A few days after British politicians lambasted Google for avoiding tax, it was Apple's turn in the spotlight. A US Senate committee report revealed that between 2009 and 2012 Apple avoided paying tax in America on over $70bn of profits, by establishing subsidiaries in Ireland that appeared to exist solely to shelter earnings from tax.
One subsidiary had not filed a tax return in any country for several years. Meanwhile, Vodafone rejected accusations that it didn't make a big enough contribution to the exchequer.
What the commentators said
Tax avoidance, as opposed to tax evasion, is legal, noted Edward Hadas on Breakingviews and Apple, and others, have "an obligation to [their] shareholders and customers to minimise tax payments". However, "the world's noses have become more sensitive to baroque tax plans, and Apple's practices now fail the smell test".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
That's putting it mildly, said the Financial Times. By playing off the Irish and US tax systems, Apple seems "to have achieved what Senator Carl Levin described as the holy grail of being taxed nowhere at all".
An Irish-registered but US-run subsidiary received $30bn of income between 2009 and 2012, but filed no tax return. Others appear to have negotiated Irish corporation tax rates of 2% (the official rate is 12%).
A key problem, said Ian King in The Times, is the "horrendously complex" US tax code. It treats foreign and domestic earnings differently and encourages firms to keep cash outside America. They have $1.7trn of unremitted profits.
Plenty of other US loopholes also encourage avoidance, said the Financial Times. Congress should get busy with closing them. Longer term, we need an international tax reform deal, with states agreeing to divide taxes based on where economic activity occurs.
With tax shelters for individuals already under pressure and the clamour for addressing corporate tax avoidance growing, a deal could work, said Hadas. "Free trade has been a global boon. Fair taxes would be also."
-
SIPP holders to get cash warnings and be offered default fundsNews Providers will be required to offer investors a default fund and must warn customers of the inflationary risk of cash savings the regulator has said. What the new rules mean for your retirement pot?
-
Zoopla: Asking price discounts hit a five-year high – is now the time to buy a property?
News Zoopla’s October House Price Index shows sellers are accepting discounts of 5.5% on average to secure a sale – we reveal where homeowners are taking the biggest asking price cuts
