United Kingdom," it says. "That would be impossible to determine without access to detailed figures from inside these companies, which we do not have."
Firms were approached and those that replied "said that they paid the correct tax in all jurisdictions."
Amazon reportedly said the charity's "conclusions were inaccurate and based on incorrect assumptions."
TaxWatch does, however, lay out its methodology in detail, and in the case of Apple says that it has referred to figures from the UK's Competition and Markets Authority (CMA). The CMA estimated Apple's 2021 turnover as between $12 billion and $18 billion, so it has based its calculations on a midpoint between those figures.
Based on this, TaxWatch estimates that Apple should have paid $863 million to the UK taxes for 2021. Instead, it reportedly paid around $163 million.
Overall, the charity claims that the seven Big Tech firms in total avoided paying almost $3 billion to the UK for 2021.
TaxWatch says that Apple did not respond to requests for comment.
Separately, figures for 2020 showed that Apple paid the UK some $8 million that year -- when it made $1.8 billion in sales. At the time, Apple said that "We are very proud of our many contributions across the UK and last year spent over 2 billion pounds [$2.51 billion] with hundreds of suppliers."
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Comments
Instead, all the named companies likely do the same thing, setting variable IP licensing rates applied in different markets for no purpose other than removing profit from a sale occurring in a higher tax location and moving it to a low-tax one, which in the US is NOT legal tho apparently difficult to catch.
Bringing this closer to home, a LOT of small US companies would love to claim the same kind of tax benefits, the value from a sale transferred to a low or no-tax locale instead of the state where the product/service sale occurred. We small fry can't do that. Rich get richer and all that, 'ya know?
Weird.
No. Then these idiots should work to change the tax codes. Sorry. As a shareholder, I do not want any company paying a penny more in taxes than legally required.
If Europe, the UK/EU or the USA want real competition among the so-called Tech Giants (gatekeepers) separate them out of each other’s backyard, and cleanup the Frand patent fiasco, won’t happen because tough, fair and equitable is by and large a myth.
I'm 100% for corporations paying the maximum tax possible, but in this case...Stiff Tory Brexlandia, Tim. Stiff 'em.
As noted recently on the Microsoft tax avoidance thread, only the wealthy and big corporations can afford to pay lobbyists and "donate" to politicians' "campaigns" to get millions or billions in favorable tax breaks, and then pay tax lawyers to file the paperwork to get the money. It's expensive to do all that, but the net gain is worth it. The middle-class is also conditioned to lament the byzantine tax code as government horribleness, and resent poor people who collect a pittance from government programs to help them try not to starve to death. This is all to get people in the middle class to function (against their own actual interests) as a political coalition with the very wealthy. That's how the "two-percent" finds enough voters to elect the "conservative" politicians who insert the lobbyists' carefully crafted billion-dollar tax-avoidance measures into the law (making it into the byzantine mess that gets attributed to government awfulness), and then make a lot of noise about the need to cut programs in order to balance budgets.
Taxwatch wants the Tories to close the loopholes. Good luck with that!
It's very important to note that Taxwatch is not a government agency. They did the analysis for illustrative purposes. As an Amazon spokesperson responded, the Taxwatch numbers are based on a lot of assumptions.
Note that enacting more laws might not be the right solution. Most tax codes end up overly complicated as the years pass by so a reform of some of the UK corporate tax law might be more beneficial than tacking on another 200 pages of legalese.
That's something UK tax officials need to think about, not just from this report but on an ongoing basis with all corporate tax activities.
and can be sued if they break the law.
You will likely say now that, in some part, the corporate taxes are passed on to the shareholders. In theory that might be true, but in actual practice, the value of your Apple shares is a somewhat arbitrary number, the value and stock price set according to the whims of the sellers and buyers. The amount of money paid out for Corporate taxes plays little to no role in that.
You can't blame sensible business people wanting to avoid paying unnecessary tax can you ??