How to make $30 billion and pay no corporate income tax, the Apple way

How to make $30 billion and pay no corporate income tax, the Apple way

Apple went to Ireland, and it found a pot of gold. Or more precisely, it managed to bring in $30 billion in overseas profits over a four-year period without paying a dime of corporate income tax to the Irish, American or any other national government.

That is one key conclusion in a new report from the Senate Permanent Subcommittee on Investigations on the computer giant’s strategies for avoiding U.S. corporate income tax. It is a rare and detailed window into how multinationals juggle their international operations to avoid having to pay the taxman. This report may be about Apple, but the information it contains will sound familiar to anyone who has talked to tax lawyers or studied the 10-Ks of other major companies that do business around the world.

“Apple complies fully with both the laws and spirit of the laws,” the company said in prepared testimony on the matter it posted to its Web site (CEO Tim Cook is scheduled to testify Tuesday). “And Apple pays all its required taxes, both in this country and abroad.” Nothing in the report contradicts that assertion, and that is why what it reveals is all the more startling. This isn’t some rogue company playing fast and loose with the tax code. This is one of America’s most successful companies finding ways to shift things around, legally and in plain sight.

Here’s how it works:

Apple Operations International is registered in Cork, Ireland, but has “no physical presence at that or any other address,” according to the report. Indeed, the corporate entity has existed for 30 years and apparently never had a single employee. Of the three people on its board, all Apple employees, two live in California; 32 of its last 33 board meetings took place in Cupertino, and the Irish director participated in seven of them. Its assets are managed by a Nevada company, and held in bank accounts in New York.

It falls in a strange loophole: Because it is not managed and controlled in Ireland, that nation does not tax its earnings, even at the low Irish corporate income tax rate. And because it is not registered in the United States, it has owed no American taxes. It would be a little like an individual living in America and earning a living from investments in Ireland and thus being able to avoid paying taxes to either government—a strategy that decidedly would not work, by the way.

From 2009 to 2012, the Irish affiliate received $29.9 billion in dividend income. The upshot, according to the report: “According to Apple, AOI’s net income made up 30% of Apple’s total worldwide net profits from 2009-2011, yet Apple also disclosed to the Subcommittee that AOI did not pay any corporate income tax to any national government during that period.”

There is another clever strategy that Apple uses that the new report documents — holding a large chunk of its intellectual property in low-tax Irish affiliates as well. Think of it this way: If you live in, say, Germany and buy an IPhone, you are buying a physical object that was assembled in China from parts that come from all over. But you are also buying a piece of the intellectual property of Apple — a benefit from the labor of thousands of designers and programmers and marketers who are in California.

But Apple has no desire to pay high California and U.S. income tax on all its intellectual property. So instead, Apple Inc. shares that cost with its Irish affiliates in proportion to their sales. As the report puts it: “By structuring its intellectual property rights and distribution operations in the manner it did, Apple Inc. was able to avoid having worldwide Apple sales revenue related to its intellectual property attributed to itself in the United States where it would be subject to taxation in the year received. Instead, Apple Inc. arranged for a large portion of its worldwide sales revenue to be attributed to [Apple Service International] in Ireland. As explained earlier, according to Apple, Ireland has provided Apple affiliates with an income tax rate of less than 2% and as low as 0.05%.”

In its prepared testimony, Apple makes a point of emphasizing all the even more aggressive tax avoidance strategies it doesn’t pursue. “Apple does not use tax gimmicks. Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the U.S. in order to avoid U.S. tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands.”

The subcommittee is investigating Apple’s tax strategies as part of a broader campaign for corporate income tax reform in the United States. The strategies it has pursued are not unique, not at the outer limits of the law, and involve one of America’s most prominent and successful companies. As such, it shows just how much work on the corporate tax code there is to do.

Capitalism at its finest eh?

Thought the answer would be to head obama's job panel which never convenes.

Just like GE!!!!!!

I always see references to Cayman banks. Ignorance abounds. Don't people know just how many IRS audits are conducted on Cayman banks as well as pretty much every other bank on the islands??? It is impossible to hide money there.

It isn't capitalism either. If they are taking advantage of Irish law, you must realize Ireland is in the top ten most socialist countries in the world.

http://blog.peerform.com/top-ten-most-socialist-countries-in-the-world/

More accurately; Globalism at its finest eh???

Marconius wrote: If they are taking advantage of Irish law, you must realize Ireland is in the top ten most socialist countries in the world.

http://blog.peerform.com/top-ten-most-socialist-countries-in-the-world/

More accurately; Globalism at its finest eh???

Ah, the S-word.....

Strange though: of those 10 there, 6 are in the top 10 "best places to be born" in 2013, with 9 in the top 15.....

So socialism is bad then....

And what does the low tax rate that apple are paying here have to do with the alleged socialism in Ireland anyway? If it were socialism, which seems to be defined in the US as "taxing the shit out of anyone who has money (ignoring the fact that all the big companies and most of the super-rich pay little or no tax) and give it to all the moochers and the other people who voted for Obama", you'd think we'd be getting a lot more money from them? Our normal corporate tax rate is 12.5%, but a lot of the big multinationals get "sweetheart deals" where if they set up here they get to pay 1-2% tax (or less) for the first 5-10 years or so, as a way of enticing them here to create jobs. That's both capitalism and globalization at work.

Miles1 wrote:

Marconius wrote: If they are taking advantage of Irish law, you must realize Ireland is in the top ten most socialist countries in the world.

http://blog.peerform.com/top-ten-most-socialist-countries-in-the-world/

More accurately; Globalism at its finest eh???

Ah, the S-word.....

