| Click for the Finfacts Ireland Portal Homepage |

Finfacts Business News Centre

Home 
 
 News
 Irish
 Irish Economy
 EU Economy
 US Economy
 UK Economy
 Global Economy
 International
 Property
 Innovation
 
 Analysis/Comment
 
 Asia Economy

RSS FEED


How to use our RSS feed

Follow Finfacts on Twitter

 
Web Finfacts

See Search Box lower down this column for searches of Finfacts news pages. Where there may be the odd special character missing from an older page, it's a problem that developed when Interactive Tools upgraded to a new content management system.

Welcome

Finfacts is Ireland's leading business information site and you are in its business news section.

Links

Finfacts Homepage

Irish Share Prices

Euribor Daily Rates

Irish Economy

Global Income Per Capita

Global Cost of Living

Irish Tax - Income/Corporate

Global News

Bloomberg News

CNN Money

Cnet Tech News

Newspapers

Irish Independent

Irish Times

Irish Examiner

New York Times

Financial Times

Technology News

 

Feedback

 

Content Management by interactivetools.com.

News : US Economy Last Updated: Jun 17, 2013 - 11:59 AM


US Congress told Apple used Irish "shell companies"
By Michael Hennigan, editor and founder of Finfacts
Jun 14, 2013 - 8:26 AM

Email this article
 Printer friendly page

Edward Kleinbard, a professor of law at the University of Southern California's Gould School of Law.
The House Ways and Means Committee of the US Congress, which is responsible for tax issues, held a hearing on Thursday on corporate tax reform and a prominent tax expert said on Apple that the question is not where the "minds and management" of the Irish "shell companies" might be, but whether they have any minds at all?

Dave Camp, the Republican chairman, said: "Whether a country has a hybrid system similar to the current US worldwide system or a dividend exemption system like that of our major trading partners, it is important to develop strong base erosion rules that protect against aggressive transfer pricing, anti-migration of intangible property overseas and foreign earnings stripping.

And let me just say that it is important to remember that the most effective anti-base erosion rule is a lower corporate tax rate.  But unfortunately, while a lower rate is necessary, the rate alone is not sufficient."

Pascal Saint-Amans, director, Centre for Tax Policy and Administration, Organisation for Economic Co-operation and Development (OECD), who is currently responsible for preparing proposals on corporate tax avoidance for a July meeting of the G-20 leading developed and emerging economies, told the hearing that a "key element is to better align taxation and the substance of taxpayers’ value creating activities."

He also highlighted the importance of transparency: "This includes the provision of better information by taxpayers to tax administrations and more effective cooperation among tax administrations. For example, many countries, including the United States, have rules that require disclosure of certain types of aggressive transactions, and work is expected to develop recommendations regarding the design of such rules."  

One proposal before the Committee is for income from intangible assets such as patents and trademarks earned by US companies overseas, would be subject to an immediate 15% tax rate compared with the standard 35% rate, which can be deferred by keeping profits abroad.

Companies would also get an immediate deduction for taxes paid. "Companies would feel less pressure to shift income to low-tax jurisdictions because that income would be taxed at the same rate - whether it is earned in the United States or Bermuda," Camp also said on Thursday.

Edward Kleinbard, a professor of law at the University of Southern California's Gould School of Law and former chief of staff of the US Congress’s nonpartisan Joint Committee on Taxation, however said it would be extremely difficult to estimate the profits from intangible assets. He referred to the Senate’s Permanent Subcommittee on Investigations (PSI) May case study of Apple’s stateless income generation strategies.

"What struck me as most remarkable about the PSI report and the hearing itself was the baldness of Apple’s tax planning. It did not involve 'Double Irish Dutch Sandwich' structures, exotic forms of Lichtenstein trusts or reliance on obscure tax treaties. Instead, the entirety of the business arrangements that explain why Apple paid virtually no tax anywhere in the world on $38bn of income in the period 2009-11 alone from research and development work conducted in California boils down to this: in 1980 Apple created a shell company subsidiary in Ireland, capitalized it, and entered into a special kind of contract with this shell company (a 'cost sharing agreement'), in which the shell company returned to Apple some of the capital seeded to it by Apple, thereby first purportedly acquiring ownership in all of Apple’s intangible assets outside the Americas. This description is a bit simplified, but in essence, that is the entirety of the story.

