Update: Apple has responded with an extensive statement on its newsroom site. It says corporate tax rate on foreign earnings is 21 percent, and 35 percent on income from overseas investments. It says “no operations or investments were moved from Ireland”.
The New York Times has published a lengthy report claiming Apple started using the island of Jersey as a tax haven after its tax arrangement in Ireland came under fire. The report, which is based on leaked corporate documents, says Apple settled on Jersey which doesn’t usually tax corporate income after shopping around.
According to the report, Apple started the process of finding a new home for its offshore profits three years ago, emails show:
“For those of you who are not aware Apple are extremely sensitive concerning publicity,” wrote Cameron Adderley, global head of Appleby’s corporate department, in a March 20, 2014, email to other senior partners. He added, “They also expect the work that is being done for them only to be discussed amongst personnel who need to know.”
Apple decided that its new offshore tax structure should use Appleby’s office in Jersey, which is one of the Channel Islands and has strong links to the British banking system. Jersey makes its own laws and is not subject to most European Union legislation, making it a popular tax haven.
Once Jersey was chosen, Apple strategically moved two subsidiaries to Jersey while locating a third in Ireland:
The campaign seemed to work. “For existing companies, there will be provision for a transition period until the end of 2020,” Mr. Noonan declared in October 2014. The gradual phase-in would apply not just to existing companies but to any new ones created by that December.
This gave Apple just enough time. By the end of the year, Jersey had become the new tax home of the Irish companies Apple Sales International and Apple Operations International.
But a third Apple subsidiary, Apple Operations Europe, instead became resident in Ireland.
There’s a theory about why Apple may have arranged its subsidiaries this way, but Apple isn’t discussing it.
Apple would not say why. But tax experts offer one possible reason. While press attention focused on Ireland’s crackdown on the double Irish, officials announced a measure that gave Ireland more appeal: The country expanded its tax deductions for companies that move rights to intellectual property — like patents and trademarks — into Ireland. If an Irish company spent $15 billion buying such rights, even from a fellow subsidiary, it could claim a $1 billion tax deduction each year for 15 years.
Apple declined to say whether it has availed itself of the new benefit.
Apple did respond to an inquiry by The Times noting that the shift did not reduce its tax payments, however, while adding that Apple supports ongoing tax reform efforts.
An Apple spokesman, Josh Rosenstock, declined to answer most questions about the company’s tax strategy. He did say that Apple had told regulators — in the United States and Ireland and at the European Commission — about the reorganization of its Irish subsidiaries. “The changes we made did not reduce our tax payments in any country,” he said.
He added: “At Apple we follow the laws, and if the system changes we will comply. We strongly support efforts from the global community toward comprehensive international tax reform and a far simpler system.”
You can read the full piece here.