LONDON, (Reuters) – Apple’s ability to shelter billions of dollars of income from tax has depended on an unusual loophole in the Irish tax code that helps the country compete with other countries for investment and jobs.
A U.S. Senate investigation revealed yesterday that Apple, maker of iPhones, iPads and Mac computers, channelled profits into Irish-incorporated subsidiaries that had “no declared tax residency anywhere in the world.”
Apple said yesterday that the arrangements dated back over 30 years and had been negotiated with Ireland’s government, which has long angered European economic peers such as France and Germany by helping multinationals to avoid paying tax on sales it makes to their citizens in their domestic markets.
Apple’s annual reports show that over the past three years, Apple paid taxes worth 2 percent of its $74 billion in overseas income.
Apple now channels most of its overseas sales through three companies that are incorporated in Ireland but for tax purposes are resident in no jurisdiction. U.S. rules that allow companies incorporated abroad not to pay U.S. taxes complement that arrangement.
Apple tax head Phillip Bullock told the U.S. Senate Permanent Subcommittee on Investigations on Tuesday that one of these three subsidiaries, Apple Operations International (AOI), had not submitted a tax return anywhere for five years.
All three were registered in Ireland in 1980 and reregistered as unlimited companies in 2006, which means under Irish law that they do not have to publish annual accounts, so the subcommittee’s report was the first time the current structure had been publicly revealed.
Peter Vale, tax partner at accountants Grant Thornton in Dublin, said it was unusual for companies incorporated in Ireland not to be tax resident there, but it is legal.
Apple relies for tax benefits on contrasting approaches to determining tax residence in Ireland and the United States.
