Apple Inc. (NASDAQ:AAPL) has shifted billions of dollars in untaxed profits from its Australian unit to Ireland between 2002 and 2013. The Australian Financial Review investigated the last ten years of financial data for Apple Sales International, the Ireland-based subsidiary of the iPhone maker which has been at the heart of its global tax arrangements.
Apple pays only 0.7% tax in Australia
The AFR found that the tech giant had sold $27 billion worth of products in Australia over the ten year period. But it has paid a meager $193 million in taxes to the Australian Tax Office (ATO). That’s just 0.7% of its total sales in the country.
The Australian Financial Review found that Apple Inc. (NASDAQ:AAPL) has sent $8.1 billion in untaxed profits from Australia to Ireland. Last year, the Cupertino-based tech giant’s Austrian unit reported pre-tax earnings of just AUD88.5 million (about $80 million), after sending about $1.82 billion to Ireland via Singapore. In the process of tax evasion, Apple doesn’t violate the law. It continues to reiterate that it does everything required by the tax office, and there is no proof that Apple has done anything illegal. Australian finance minister Mathias Cormann says that the government is pursuing the issue via the G20.
How does Apple do this?
Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT) and many other giant employ an accounting method called “Double Irish with a Dutch Sandwich” to evade taxes. But the Tim Cook-led company has become the center of criticism. The method leverages multiple international laws to avoid taxes. Apple Sales International has never filed financial returns in Dublin. Over the past five years, it has reported more than $100 billion in profits. But the Irish arm of Apple has paid less than 0.05% in taxes.
That’s possible, and legal, because the Irish law considers a company as a tax resident of a nation from where it is managed, not incorporated. To save taxes on its international profits, Apple Inc. (NASDAQ:AAPL) sends money to its Irish subsidiary as royalties earned on the company-owned patents. Ireland has a 12.5% regular tax rate. But that doesn’t apply on Apple Sales International because, under Irish law, it is managed by Apple Inc. (NASDAQ:AAPL) in the United States. And other countries like Australia can’t levy taxes on the company’s Irish operations because that is out of their jurisdiction.
Irish finance minster Michael Noonan has said that he will close the loophole in the Irish tax code.