Paradise Papers: Apple Used Tax Loopholes to Shift Profits, Avoid Paying Billions of Dollars in Taxes

At a U.S. Senate hearing convened in 2013, Apple Inc. CEO Tim Cook forcefully disputed allegations that the Cupertino-based company had dodged tens of billions of dollars in taxes by shifting profits overseas.

“We pay all the taxes we owe,” he said from the dais, “every single dollar. We don’t depend on tax gimmicks. We don’t move intellectual property offshore and use it to sell our products back to the United States to avoid taxes. We don’t stash money on some Caribbean island.”

Apple may not stash profits in a Caribbean tax haven, but it found another island refuge in the English Channel.

According to a trove of newly leaked documents called the Paradise Papers, Cupertino-based Apple Inc. sidestepped government crackdowns by shifting profits from Ireland to Jersey, a tiny island with a corporate tax rate of 0 percent.

The cache of 13.4 million documents, obtained by German newspaper Süddeutsche Zeitung and shared with the International Consortium of Investigative Journalists, show how multinational firms exploit tax loopholes by playing nations against each other.

Apple’s elaborate tax avoidance has been an open secret for years. But the Paradise Papers reveal how the iPhone maker in 2015 sidestepped tax reforms in Ireland—where it had parked profits in three “ghost firms” that claimed tax residency nowhere in the world—by expatriating its earnings to an even laxer regulatory climate.

With the European Commission forcing Ireland to claim $14.5 billion in back taxes, Apple’s advisers began shopping around for another tax refuge.

In 2014, Apple attorneys emailed a query to a law firm called Appleby, which specializes in creating offshore tax shelters. One of the 14 points in the questionnaire requested that the office: “Confirm that an Irish company can conduct management activities … without being subject to taxation in your jurisdiction.”

Apple also sought assurance that the local political climate would remain business friendly. The Silicon Valley tech giant asked: “Are there any developments suggesting that the law may change in an unfavorable way in the foreseeable future?”

By setting up shop in Jersey, Apple continues to avoid taxes and amass $252 billion in offshore cash. The Irish government’s attempt to close loopholes has had little impact.

The revelations in the Paradise Papers come as U.S. Republican lawmakers unveiled a sweeping overhaul of the tax code, which would permanently slash the corporate tax rate from 35 to 20 percent. That change alone is estimated to reduce federal revenues by $1.5 trillion over the coming decade.

House Speaker Paul Ryan called the tax plan critical for allowing the U.S. to compete with the rest of the world. But according to the Paradise Papers and findings from the U.S. Senate inquiry four years ago, Apple—the most profitable firm on the planet—already pays an effective tax rate far below 35 percent by claiming its profits overseas.

Despite the fact that these tax maneuvers play out on a global scale and are technically lawful, the impact is felt locally. By pioneering new lengths for corporate tax avoidance, Apple, Google and other high-profile tax dodgers siphon investment from public infrastructure and public schools in their Silicon Valley hometowns and beyond.

Jennifer Wadsworth is a staff writer for San Jose Inside and Metro Newspaper. Email tips to [email protected] or follow her on Twitter at @jennwadsworth.

11 Comments

  1. Yep, this is what could be called Legal Tax Evasion. Money can move seamlessly across borders, but people can’t, even if they’re dying. That kind of thinking shows our priorities, our true stripes, and paints a very bleak and dark picture of the humans of today.

  2. Leftwing liberals from Silicon Valley are tax cheats, oh what a surprize, must have learned that from the Clintons when the sold that American uranium to the Russian for some cash to the trust and speaking engagements for Billy.

    Why I’m going to dump my stock and crush my Iphone and cancel my facebook account, oop’s I don’t have any of those.

  3. “… all the taxes we owe…” — I suspect his interpretation of tax obligations will prove as self-serving as Harvey Weinstein’s interpretation of consensual sex.

    “We don’t depend on tax gimmicks.” — When you rely on a complex and cunning strategy there’s no need to depend on gimmicks.

    “We don’t move intellectual property offshore and use it to sell our products back to the United States to avoid taxes.” — Neither did Al Capone, but that didn’t mean he wasn’t dodging taxes in other ways.

    “We don’t stash money on some Caribbean island.” — Neither does anyone who watches the show American Greed. Those islands are teeming with federal beancounters.

    With his testimony, Mr. Cook proved he can lawfully dodge the truth every bit as well as he has lawfully dodged the IRS (no doubt thanks to legal advice of equally high quality). With that done, he can now get back to selling overpriced gadgets and posturing himself as having the character required to justify his preaching morals to the rest of us.

  4. Maybe carefully worded spin by both sides, and Congress putting on a show to try to look like they are surprised and annoyed? Ironic. Did the House not read the tax laws they wrote, laws that allow tax avoidance and tax deferral?

    I think Cook was talking about US tax owed when he spoke, not the tax owed on UK manufacturing. The article is about tax owed in Ireland. The anti-Apple folks are trying to draw dots between tax avoidance in the UK and the deprivation of schools and public infrastructure in the US. I fail to understand the tie. Our Federal government has a very complicated tax code for multi-national manufacturing and retail sales. Apple is simply using all the tools Congress provides to help US competitiveness. Complicated tax reduction strategies are part of the game for any large and developed country. The UK has them as well, and this is why the independent Jersey shows up in the story. It is not a secret.

  5. I’d be outraged if I thought the U.S. government would have put the money to better use than Apple and it’s shareholders.

  6. Don’t you love how these Democratic companies such as Apple, Facebook, Microsoft, and more exhibit this self-righteous attitude about societal issues, but then insure that they force the rest of us to pay more taxes to make up for their greed.

  7. Doesn’t everyone know this is how its been done for years? Double Irish, etc. All tech does it.

  8. There is nothing wrong whatsoever with Apple paying as few taxes as legally possible. The larger wrong is the way politicians and government bureaucrats waste what they’re given, including on themselves.

    • There is nothing legally wrong with Apple’s money migrating from one country to another for economic reasons (I guess it’s ok for money to relocate, but not people). But it’s morally wrong.

      Scan through the open letter to Tim Cook from the editor-in-chief of the Süddeutsche Zeitung, Germany’s leading daily and the outlet that obtained the Panama Papers and later the Paradise Papers, where these revelations came from. It’s here:
      https://projekte.sueddeutsche.de/paradisepapers/politik/dear-tim-cook-e322998/

      Yeah, I gotta agree with them. Tim seems to talk out of two sides of his face.

      • > But it’s morally wrong.

        Really?!

        But WHY is it morally wrong?

        I’m trying to goad some progressive into actually explaining what “morality” is, and in particular, what THEIR morality is.

        Progressives have been fond of snickering and sneering at OTHER people’s morality. Time to find out if there are snickers to be had at the expense of “progressive morality”.

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