Strange though: of those 10 there, 6 are in the top 10 "best places to be born" in 2013, with 9 in the top 15.....

So socialism is bad then....

And what does the low tax rate that apple are paying here have to do with the alleged socialism in Ireland anyway? If it were socialism, which seems to be defined in the US as "taxing the shit out of anyone who has money (ignoring the fact that all the big companies and most of the super-rich pay little or no tax) and give it to all the moochers and the other people who voted for Obama", you'd think we'd be getting a lot more money from them? Our normal corporate tax rate is 12.5%, but a lot of the big multinationals get "sweetheart deals" where if they set up here they get to pay 1-2% tax (or less) for the first 5-10 years or so, as a way of enticing them here to create jobs. That's both capitalism and globalization at work.

Don't believe I even mentioned anything bad about socialism, so you can quit trying to defend it so vehemently. You like it, that is fine. I am not in the position to say anything. If anything, I kinda bitched about globalism. I just pointed out that you were wrong in your slamming of capitalism.

Now chill out.

Marconius wrote:
Don't believe I even mentioned anything bad about socialism, so you can quit trying to defend it so vehemently. You like it, that is fine. I am not in the position to say anything. If anything, I kinda bitched about globalism. I just pointed out that you were wrong in your slamming of capitalism.

Now chill out.

Sorry, bit of a knee-jerk reaction from being on a few other message boards/facebook groups..... Am not a big fan of globalization either, is all just one big race to the bottom, doesn't matter how cheaply your country can do XYZ, someone is eventually going to come along and undercut you. Back in the 80s everyone was running scared that the Japanese were going to take over the world, now everyone is complaining about all the manufacturing/services jobs being outsourced to China and India, give it another 10 years and the indians will be complaining about the goddamn kazakhs or mongolians or whatever taking all their jobs.... And the only people to win at the end of it all are the vulture capitalists and the CEOs/top shareholders of the big multinationals who get to maximize profits by moving production to the next and newest lowest cost centers.....

Cant rightly blame capitalism or even greed when it comes to taking advantage of LEGAL loopholes they can. Thats just prudent. See, politicians pass laws thinking people are just going to blindly take it, without looking for other ways to minimize their tax burdens. And global trade and globalization are two different things, imo. To me, globalization simply represents the interdependency of global economies, their debt, foreign aid, and the IMF and UN plans to globally redistribute the wealth. To the point where a frog fart in indonesia can bring the whole "global economy" down. Brilliant!

Miles1 wrote:

Marconius wrote:
Don't believe I even mentioned anything bad about socialism, so you can quit trying to defend it so vehemently. You like it, that is fine. I am not in the position to say anything. If anything, I kinda bitched about globalism. I just pointed out that you were wrong in your slamming of capitalism.

Now chill out.

Sorry, bit of a knee-jerk reaction from being on a few other message boards/facebook groups..... Am not a big fan of globalization either, is all just one big race to the bottom, doesn't matter how cheaply your country can do XYZ, someone is eventually going to come along and undercut you. Back in the 80s everyone was running scared that the Japanese were going to take over the world, now everyone is complaining about all the manufacturing/services jobs being outsourced to China and India, give it another 10 years and the indians will be complaining about the goddamn kazakhs or mongolians or whatever taking all their jobs.... And the only people to win at the end of it all are the vulture capitalists and the CEOs/top shareholders of the big multinationals who get to maximize profits by moving production to the next and newest lowest cost centers.....

I am no fan of unfettered capitalism. It leads to what we have now.....global corporatism where governments are in fact run by the corporations. It doesn't matter how many social tendencies Ireland or the USA has.....it screws us all in the end......of course the secret of true, unfettered socialism is that it is really open corporatism. In respects, without checks in place, both socialism and capitalism end at the same place......oligarchy.

Miles1 wrote:

Marconius wrote:
Don't believe I even mentioned anything bad about socialism, so you can quit trying to defend it so vehemently. You like it, that is fine. I am not in the position to say anything. If anything, I kinda bitched about globalism. I just pointed out that you were wrong in your slamming of capitalism.

Now chill out.

Sorry, bit of a knee-jerk reaction from being on a few other message boards/facebook groups..... Am not a big fan of globalization either, is all just one big race to the bottom, doesn't matter how cheaply your country can do XYZ, someone is eventually going to come along and undercut you. Back in the 80s everyone was running scared that the Japanese were going to take over the world, now everyone is complaining about all the manufacturing/services jobs being outsourced to China and India, give it another 10 years and the indians will be complaining about the goddamn kazakhs or mongolians or whatever taking all their jobs.... And the only people to win at the end of it all are the vulture capitalists and the CEOs/top shareholders of the big multinationals who get to maximize profits by moving production to the next and newest lowest cost centers.....

I am no fan of unfettered capitalism. It leads to what we have now.....global corporatism where governments are in fact run by the corporations. It doesn't matter how many social tendencies Ireland or the USA has.....it screws us all in the end......of course the secret of true, unfettered socialism is that it is really open corporatism. In respects, without checks in place, both socialism and capitalism end at the same place......oligarchy. The secret is to find a happy medium that the populace can live with. In tUSA, that medium has long come and gone.

Even though you see me bitch about government day in and day out, government is indeed the answer to corporatism. Our government is screwed because not enough checks were put in. We now have members of government who have family members as corporate lobbyists in their ear. We also have a ruling class. Many law makers are in fact related to the law makers they replaced. I have no answers on how to keep government in check in the long run, but it is historic fact that all governments run amok. We are really close to bad things here. Too bad that due to globalism, when we fall, you guys in Ireland, and everywhere else, will fall too. Fiat currencies are too intertwined.