"We didn’t look for a tax haven or something to put it somewhere." —Tim Cook, to The Washington Post
Okay. Maybe Apple didn't go looking for a tax haven in Ireland, but that's what its Irish subsidiary became.
From Apple's 2013 testimony before the U.S. Senate's permanent subcommittee on investigations:
[Apple Operations International] is incorporated in Ireland; thus, under U.S. law, it is not tax resident in the U.S. AOI is also not tax resident in Ireland because it does not meet the fact-specific residency requirements of Irish law.
"In other words," writes Jeremy Scott, editor in chief of Tax Analysts Blog, "Ireland is a corporate tax haven."
Two point worth clarifying, since almost everybody gets them wrong:
- This does not mean that AOI’s income is tax free. The money Apple funnels into its Irish holding company is post-tax money. According to Apple, it has already been taxed under the laws of the countries where it was earned.
- Apple intends to pay U.S. taxes as well, just not at the corporate rate of 35%. Like other U.S. firms with cash parked overseas, Apple has been holding out for a tax holiday. It may finally get one, now that the European Commission has launched a $14.5 billion tax clawback and awakened both aisles of the U.S. Congress.
"At its root," Cook said yesterday in his letter to the Europeans, "the Commission’s case is not about how much Apple pays in taxes. It is about which government collects the money."
Perhaps. But this is going to be a festering public relations problem for Apple until it cleans up its act.
Note: In its press release, the European Commission refers to two Irish "head offices" that exist "only on paper": Apple Sales International and Apple Operations Europe. I'm still trying to figure out where Apple Operations International fits in.