Paradise Papers: Apple’s secret tax bolthole revealed

Paradise Papers: Apple’s secret tax bolthole revealed, by the BBC.

The world’s most profitable firm has a secretive new structure that would enable it to continue avoiding billions in taxes, the Paradise Papers show.

They reveal how Apple sidestepped a 2013 crackdown on its controversial Irish tax practices by actively shopping around for a tax haven.

It then moved the firm holding most of its untaxed offshore cash, now $252bn, to the Channel Island of Jersey.

Apple said … it remained the world’s largest taxpayer, paying about $35bn (£26bn) in corporation tax over the past three years, that it had followed the law and its changes “did not reduce our tax payments in any country”. …

Up until 2014, the tech company had been exploiting a loophole in tax laws in the US and the Republic of Ireland known as the “double Irish”.

This allowed Apple to funnel all its sales outside of the Americas – currently about 55% of its revenue – through Irish subsidiaries that were effectively stateless for taxation purposes, and so incurred hardly any tax.

Instead of paying Irish corporation tax of 12.5%, or the US rate of 35%, Apple’s avoidance structure helped it reduce its tax rate on profits outside of the US to the extent that its foreign tax payments rarely amounted to more than 5% of its foreign profits, and in some years dipped below 2%.

Stephen Green:

Corporations don’t pay taxes — they collect them. Any taxes are actually paid by customers (higher prices), employees (lower wages), shareholders (smaller returns), etc.

The ideal corporate tax rate is therefore zero, but politically that would never fly. Instead we have a tangled mess of corporate tax law, which benefits large corporations with their armies of lawyers and lobbyists. Small corporations which can’t afford all that are put at a competitive disadvantage, not to mention sole proprietorships which pay through the nose on everything.

But since we can’t get an ideal corporate tax rate, a flat and transparent corporate tax would be the next best thing. Our current system is the worst of all possible worlds: It diverts resources and manpower away from investment and innovation, and stifles entrepreneurs to the benefit of established interests.

On the other hand, our system creates endless possibilities for corruption and graft. So it has that going for it. Which is nice for Washington.