Saturday 21 July 2018

Apple settled on Jersey for new tax shelter after Irish rule change

In 2013, Apple was accused by two of America’s most senior politicians of using Ireland to help cut its global tax bill to almost zero. Photo: Getty Images
In 2013, Apple was accused by two of America’s most senior politicians of using Ireland to help cut its global tax bill to almost zero. Photo: Getty Images
Colm Kelpie

Colm Kelpie

Apple reportedly looked around Europe and the Caribbean for a new tax shelter, settling on Jersey, after a US Senate inquiry found the tech giant avoided tens of billions of dollars in taxes by shifting profits into Irish subsidiaries.

That US probe subsequently contributed to the Government deciding to tighten rules on so-called stateless companies to ensure that Irish companies had to be resident somewhere.

The Government also shut off the so-called 'double Irish', which allowed companies to funnel profits into tax havens.

That then led Apple lawyers to look at six offshore tax havens that might allow an Irish subsidiary to "conduct management activities without being subject to taxation in these jurisdictions", according to the 'Paradise Papers'.

Reports yesterday from a new release of documents from the 'Paradise Papers' stated that Apple settled on Jersey as its tax refuge.

It is the latest revelation from the vast set of papers throwing light on the offshore activities of certain companies and individuals.

Although there is no suggestion that Apple did anything illegal, the revelations will once again cast the spotlight on the tax affairs of the world's most profitable company.

In 2013, Apple was accused by two of America's most senior politicians of using Ireland to help cut its global tax bill to almost zero.

The head of the world's biggest technology company faced a grilling in Washington over what politicians there claimed were "gimmicks" used to get around US tax laws.

Apple paid almost no tax on earnings of more than $100bn over four years, US Senator Carl Levin and former presidential candidate John McCain claimed, although Apple mounted a strong defence.

Apple boss Tim Cook stressed at the time that the company paid the tax it owed.

"We pay all the taxes we owe, every single dollar. We do not depend on tax gimmicks... We do not stash money on some Caribbean island."

In a statement Apple said changes made to its tax structure in 2015 had not led to a lower overall tax bill.

“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. The changes we made did not reduce our tax payments in any country.

"In fact, our payments to Ireland increased significantly and over the last three years we’ve paid $1.5bn in tax there — 7pc of all corporate income taxes paid in that country. Our changes also ensured that our tax obligation to the United States was not reduced."

However, the company was quoted in the 'Guardian' newspaper as saying it had paid tens of billions of dollars in taxes in recent years.

"The debate over Apple's taxes is not about how much we owe but where we owe it. We've paid over $35bn in corporate income taxes over the past three years, plus billions of dollars more in property tax, payroll tax, sales tax and Vat," it said.

"We believe every company has a responsibility to pay the taxes they owe."

Read more: Facebook, Starbucks to be quizzed as EU ponders tax haven blacklist

In Budget 2014, following months when the Government here faced repeated attacks over a low corporation tax rate and its popularity with global brands such as Apple, Facebook and Google, the Government moved to rebuild its reputation abroad.

The Government unveiled rules removing the so-called "stateless company" tax loophole.

Then-finance minister Michael Noonan said the reform was necessary because the tax loophole had "caused Ireland great reputational damage" and "the solution was in our hands".

The loophole had allowed countries to incorporate in Ireland but declare profits in other low-tax or tax-free jurisdictions, meaning they could in theory pay no corporation tax at all. In the following Budget, it moved to shut down the so-called 'Double Irish' tax avoidance strategy.

The 'Paradise Papers' reportedly suggest Apple began to consider its options in 2014 after the comments about its alleged actions in Ireland, and the subsequent government response.

Apple is already embroiled in controversy with the European Commission after the latter announced that Ireland must collect about €13bn in back taxes allegedly owed from the iPhone maker.

The record-breaking case surrounding Apple has placed a major spotlight on Ireland's tax regime and led to criticism from the likes of US President Donald Trump.

Irish Independent

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