Innovation
Apple shifted "golden goose" and 64% of 2011 income to Irish "shell corporation"
By Michael Hennigan, Finfacts founder and editor
May 22, 2013 - 7:51 AM

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Tim Cook, Apple‘s chief executive, on Tuesday at a US Senate hearing on Capitol Hill, rejected charges about his firms tax practices, where stateless or ghost Irish companies are used to saves billions in US and domestic taxes. The hearing also heard that Apple shifted 64% of its 2011 income into an Irish "shell corporation" as well as intellectual property which Senator Carl Levin called the "golden goose."

“We pay all the taxes we owe, every single dollar. We not only comply with the laws, but we comply with the spirit of the laws,” Cook said. “We don’t depend on tax gimmicks.”

The rejections of charges of gimmicks and the spirit of the laws that had been made in a report on Apple that had been  issued on Monday by the US Senate's Permanent Subcommittee on Investigations, had about as much credibility as the statement Tuesday by Eamon Gilmore, tánaiste (Irish deputy prime minister), that the Irish tax system was "very transparent."

Apple's accounts have been shielded from public view since 2005. Intel and Pfizer do not publish accounts in Ireland as they are branch operations of Cayman Islands and Dutch firms.

Also on Tuesday, a spokesperson for the Irish Revenue was reported to have denied Apple's claim in the US Senate report that it had an agreement with the Irish government dating from the 1990s, to pay taxes at a rate below 2%.

However, no written statements were issued by the Department of Finance or Revenue.

It is no surprise that secret deals would be made.

As for Apple using its ghost or stateless Irish companies as resident companies when it suited,
it's interesting news in the context of Ireland's prosecution service's current preparation of a case of alleged false accounting against former executives of Anglo Irish Bank.

Apple has special Irish tax rates; 'Stateless' companies based in Ireland

Richard Harvey, a Villanova University law professor, told the hearing: "I suspect what Apple has done is within the bounds of international law." However, he said that when he heard Apple's comment that it did not use "gimmicks" to reduce taxes, "I about fell off my chair."

He said his analysis showed Apple shifted 64% of its 2011 income to Ireland into a "shell corporation" which had "no employees, no real activity, basically an entity on paper."

Senator Carl Levin, chairing the hearing, told Cook that the subcommittee had found a disturbing pattern of shifting profits.

"Of course you shifted something, the most valuable thing you have, the intellectual rights of your company," Levin told Cook and Apple colleagues called before the Senate Permanent Subcommittee on Investigations.

Levin said the report showed Apple shifted profits to offshore entities which were "a sham and a mere instrumentality of the parent."

He said Monday's report showed Apple assigned its "crown jewels," or intellectual property rights to three Irish subsidiaries controlled by Apple, which collected profits on much of Apple's global profits. “You shifted the golden goose to Ireland,” Levin said.

"About 70% the profits you own end up with those three Irish corporations," he said

"Apple is exploiting an absurdity, one that we have not seen other companies use," Levin added but Cook countered: "There's no shifting going on…We pay all the taxes we owe, every single dollar."

Cook also put the case for a "dramatic simplification," of the tax code that should be revenue neutral, eliminate corporate tax loopholes, lower overall tax rates and make it easier to bring money back from overseas.

He added that he would like a top corporate tax rate in the "mid-20s" and a repatriation rate in the "single digits."

"I have no current plans to bring them back at the current tax rate," Cook said, referring to the more than $100bn Apple technically overseas but in New York bank accounts.

Senator Levin said that just in 2012, Apple had exploited tax loopholes allowing it to avoid $9bn in US taxes, or $25m per day, and said such practices did “real harm” to the US economy.

Senator John McCain, the ranking minority member, called Apple’s tax strategies “complicated and pernicious,” adding that the group’s practices were “unacceptable.”

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