Image of CFO Oppenheimer and CEO Cook

Image of CFO Oppenheimer and CEO Cook

Following the announcement that Apple CFO Peter Oppenheimer will be retiring in September, the Australian Financial Review has uncovered evidence of a scheme that it says has allowed Apple to move around $9 billion in untaxed Aussie profit to Ireland. The program has allowed Apple to get away with paying only $200 million in taxes on $8.9 billion in profit over the past ten years or so.

Here’s how the whole thing works: Apple has created an Ireland-based company known as Apple Sales International which contributes money toward the research and development budget in Cupertino. This allows the company to legally claim an economic stake in these products and gives ASI partial ownership of the intellectual properties that comprise Apple’s products.

Most of the profits for international sales of these products are then routed to Apple Sales International under the guise of intellectual property licenses. As noted above, this figure comes out to around $8.9 billion over the course of about a decade. This money is paid out bt Apple Australian before taxes, allowing the Australian branch of the company to report much lower profits (and thus pay much lower taxes) while ASI redistributes the money back into Cupertino’s budget.

It should be noted that nothing here is actually illegal according to Australian government officials. Shifting money overseas to avoid taxation isn’t an incredibly rare practice. Many large international companies use tricks and loopholes to minimize the impact of taxes. Despite that, the Australian government has said that it plans to attempt to recover the taxes that Apple and others have avoided.

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41 Responses to “Apple under fire for Australian profit-shifting scheme that moved $9 billion in untaxed profit to Ireland”

  1. Then lower their taxes then. We do realize that the company does not pay any taxes, WE DO. Stop stealing OUR money.

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  2. fredhstein says:

    “..isn’t an incredibly rare practice.” means what? It is a common practice? It is a rare but not incredibly rare? It is medium rare?

    Mike, as investors we want Apple to gain every legal advantage. We also want the company to have it’s own ethical standards, a moral compass.

    I would like you to help us understand whether Apple is within legal and moral norms. Frankly if Apple has to pay some back taxes and it is fair, not a witch hunt, fine. But please no innuendo.

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  3. Len Williams says:

    Until the last paragraph the tone of this article is that Apple is somehow lying and cheating the Australian government. and only in the last paragraph is it admitted that Apple isn’t doing ANYTHING illegal. Shame on you Mr. Beasley for writing such obvious clickbait. ALL companies use legal loopholes to save themselves from paying taxes. Those that don’t are uneducated or plain dumb. So don’t try to slant this article that Apple is trying to get away with something that isn’t lawful. The simplicity is that if no laws are violated, no crime has been committed. The title of this article should be “Australian officials scrambling to write new laws to plug legal loopholes that have allowed Apple to pay lower taxes”. The problem is NOT with Apple being the bad guy and operating illegally. I am sick of the constant bashing and innuendo leveled at Apple, when each time it is discovered that they’re operating within the law. If the politicians want more of Apple’s pile of cash (politicians always do) they need to write and pass new laws to do so. And when the laws are passed, Apple will again be in compliance with whatever is now law, but will still be trying to save itself money any way it can (just like ANY other business in the world).

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    • shm1ck83 says:

      Totally agree!

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    • Pedro says:

      Not illegal but profouldly immoral.

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      • Mike Dowling says:

        Only leftist dupes would think following the law is immoral.

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      • You are right. But corporations are obliged to seek-out tax efficiency.

        If governments design games, it is hypocritical to blame companies who follow the rules and try to win.

        If governments genuinely want multi-national companies to pay tax in the country where the transactions occur, then taxing profits is not the right solution.

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      • “then taxing profits is not the right solution.”

        Hello! Profits are the only monies left to tax. The government surely can’t tax expenses.

        The issue here are the unintended consequences of a system set up to promote business. Smart lawyers and accountants can find loopholes the law makers did not intend. Yes, you are right the companies are probably doing nothing illegal but morally they are corrupt.

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      • What seems morally dubious criticise an activity, while designing legislation which encourages it.

        Corporations are not built to fulfil a moral goal. They are commercial engines. And they are formally obliged to maximise ever penny of profitability though legal means.

        The moral obligation rests with politicians who design these game-able systems.

        If a business entity resides in just one territory, it is obliged to pay corporation tax. While multi-nationals can beam profitability around like Scottie on LSD. See Apple, Amazon, EBay, Google.
        This puts domestic corporations at a commercial disadvantage.

