The explosive new “Paradise Papers” allege that Apple, the world’s most profitable company, has been using a tax shelter scheme based in the Bailiwick of Jersey, a British dependency.
Apple would thus appear to have switched tax shelter strategies from the Caribbean “Double-Irish-Flip” to a “Jersey Isle.”
The German newspaper Sudendeutsch Zeitung gave the New York Times and the International Consortium of Investigative Journalists access to the “Paradise Papers,” which are secret files that detail alleged corporate strategies of clients of the Appleby Law Firm, based in Bermuda, that specializes in tax shelter schemes.
The Times reported that leaked documents suggest that Apple, Inc.’s CEO Tim Cook did not lie in sworn testimony to the Senate Permanent Subcommittee on Investigations in May 2013 when he stated that Apple does not “move intellectual property offshore and use it to sell our products back to the United States to avoid taxes. We don’t stash money on some Caribbean island.”
The response came after Subcommittee Chairman Carl Levin said that Apple had created “the Holy Grail of tax avoidance” schemes by forming a “double-Irish-flip.” Specifically, to avoid paying $9 billion in U.S. corporate taxes in 2012, Apple allegedly used a strategy that involved rapid transfers of cash between three offshore units with no tax “residence.”
Other companies allegedly used similar approaches. As Breitbart News reported in June 2016: “Tech companies, including Apple, Cisco Systems and Google pay lower overseas tax rates than their non-tech U.S. peers, such as Boeing or Johnson & Johnson.” Some of the tech giants had allegedly paid corporate tax rates as low as Apple’s 0.00045 percent, versus almost 29 percent for U.S. non-tech firms.
When President Bill Clinton first took office in 1993, Apple was allegedly one of the first major Silicon Valley tech firms to pioneer the infamous “double-Irish-flip.” The tax-avoidance scheme involved allegedly transferring tech patent portfolios to Ireland; then allegedly using Irish and Dutch subsidiaries in the Caribbean to shift profits to low-tax jurisdictions; and then allegedly moving those profits on to virtually “no tax” jurisdictions.
That led to the questions Cook faced before Congress. It now appears that Cook was technically honest, because the patents and the money were supposedly already stashed offshore when they were allegedly moved to Jersey.
Jersey is a 47-square mile island that is 87 miles south of the UK and only 14 miles from the French coast. It is the largest of three English Channel Islands that became a Crown Dependency of the British monarch when William the Conqueror, from Normandy in France, became the King of England in 1066.
Citizens of the Channel Islands are now British subjects, but not British citizens with the same rights and responsibilities as British citizens. That allowed the Isle of Jersey to cut its corporate tax rate to zero percent a decade ago.
According to documents reviewed by the Times, when the European Union started talking about a crackdown on tech companies using Ireland for tax avoidance, Apple’s lawyers allegedly began shopping to shift to a new tax-free subsidiary in the British Virgin Islands, Bermuda, the Cayman Islands, Mauritius, the Isle of Man, Guernsey, or Jersey.
Apple claims that the company pays an “effective tax rate on foreign earnings” of 21 percent, despite the fact that European Union was trying to make Apple pay about $15 billion in disputed back taxes associated with double-Irish-flips.
But by setting up a perfectly legal zero percent corporate tax rate structure in the Isle of Jersey, a BBC analysis found that with Apple making $44.7 billion in 2017 foreign profits outside the U.S., the company only paid $1.65 billion, or 4 percent, in foreign taxes.