A taxing time: Apple responds to tax avoidance allegations

Tiffany Paczek
13 November, 2017
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Sergey Kuzmin © 123RF.com

In the past week, the world has been abuzz with speculation about Apple’s tax habits and rumours of alleged tax structure exploitation. This follows on from the 2013 leaked financial papers, so named the ‘Paradise Papers’, obtained by The New York Times and the BBC, which investigated the way in which the company manoeuvred around the Irish taxation laws.

In The New York Times, Jesse Drucker and Simon Bowers wrote, “Irish officials began to crack down on the tax structure Apple had exploited. So the iPhone maker went hunting for another place to park its profits, newly leaked records show. With help from law firms that specialise in offshore tax shelters, the company canvassed multiple jurisdictions before settling on the small island of Jersey, which typically does not tax corporate income.

“The previously undisclosed story of Apple’s search for a new tax haven and its use of Jersey is among the findings emerging from a cache of secret corporate records from Appleby, a Bermuda-based law firm that caters to businesses and the wealthy elite,” Drucker and Bowers added.

“The documents reveal how big law firms help clients weave their way through the gaps between different countries’ tax rules. Appleby clients have transferred trademarks, patent rights and other valuable assets into offshore shell companies, avoiding billions of dollars in taxes. “

Reports have also emerged indicating that Apple had sought to extend its tax avoidance to Australian shores. The Guardian has revealed that the law firm at the centre of the Paradise Papers, Appleby, had developed a plan to set up a ‘stealth’ office in Sydney or Melbourne, but avoid paying tax here. Appleby declined to comment on its supposed Australian project, but did say, “Appleby operates in highly regulated jurisdictions and, like all professional organisations in our regions, we are subject to frequent regulatory checks and we are committed to achieving the high standards set by our regulators.”

Last week Apple released a statement to the press entitled ‘The facts about Apple’s tax payments‘, which has been produced in response to the recent reports of the company’s tax inaccuracies.

“Apple believes every company has a responsibility to pay its taxes and, as the largest taxpayer in the world, Apple pays every dollar it owes in every country around the world,” the company states in the release. “We’re proud of the economic contributions we make to the countries and communities where we do business.

“When Ireland changed its tax laws in 2015, we complied by changing the residency of our Irish subsidiaries and we informed Ireland, the European Commission and the United States. The changes we made did not reduce our tax payments in any country.

“The debate over Apple’s taxes is not about how much we owe, but where we owe it. As the largest taxpayer in the world we’ve paid over US$35 billion in corporate income taxes over the past three years, plus billions of dollars more in property tax, payroll tax, sales tax and VAT.”

Apple also says that it firmly believes comprehensive tax reform is essential and that, for many years, it has been advocating for the simplification of the tax code. “Reform that allows a free flow of capital will accelerate economic growth and support job creation. A coordinated legislative effort internationally will remove the current tug of war between countries over tax payments and ensure certainty of law for taxpayers,” Apple says.

Image: Sergey Kuzmin © 123RF.com

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