Linked by Thom Holwerda on Thu 1st Sep 2016 22:42 UTC

Matt Gardner, the director of the Institute on Taxation and Economic Policy, took a look at Tim Cook's terrible letter to EU consumers regarding Apple's tax evasion, and pretty much tears it to shreds.

Apple created a complicated web of subsidiaries to avoid taxes, and the Irish government allowed it. Both the company and the country were complicit in this agreement. The idea that Ireland gave Apple guidance on "how to comply correctly with Irish tax law" makes both parties sound less guilty than they are. A better characterization would be that Apple cooked up a tax-dodging scheme, and Ireland allowed it.

Further along, Gardner actually opens up a major can of worms, arguing that either Apple provided false figures in its annual report, or Tim Cook is lying in his letter to EU consumers:

It doesn't appear to be even remotely truthful based on the numbers they publish in their annual reports. Each year they report that the majority of their profits are earned outside the U.S., with roughly a third (on average, over the past five years) coming from the U.S. When you look at the 10K, the annual report for 2015, you see the company reports earnings of $72 billion worldwide, and just one third of those profits are attributed to the U.S. And yet Cook's statement says that the vast majority of their income is taxed in the U.S.

We think that is a very low estimate. It certainly appears that the company is shifting profits out of the U.S. and into tax havens overseas. So one of these things must not be true: Either the numbers presented to shareholders in their annual report are false, or Tim Cook's new statement that the majority of its profits are taxed in the U.S is false. They both can't be true.

That's a bold claim to make, but it's hard, if not impossible, to argue with Gardner on this one. Since it's incredibly unlikely Apple is falsifying its annual reports, the most logical conclusion is that Tim Cook is lying in the open letter.

Tim - if you find yourself in a hole, stop digging.

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Try to understand EU first
by fabrica64 on Mon 5th Sep 2016 17:32 UTC
Member since:

The problem is that Apple, when sell something, for example, in Italy, they make a profit in Ireland, so they pay sale taxes in Italy but profit taxes in Ireland, where profit tax is much smaller.
This is not fitting well with the rest of European people...
Imagine if Apple does that with the US sales, pay profit taxes of US sales to Ireland instead of the US, could you imagine that?

Edited 2016-09-05 17:36 UTC

Reply Score: 1

RE: Try to understand EU first
by Alfman on Mon 5th Sep 2016 20:40 in reply to "Try to understand EU first"
Alfman Member since:


Imagine if Apple does that with the US sales, pay profit taxes of US sales to Ireland instead of the US, could you imagine that?

I'm not sure if you were being sarcastic, that's kind of what companies are doing through a multitude of scemes. Instead of paying taxes where they primarily do business or where their consumers are, they can use a shell companies existing solely to shift taxes.

Double Irish—sadly not a delicious pub sandwich

Lots of companies engage in these strategies—Apple, Google, Amazon, Adobe, and Microsoft to name a few. How beneficial are they? Google’s overseas tax rate was 2.4 percent in 2009, the lowest of all American tech companies when measured by market capitalization. This shifting move saves the company billions of dollars annually.

As Ars reported in October 2013, Google is now moving even more money through a shell corporation in Bermuda—reaching a total of €8.8 billion ($11.91 billion) in 2012, 25 percent more than it did in 2011. (Ars obtained a copy of a Google financial filing from the Netherlands, dated September 27, 2013, from an anonymous source.)

Bloomberg first described the process of the Double Irish in 2010. As we have reported, here’s how the Double Irish works: a company sells or licenses its foreign rights to intellectual property developed in the United States to a subsidiary in a country with lower tax rates. The result? Foreign profits that come from that tech—like the rights to Google’s search and advertising technology, effectively the keys to the kingdom—are now attributed to that offshore subsidiary rather than the Mountain View, California headquarters. The subsidiaries have to pay “arm’s length” prices for those rights, just like an outside company would.

Bloomberg concluded, “Because the payments contribute to taxable income, the parent company has an incentive to set them as low as possible. Cutting the foreign subsidiary’s expenses effectively shifts profits overseas.”

So who does Google license its tech to? A fun little company called Google Ireland Holdings, headquartered in Bermuda. Bermuda, of course, has zero corporate income tax. So as a Bermuda company, Google Ireland Holdings pays none.

Google Ireland Holdings, in turn, owns Google Ireland Limited, which employs 2,000 people in downtown Dublin. Google Ireland Limited reported a pretax income of less than one percent of sales in 2008 and paid $5.4 billion in royalties to Google Ireland Holdings. (French investigative news site published Google Ireland Limited’s 2011 annual report and its Irish Registration Office documents in 2012.)

This holding company based in Bermuda is owned by yet another Bermuda-based subsidiary, Google Bermuda Unlimited. It is managed by Conyers, Dill, and Pearman, a law firm specializing in such offshore transactions. That “unlimited” corporation means it is not required to disclose income statements, balance sheets, and other financial information.

But getting money tax-free from Ireland to Bermuda requires a stopover in the Netherlands (the "Dutch Sandwich" part) at Google Netherlands Holdings B.V. This entity, according to Bloomberg, “pays out about 99.8 percent of what it collects to the Bermuda entity, company filings show. The Amsterdam-based subsidiary lists no employees.”

Normal individuals aren't allowed to do this, US citizens living abroad are expected to pay portions of their US taxes regardless of where they live/work in the world and there are large penalties for failure to do so...

Multinationals corps, however, can & do get away with it because their foreign subsidiaries aren't under US jurisdiction.

Edited 2016-09-05 20:49 UTC

Reply Parent Score: 2