        Saying “I wish entity X would volunteer to pay more tax” isn’t a very sustainable solution.

        To eliminate this, politicians will have to either.
        Shift more taxation to VAT.

        Or perhaps a scheme whereby corporations pay 20% of profits, or 1% of turnover, whichever is the larger figure.

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      • PMZanetti says:

        LOL Omg I just fell out of my chair! What a hilarious statement. Immoral. Avoiding ridiculous corporate tax is illegal. Government stealing money legitimately earned corporate profits is moral.

        Gotcha. Grow up nut bag.

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      • So, is it also immoral for you to claim a deduction on your taxes? It certainly isn’t illegal, but under your logic any legal action taken to lower the overall taxes paid is immoral. Therefore, I assume that you are not a hypocrite and therefore do not claim any deductions or credits when you file your taxes, because that is immoral in your view.

        Or does that morality only apply to people other than yourself?

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    • Kyle Foster says:

      Finally someone who understands..

      Like

  4. Why not reframe and focus the article on complacency of the Australian government on blocking the loopholes that many companies take advantage at a cost of ordinary tax paying people?

    It wouldn’t surprise me if the same people writing the tax laws are the same people advising these companies.

    BTW – Isn’t this also how terrorist organisations shift money around the global?

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  5. As long as that money is used to build awesome products or build the share price of AAPL then I don’t care. I will care if this was done for Cooks hippie agenda.

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  6. Profit belongs to the company that earned, not the government. The government doesn’t own everything and I really hate seeing articles like this.

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  7. Tim Jr. says:

    It’s how their tax law is written.. what a sensationalist article.. this is why I’ve been staying away from 9to5 lately.

    They want more taxes, close the f’ing loop holes. pfffff

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  8. Country A charges high taxes. Country B charges less taxes. Sounds like country A needs to lower it’s taxes.

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    • thejuanald says:

      Sounds like the company shouldn’t be doing business in Country A if they don’t like their tax laws instead of finding a loophole to basically cheat the system.

      You people will back Apple no matter what, it’s insane.

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      • Some Dude in NC says:

        It’s not cheating the system. It’s working within the system as designed. The system is poor. The people we should be annoyed with are the governments that create the laws that have these loopholes in them. Some countries have a much simpler tax rule: If you sell the product here, you pay taxes on it here. Some don’t. We’ve already seen this exact story in the US. They do the same thing here. Tim Cook testified before the US Congress that he would like the law to change, but until it is, he is legally obligated to take advantage of it, and even if he were not, he would be putting Apple at a competitive disadvantage if he didn’t take advantage since all of Apple’s competitors are doing the same thing.

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      • Tallest Skil says:

        Show us where anyone cheated any system or broke any law.

        You’re a worthless, pathetic idiot who is incapable of reading or comprehending words in any language. Shut up and go away.

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      • thejuanald says:

        Is there seriously no moderation on this page? Tallest Skil is a worthless human being who makes Apple fans look bad.

        Some Dude in NC, I understand what loopholes are, a way of legally cheating the system that is set in place. I also agree that the system is poor and needs to be reworked. My comment was directed at what Piliger Black posted, he suggested that if one country has lower taxes than another, the country with higher taxes should lower them. This is an incredibly short sighted way of looking at things.

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      • Len Williams says:

        Let me guess, you’ve never owned a business or know a single thing about accounting and financial compliance. You’re a worker who feels the government should be giving you more and not taking so much of your paycheck (guess what, you’re doing exactly what Apple is doing). You’re quick to jump onto the “Apple is cheating!” bandwagon where nothing of the kind exists.
        Get this: It is the job of every single accountant and financial manager in every company EVERYWHERE in the world to save his/her company as much money within the tax laws as possible when paying taxes. These millions and millions of accountants and financial managers scrutinize the tax laws and work out how to take every deduction possible within the law — it’s their job. This is not “cheating” but part of what they are expected to do, and if they’re not doing it, they get fired. If these same guys are actually breaking the law, the responsible people can go to jail and the company can face huge fines and penalties.
        If taking every deduction allowable by law is wrong, then you should be positively INCENSED about H&R Block and hundreds of other companies that prepare tax forms for individuals and corporations. How dare they try to save you from paying too much to the government!

