A set of leaked financial documents nicknamed the “Paradise Papers” shows that Apple stashed its cash stockpile to the tiny British island of Jersey, to continue avoiding billions in taxes.
The International Consortium of Investigative Journalists (ICIJ) revealed in the paper that in 2014, the tech titan secretly moved its pile of overseas profits to the island as the US and various European governments cracked down on its controversial tax practices in Ireland.
Jersey is located near the coast of Normandy. Only 100,000 people live there. And it has a zero percent corporate tax rate for foreign companies.
Since 2013, Apple has come under heavy criticism for minimizing its tax bill by shifting profits from sales in Europe, Asia, and the Middle East out of any country’s direct tax jurisdiction, a tax strategy it has been employing since the 1980s.
The European Union Commissioner Margrethe Vestager started the investigation about the overseas tax strategy of multinationals in 2014. The tech giant smelled something fishy, and it turned to tax avoidance experts at the law firm Appleby for that advice, according to disclosed emails.
The company finally decided to set up its tax home in Jersey. Two of its biggest subsidiaries incorporated in Ireland, in which its funds were stashed, Apple Sales International and Apple Operations International, had declared tax residency in Jersey as of early 2015.
“Under this arrangement, the MacBook maker has continued to enjoy ultra-low tax rates on most of its profits and now holds much of its non-US earnings in a US$252 billion mountain of cash offshore,” ICIJ reported.
Apple’s tax strategy was later ruled illegal by the EU Competition Commission. Last year, the European Union ordered Apple to pay up to US$14.5 billion for illegal tax benefits in Ireland – a ruling Apple and Ireland are still fighting.
Under international pressure, Ireland has tightened its tax rules, first cracking down on Irish companies that had no tax residency. In mid-2014, it started exploring the “Double Irish”, a tax avoidance structure widely used by US multinationals to route their foreign profits to tax havens.
Apple said in a written statement to the ICIJ that the “changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and over three years [2014, 2015 and 2016] we’ve paid US$1.5 billion in tax there – 7 percent of all corporate income taxes paid in that country.”
While most of the company’s cash is outside of the US, Apple just started selling new bonds in order to finance a share buyback program and dividends for shareholders, according to Bloomberg.
During Apple’s fourth-quarter earnings call, the company said it had accumulated US$268.9 billion in cash and marketable securities. About 94 percent of this cash is currently outside of the US. It is currently holding just around US$16 billion in cash and cash equivalent in the US.
US companies need to pay 35 percent in taxes when they bring overseas profit back home. In the new tax plan proposed by US President Donald Trump, companies would only pay 12 percent on overseas profit.
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