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News : Innovation Last Updated: Apr 9, 2014 - 10:17 AM

Apple booked $100bn in sales through Irish subsidiaries in 2013
By Michael Hennigan, Finfacts founder and editor
Apr 8, 2014 - 7:49 AM

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Enda Kenny, taoiseach, meets Tim Cook, Apple's CEO, at the Cork campus, Jan 31, 2014

Apple booked about $100bn in sales through Irish subsidiaries in 2013 but the Irish Government is bizarrely claiming that the Irish incorporated offshore affiliates, which were stateless until a change in Irish law late last year, are not Ireland's concern because trading is not located in Ireland.

In the technical paper [pdf] issued by the Department of Finance on Monday on effective corporate tax rates, it is stated that in 2011 the surplus of non-financial corporations in Ireland was €40bn compared with a reported net income of Irish affiliates (both in Ireland and offshore) of  $147bn (€113.5bn) as reported by the US Bureau of Economic Analysis (BEA).

The surplus reported in Ireland is post "Double Dutch Irish" sandwich transactions that move billions of profits from Ireland tax-free to offshore Irish affiliates. These profits are booked as "administrative expenses" in Ireland.

On the claim that total Irish affiliate sales of €230bn reported by the BEA were greater than the total exports from Ireland in 2011 of €167bn, in a budget in recent years, multinationals were given the break of no withholding tax and these payments are mainly a profit transfer to island tax havens.

In 2011, Apple's offshore Irish affiliates booked $66bn in sales.

The Irish Government doesn't know what transactions go through the Irish offshore affiliates but its political purpose is to undermine the case that big US multinationals have low effective tax rates through the use of Irish subsidiaries.

The more it will invest in this foolish quest, the more ridiculous it will appear.

It is US companies that report the data to the BEA and besides the penalties, why would they lie?

Wonder why the distortions that arise in Ireland from companies moving headquarters to the country, to avail of the low corporate tax rate is not an issue of concern?

King Digital Entertainment Plc, the maker of the popular 'Candy Crush Saga' video game had an IPO (initial public offering) on the New York Stock Exchange last month - - it has had a mailbox registered office at the office of William Fry, a Dublin law firm, since last July, and a London phone number. Still, it has become an Irish company despite having no physical presence there, and it will along with others that have no physical presence or a limited one in Ireland, impact national accounts data.

Apple Inc. makes it clear in its Form 10-K filing [pdf] with the US Securities and Exchange Commission for year ending September 28, 2013, that most of the international revenues and profits were booked through Irish subsidiaries. 

During 2013, the Company’s domestic and international net sales accounted for 39% and 61%, respectively, of total net sales...The Company is subject to taxes in the US and numerous foreign jurisdictions, including Ireland, where a number of the Company’s subsidiaries are organized...The foreign provision for income taxes is based on foreign pre-tax earnings of $30.5bn, $36.8bn and $24.0bn in 2013, 2012 and 2011, respectively...Substantially all of the Company’s undistributed international earnings intended to be indefinitely reinvested in operations outside the US were generated by subsidiaries organized in Ireland, which has a statutory tax rate of 12.5%."

The foreign earnings tax rate was 1.9% in 2012 and 3.8% in 2013.

The tax rate in Apple’s big foreign markets is a multiple of the Irish 12.5% headline rate.

In 2013, the average OECD rate weighted for GDP was 32.5% and a simple average of 25.5%.

Apple has about two-thirds of its $159bn cash hoard technically in Irish afiliates.

In 2012 Google Ireland paid €17m tax on €137m profit - - a 12.4% rate.

However the total Google Inc net income was at a ratio of 22% , while Irish reported revenues of €15.5bn would have generated a profit of €3.4bn using a ratio of 22%, but big charges from Irish affiliates in Bermuda ensured that most of the profit was transferred tax-free.

These are the facts that the Irish Government does not address and the technical paper is a feeble effort to change the public discussion on tax avoidance.

Up to now civil servants were used to make a political case for ministers. Seamus Coffey, economics lecturer at UCC has stepped into this role.

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