According to newly leaked documents, in recent years, Apple used a Bermuda-based law firm to take advantage of highly advantageous (though legal) tax arrangements in Jersey to mitigate its tax burden as much as possible.
The so-called Paradise Papers, which were leaked to the International Consortium of Investigative Journalists, show that as the so-called “Double Irish” tax loophole began to close, Apple began shopping for a new place to park its hundreds of billions in offshore cash.
As one of the world’s largest corporations, Apple’s tax practices have been scrutinized in recent years. Under American law, companies must pay a 35-percent corporate tax rate on global profits when that money is brought home—so there is an incentive to keep as much of that money overseas as possible. Also, due to various tax law exemptions or loopholes, large multinational companies typically do not pay the full 35 percent.
In 2013, a Senate report found that “Apple, over a four-year period from 2009 to 2012… defer[red] paying US taxes on $44 billion of offshore income, or more than $10 billion of offshore income per year. As a result, Apple has continued to build up its offshore cash holdings which now exceed $102 billion.”
The same report concluded: “Apple has exploited a difference between Irish and US tax residency rules.”
According to a recent report by the Institute on Taxation and Economic Policy, under a newly proposed Republican tax plan that would allow for a one-time tax holiday to encourage companies to bring money home, Apple would be the single largest corporate beneficiary.
Ultra-low tax rates
But recently, according to the ICIJ, Apple employed an American law firm, Baker McKenzie, which in turn contacted an offshore specialist firm in Bermuda, known as Appleby. In 2014, Baker McKenzie e-mailed Appleby offices in various tax havens, including Jersey, a British dependency in the English Channel with a population of about 100,000.