Apple — which is one of the multinational poster children for tax dodging, along with Google, Amazon, Ikea and others — has billions of dollars “offshore” and in theory they can’t bring that money into the USA without paying tax on it; but thanks to some fancy accounting, much of that money is sunk into US Treasury Bills (floated by the government Apple is starving through tax evasion), and the US taxpayers pay Apple, about $600M so far.
This trick is legal.
Donald Trump has promised to allow companies like Apple to bring their profits back to the USA at very low tax rates — not available to law-abiding firms that lacked the accounting sophistication or the unpatriotic sentiment to avail themselves of this loophole.
Apple typically directs Wall Street bond dealers and big money managers like BlackRock Inc. and Pimco to buy Treasuries at debt auctions and in the secondary market on behalf of its Irish subsidiaries, all from a nondescript, three-story building in Reno, Nevada—a state with no corporate taxes, the people said. That’s where its internal investment firm, Braeburn Capital, is housed. Apple established the unit in 2005 to manage its cash and short-term investments.
As for Ireland, Apple isn’t alone. Nine of the 10 U.S. companies with the most cash abroad have foreign subsidiaries there.Over the years, lax Irish regulations have encouraged multinationals to pursue aggressive accounting practices that enabled them to shift much of their profits to those subsidiaries and minimize U.S. tax liabilities, according to tax experts.
In one of the more notable examples that’s drawn particular scrutiny, companies will book a disproportionate amount of revenue as “offshore” by claiming the underlying technologies are owned by their Irish units—even if the intellectual property originated in the U.S.
Apple went even further. According to a 2013 report by the U.S. Senate Permanent Subcommittee on Investigations, it exploited gaps in U.S. and Irish laws so that it didn’t have a tax home anywhere.
The company is already in hot water with the European Union. Regulators ordered Apple to pay $14.5 billion in back taxes in August after concluding it paid an effective tax rate of 0.005 percent in 2014 because of preferential Irish treatment. Last week, Apple called the EU decision “seriously flawed.”
Americans Are Paying Apple Millions to Shelter Overseas Profits
[Andrea Wong/Bloomberg]