Apple defends its tax record, declaring US payments were ‘not reduced’

Apple has defended its decision to move cash to an overseas Jersey tax haven in order to avoid US and European tax clampdowns.

As part of the Paradise Papers leak, which exposed the offshore tax affairs of the likes of the Queen, Uber and McDonald’s, it was revealed that Apple had moved its subsidiaries in Ireland to Jersey to avoid corporate taxes on the whole.

Previously, Apple had used a financial process dubbed the “double Irish” that allowed it to take advantage of Ireland’s low corporate tax rates by funnelling the profits it made outside of the US to its Irish subsidiaries, paying less tax rather than be subject to higher rates in the US.

But in 2014, The European Union probed Apple’s tax practices and ordered it to pay back nearly $15 million in tax. In 2015, Ireland changed its tax laws, which then prompted Apple to explore other options, resulting in it turning to law firm Appleby which helps operate offshore funds stored in Jersey.

This led to accusations that Apple was avoiding pay the tax it owed in the US on its profits, as it would be required to pay a 35% share to US authorities if it wasn’t paying foreign tax rates at 5% or less via its subsidiaries.

However, Apple has said it does pay the taxes it legitimately owes and that the Jersey arrangement was not to avoid tax but to “specifically to ensure that tax obligations and payments to the US were not reduced”.

“Apple’s subsidiary which holds overseas cash became resident in the UK Crown dependency of Jersey, specifically to ensure that tax obligations and payments to the US were not reduced. Since then Apple has paid billions of dollars in US tax on the investment income of this subsidiary. There was no tax benefit for Apple from this change and, importantly, this did not reduce Apple’s tax payments or tax liability in any country,” Apple said in a statement.

“Far from being ‘untouched by the United States’, Apple pays billions of dollars in taxes to the US at the statutory 35 percent rate on investment income from its overseas cash.”

Apple noted that there needs to be a change in international tax rules, and said that the issues with its tax are “not about how much we owe but where we owe it”.

“We strongly support efforts from the global community toward comprehensive international tax reform and a far simpler system, and we will continue to advocate for that,” the Cupertino company added.

Despite all these claims, according to the BBC, Apple’s 2017 accounts show out of the $44.7 billion it made that financial year, it only paid $1.6 billion in taxes which equates to a low rate of 3.7%, far lass that it would have to pay in the US.

Corporate tax affairs are generally complex and murky even when performed with full legitimacy, so it’s difficult to tell if Apple tax practices were inherently wrong. Likely more investigations into the Paradise Papers with throw up more information and insight into the tax operations of one of the world’s richest companies.

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