1. How much money does Apple Computer have in the bank in Ireland?
Apple went to Ireland, and it managed to bring in $30 billion in overseas profits over a four-year period without paying a dime of corporate income tax to the Irish, American or any other national government. That is one key conclusion in a new report from the Senate Permanent Subcommittee on Investigations on the computer giant’s strategies for avoiding U.S. corporate income tax.
2. Why does Apple Computer keep their funds in Irish banks?
The double Irish arrangement is a tax avoidance strategy that multinational corporations use to lower their corporate tax liability. The strategy uses payments between related entities in a corporate structure to shift income from a higher-tax country to a lower-tax country. It relies on the fact that Irish tax law does not include US transfer pricing rules. Specifically, Ireland uses territorial taxation, and hence does not levy taxes on income booked at subsidiaries of Irish companies that are outside of the state. In the late 1980s, Apple Inc. was among the pioneers in creating this tax structure.
Specifically, some of U.S. corporations station subsidiaries in Ireland, which has a top corporate income tax rate of 12 percent – and occasionally makes a better deal with some corporations, in exchange for their capital. This, of course, helps their local economies: When a corporation deposits funds in an Irish bank, for example, the bank is able to then lend that money back out into the local economy several times over. The Irish use this to help fund ridiculous house prices in Galway.
Amusingly, Apple’s vigorous counterattack is also not-so-subtly throwing some of its competitors under the bus. From Apple’s testimony:
Apple does not use tax gimmicks. Apple does not move its intellectual property into offshore tax havens and use it to sell products back into the US in order to avoid US tax; it does not use revolving loans from foreign subsidiaries to fund its domestic operations; it does not hold money on a Caribbean island; and it does not have a bank account in the Cayman Islands.
Source : http://www.forbes.com/sites/leesheppard/2013/05/28/how-does-apple-avoid-taxes/
In Ireland, only companies that are managed and controlled in Ireland are considered tax residents. And in the U.S., tax laws are based on where a company is incorporated, rather than where it is managed and controlled. Ireland is a tax haven. If Ireland were a legitimate low-tax country, all of Apple’s Irish affiliates would be paying the statutory 12.5% rate on their income. Instead, those Apple affiliates…