Apple: If it looks like a tax haven and quacks like a tax haven...

"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.

9 Comments

  1. David Emery said:
    I don’t think that’s quite fair. If all Apple wanted was a tax haven, it could have used the Caymen Islands or even Malta (which is part of the EU.)

    In many respects, this case is a lot like the FBI iPhone hacking case, where Apple has a principled position with respect to the law and accusations of overreach, versus being on the wrong emotional side of the issue.

    2
    September 1, 2016
  2. David Humphrey said:
    If Apple moved to Wyoming, and built the corporate spaceship headquarters there, a state with no state income tax, is that a tax haven, or just a jurisdiction with more favorable tax rate?

    If Apple moved to such a state, would not the state governor give a press conference on how his/her state was attracting business to the state with their “more fair” tax policy and how they were the more progressive pro business state?

    2
    September 1, 2016
    • David Drinkwater said:
      I think so! And as a Dallasite, I see that *many* companies are interested in doing business in “tax-friendly” or “pro-business” states. Apart from the resultant over-crowding, I don’t see much wrong with that. (Not “much*, but sorta still …)

      0
      September 1, 2016
  3. George Providaked said:
    I think it is worth repeating the money earned has already been taxed in countries where earned per local code e.g., VAT.

    .It is in Ireland until US Tax law/rate changes to something more reasonable. Then it will be taxed again by the US when returned.

    1
    September 1, 2016
  4. Fred Stein said:
    Hopefully the lesson is for our legislators and next president (not taking any sides). The EU is going after Apple and other US owned Internationals. If we offered our Internationals an attractive tax rate to repatriate overseas earnings, that would diminish the political energy behind the EU’s case.
    Collectively our Internationals have over $2T overseas, which is an attractive target.

    0
    September 1, 2016

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