I refer to Apple’s Irish subsidiaries that purportedly own and exploit some of the world’s most valuable assets as 'shell companies' because they are. Until 2012, the key Irish subsidiary (Apple Sales International) had no employees and no independent ability to act according to its own perceived interests. What little activity the shell companies performed ('negotiating' a cost sharing agreement with the parent company, where the shell companies act through the mouthpiece of senior Apple Inc. employees who were ‘dual hatted’ to the Irish companies as well, and 'negotiating' contracts with third party manufacturers of Apple products, like Foxconn, when the record showed that those contracts again were in fact negotiated by Apple Inc. employees, and just mirror the contracts used by Apple Inc.) were not in any way performed by actors independent of Apple Inc. Nor have the subsidiaries done anything with their crown jewel intangible assets that is separate from what Apple Inc. does. These truly are shell companies.

He proposed a 25% tax on worldwide income and mandating that companies reveal where their income is earned and the tax rates they paid around the world. That would help solve the problem of 'stateless' income, which came up at the PSI hearing last month on Apple Inc.'s tax planning.

Written testimony of witnesses

More Finfacts articles on corporate taxes

Check out our subscription service, Finfacts Premium , at a low annual charge of €25.

Related Articles
Related Articles


© Copyright 2011 by Finfacts.com

Top of Page

US Economy
Latest Headlines
US jobs rose by 215,000 in July; Unemployment rate stable at 5.3%
US economy grew at weak pace in Q2 2015 - Worst expansion since 1945
Decoupling of per capita GDP, productivity, private employment, and median family income in America
US economy stumbles again in 2015
Income gap highest in 30 years; No inequality rise in best-paying US firms
Fed minutes raise doubts about fragility of US recovery
Senate Democrats block trade deal authority for Obama
Five firms held 25% of top US non-financial companies cash pile in 2014
US added 223,000 jobs in April; Broad jobless rate at 10.8%
Investment struggles as dividends/ share buybacks at top US firms to exceed $1tn in 2015
US economic growth plunged in Q1 2015
Why the Fed may (almost) never raise interest rates
US jobless rate falls to 5.5%; Broad rate at 11%; Participation rate at 1978 level
US added 257,000 jobs in January; Broad jobless rate at 11.3%
US economy will soon see best years in a decade
US annualised GDP slowed sharply in final quarter 2014
US budget deficit to fall to 2.6% of GDP in 2015
US added 252,000 jobs in December; Jobless rate falls to 5.6%
US adds 321,000 jobs in November; Private sector adds 10.9m jobs in 57 months of growth
US manufacturing slowed in November
US retail spending over Thanksgiving weekend fell 11%
US consumer spending weak in October; Business investment fell again
US third-quarter GDP revised up to 3.9% annualised rate
After destroying banking secrecy US helps Swiss exporters
US oil imports from OPEC cartel at 30-year low
Tax-inverted "Irish" firm Actavis agrees to buy US Botox maker Allergan
US nonfarm payroll employment rose 214,000 in October' Jobless @ 6-year low
Swiss bankers await fallout of US tax evasion acquittal
Two PMI reports give contrasting trends on US manufacturing
US GDP increased at annualised 3.5% in third quarter of 2014
US city home price growth slowed again in August; Consumer confidence rebounded in September
US new orders for manufactured durable goods fell again in September
Loans to buy US shares at record highs
Global markets slide; US industrial production best in 3 years & jobless claims in 14-year low
US federal budget deficit dips to 2.9% of GDP in fiscal year 2014
US added 248,000 jobs in September; Jobless rate falls to 5.9%
US set to become world’s leading liquid petroleum producer again
Obama issues new rules to combat tax inversions
US Securities and Exchange Commission to pay $30m award to foreign whistleblower
Typical American household income in 2013 was below the 1989 level