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Does Apple pay tax? | Why doesn't Apple pay more tax: Complete guide to Apple's tax affairs

David Price | Sept. 2, 2016
Apple is in trouble with a really scary foe: the tax man

Maybe the Irish should be grateful they got even that much: Apple didn't pay any corporation tax at all in the UK in 2012. But more recently things have got a little better here; Mail Online estimates that Apple made £1.9bn of profit in the UK in the year ended September 2014 and paid £11.8m in tax - a rate of 0.6 percent - although it should be emphasised that this figure is based on accountants' estimates of profit generated rather than Apple's own figures, which are vastly lower.

How does the maths work? Doesn't Apple have to pay 12.5 percent of its profits in Ireland, and 20 percent in the UK?

It does, but remember that profits are taxed, not revenues. And profits can be quite mobile.

Like most multinational companies (we'll return to this theme later on), Apple's tax arrangements are complex. By funnelling profits from one territory to another - by such devices as one regional operation paying IP licensing fees to the headquarters in another - it's able to relocate profits to tax-favourable places.

Wired has put together an infographic illustrating some of the manoeuvres the tech giants pull to move profits around Europe. Apple, like most of its rivals, is a practitioner of what's known as the 'double Irish' strategy, where profits are transferred from one Irish company to another; but it gets the profits to Ireland in the first place by buying iPhones from Chinese suppliers through an Irish subsidiary and then selling them on to Apple US at a markup.

How can Apple possibly justify paying so little in Ireland?

These days Apple seems to have three ways of communicating with the outside world: large elaborate press conferences, long-form interviews with Tim Cook on US TV, and open letters to customers posted on the company's website. Just as it did when facing off with law enforcement, Apple has addressed the tax issue through a customer letter.

The company's main justifications are threefold. Two of them are standard for large corporations in these situations: those are the rules and we pay every euro cent that we are required to ("In Ireland and in every country where we operate, Apple follows the law and we pay all the taxes we owe"); and nice economy you've got there, be a shame if someone moved their European operations away resulting in the loss of several thousand jobs ("Beyond the obvious targeting of Apple, the most profound and harmful effect of this ruling will be on investment and job creation in Europe We are committed to Ireland and we plan to continue investing there").

 

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