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      • thejuanald says:

        I may not own a business, but it’s easy to see how funneling money made in one country to another in order to avoid taxes is shady. I know every company does it, that doesn’t make it right, however. Maybe I was a little off base calling it cheating, but it is close. And, as a matter of fact, I do believe tax reform does need to occur in order to close loopholes like offshore tax havens and shell companies meant solely to funnel money.

        Then again, I’m just a poor little worker bee biomedical engineer. Try to sound a bit less condescending, please.

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  9. I don’t think this is unique to Australia, nor Apple the only company doing this, (Starbucks etc etc) all do it so to the comment made by Len Williams, agree, the laws need to change if people believe this is wrong.

    Mr. Mike, Beasley, this isn’t new news, what would be news, is when the laws change, how the additional taxes help the countries losing out, and what the International Corporations like Coca Cola, Pepsi, Apple, Microsoft … etc. change in their business and financial practice / process to avoid or comply? Don’t forget the lobbyists who **encourage and manage** the governments in many countries through various mean$ to ensure the laws don’t get change.
    -B.

    Like

  10. rogifan says:

    Man this site is getting worse every day. I don’t expect Apple rumor sites to be blatantly pro-Apple shills but these days the majority of stuff here has a decidedly negative tone. You guys need to get over iOS 7 already. Or move to another platform and turn this site over to people who would do better reporting.

    Like

  11. Firebender says:

    Legal or Illegal is irrelevant at this point as the major companies dictate and lobby the crap out of rules and regulations in order to shit and change any law in their favour. Has it ever occurred to you, that the majority of laws out there are to protect companies? A human being has less rights and laws to protect it than anything out there.

    Apple is doing something immoral, something most people seem to be fine with and leave out in any serious discussion or debate.

    Listen people, and I am not talking to the apple fans, fanatics or psycho lust driven fanboys, I am talking to the level headed people who understand that this is a computer company that has gotten way out of hand, somehow is involved in politics in ways they shouldn’t. At the end of the day they make iPods, iPhones and tablets, computers don’t seem to interest them much these days, unfortunately these are what we grew up with, but the new generation sees this company as some religious shrine to worship and their stores as some kind of temple.

    When a company becomes as big as Apple and can dictate terms and conditions that has political implications, then something is terribly wrong.

    This my opinion and as much as it pains the fanboy to read this, not everything is good about Apple. Steve Jobs is dead and has been rotting away for a while, he doesn’t give a rats ass about anything anymore, he’s dead and now Apple that once was in the late 90s and early 00s, is no more. Face the facts, man up and get real.

    Being a hipster is not cool.

    -Former Apple Employee. Yes you could find my name on the poster if you knew who I was. But you won’t, cause sometimes, it’s best to not be associated with Apple at all. (Some of you will understand this but most won’t)

    Like

  12. There does not exist a single multi-national corporation that does not engage in similar or even precisely the exact same profit shifting procedures as Apple. Google does the same thing. Microsoft? Yup. GM, everyone. Many use Ireland, some use other countries. This is not an issue that can be “fixed” – there will always be tax havens and corporations will always take advantage of their benefits. You have to remember that the richest companies and people in the world set all these policies – no one is going to change anything here.

    Instead of looking at the raw income tax that Apple supposedly doesn’t pay in Australia, how about looking at all the jobs it creates. The VAT it generates, property taxes, the other money it pumps into the national and local economies. Income tax is only a small piece of the pie, and if you want to argue morality, you should probably look more closely at the Australians doing the finger pointing, not at Apple and other multinationals whose purpose it is to maximize ROI for shareholders.

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  13. Apple (along with most all other corporations) is doing exactly what its supposed to do. Generate and protect its profits. They’re doing it legally. Morality has no face here nor should it. A wolf kills and eats other small animals. Can be disturbing but that’s the way it is. The wolf is doing exactly what its supposed to do to survive. If there are moral obligations to be realized here, they should start with the US government’s horrid mis-use of tax payer funds. Then, the moral issue’s can be decided. Until then, I support all of Apple’s legal tax maneuvering as well as all other corporations. They’re doing exactly what they are supposed to be doing. Like it or not.

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  14. I assume when customers buy products they are taxed right there. On top of that gov’ts want to tax companies selling those products so in essence the gov’t is getting twice the tax on the same products. For this fact alone I dont blame large companies trying to save a buck. As long as they do it legally which Apple did!

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  15. gonenomadic says:

    defend Apple all you like, end of the day who loses? you do.

    Like