Leaked documents expose secret tale of Appleโs offshore island hop
He sat before the U.S. Senate Permanent Subcommittee on Investigations, which had completed an inquiry into how Apple avoided tens of billions of dollars in taxes by shifting profits into Irish subsidiaries that the subcommitteeโs chairman called โghost companies.โ
Reveal journalists teamed up with ICIJ for a new bombshell.
โWe pay all the taxes we owe, every single dollar,โ Cook declared. โWe do not depend on tax gimmicks. . . . We do not stash money on some Caribbean island.โ
Five months later, Ireland bowed to international pressure and announced a crackdown on Irish firms, like Appleโs subsidiaries, that claimed that almost all of their income was not subject to taxes in Ireland or anywhere else in the world.
Now leaked documents shine a light on how the iPhone maker responded to this move. Despite its CEOโs public rejection of island havens, thatโs where Apple turned as it began shopping for a new tax refuge.
Appleโs advisers at one of the worldโs top law firms, U.S.-headquartered Baker McKenzie, canvassed one of the leading players in the offshore world, a firm of lawyers called Appleby, which specialized in setting up and administering tax haven companies.
A questionnaire that Baker McKenzie emailed in March 2014 set out 14 questions for Applebyโs offices in the Cayman Islands, the British Virgin Islands, Bermuda, the Isle of Man, Guernsey and Jersey.
One asked that the offices: โConfirm that an Irish company can conduct management activities . . . without being subject to taxation in your jurisdiction.โ
Apple also asked for assurances that the local political climate would remain friendly: โAre there any developments suggesting that the law may change in an unfavourable way in the foreseeable future?โ
In the end, Apple settled on Jersey, a tiny island in the English Channel that, like many Caribbean havens, charges no tax on corporate profits for most companies. Jersey was to play a significant role in Appleโs newly configured Irish tax structure set up in late 2014. Under this arrangement, the MacBook-maker has continued to enjoy ultra-low tax rates on most of its profits and now holds much of its non-U.S. earnings in a $252 billion mountain of cash offshore. The Irish governmentโs crackdown on shadow companies, meanwhile, has had little effect.
The inside story of Appleโs hunt for a new avoidance strategy is among the disclosures emerging from a leak of secret corporate records that reveals how the offshore tax game is played by Apple, Nike, Uber and other multinational corporations โ and how top law firms help them exploit gaps between differing tax codes around the world.
The documents come from the internal files of offshore law firm Appleby and corporate services provider Estera, two businesses that operated together under the Appleby name until Estera became independent in 2016.
The files show how Appleby played a cameo role in creating many cross-border tax structures. German newspaper Sรผddeutsche Zeitung obtained the records and shared them with the International Consortium of Investigative Journalists and its media partners, including The New York Times, Australiaโs ABC, the BBC in the United Kingdom, Le Monde in France and CBC in Canada.
These disclosures come as the White House and Congress consider cutting the U.S. federal tax on corporate income, pushing its top rate of 35 percent down to 20 percent or lower. President Donald Trump has insisted that American firms are getting a bad deal from current tax rules.
The documents show that, in reality, many big U.S. multinationals pay income taxes at very low rates, thanks in part to complex corporate structures they set up with the help of a global network of elite tax advisers.
In this regard, Apple has led the field. Despite almost all design and development of its products taking place in the U.S., the iPhone-maker has for years been able to report that about two-thirds of its worldwide profits were made in other countries, where it has used loopholes to access ultra-low foreign tax rates.
Now leaked documents help show how Apple quietly carried out a restructuring of its Irish companies at the end of 2014, allowing it to carry on paying taxes at low rates on the majority of global profits.
Multinationals that transfer intangible assets to tax havens and adopt other aggressive avoidance strategies are costing governments around the world as much as $240 billion a year in lost tax revenue, according to a conservative estimate in 2015 by the Organization for Economic Cooperation and Development.
