Apple's relocation of Irish subsidiary to Jersey 'did not reduce tax liabilities'

Thursday, 09 November 2017
US technology giant Apple has defended its setting up of a subsidiary company in Jersey in 2015, when corporation tax law was changed in Ireland, the company's usual preferred place of residence for its foreign subsidiaries.

 

The company's actions were revealed by the BBC TV current affairs programme Panorama, which obtained it from the cache of private documents stolen from offshore law firm Appleby in a cyber-hacking attack last year.

The Panorama coverage was limited to noting that Apple had set up some Jersey companies, without being able to explain their function. Apple has now published a reply giving more details.

Like many large US-based multinational companies, Apple has a big pool of profits earned from overseas countries that it does not wish to repatriate to the US immediately, because of the 35 per cent US corporation tax it would then pay. It thus keeps these earnings offshore - until 2015, in an Irish subsidiary company. Apple says it has earmarked more than USD36 billion to cover these deferred US taxes. This is in addition to the USD35 billion the company paid in corporate income taxes over the past three years.

In 2015, in response to international disquiet at the low rates of tax being paid there by Apple, Ireland changed its tax laws to force companies operating there to also have tax residence there. Apple responded by changing its corporate structure to comply. It was during the preparation for this process that the company contacted Appleby through its advisers at Baker McKenzie, who were researching suitable new locations for some of Apple's subsidiaries.

Since then, Apple says, all its Irish operations have been conducted through Irish-resident companies, and accordingly it pays tax at Ireland’s statutory 12.5 per cent. Also, however, the subsidiary which holds its overseas cash became resident in Jersey, 'specifically to ensure that tax obligations and payments to the US were not reduced'.

'Since then Apple has paid billions of dollars in US tax on the investment income of this subsidiary', it says. 'There was no tax benefit for Apple from this change and, importantly, this did not reduce Apple's tax payments or tax liability in any country.'

The company adds that it agrees reform of international tax rules is needed, but that it must be done through 'a coordinated international legislative effort that will remove the current tug of war between countries over tax payments and ensure certainty of law for taxpayers'. It insists it is fully compliant with tax law as it stands.

'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', it said. 'The changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and over the last three years we have paid USD1.5 billion in tax there. Our changes also ensured that our tax obligation to the United States was not reduced.'

The Jersey government and Jersey Financial Services Commission have also issued statements on the controversy. But as they have not yet been shown any of the source documentation stolen from Appleby, they are unable to clarify matters further.

Sources

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