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Apple’s Irish Tax Haven: Are US Corporate Taxes Too High?

Apple claims it uses a foreign tax haven because US taxes are too highThe United States May Be Forcing Corporations to Foreign Tax Havens

The United States loses a huge amount in taxes every year due to companies like Apple Computer seeking a foreign tax haven. In 2013, a report from the Senate Permanent Subcommittee on Investigations stated that Apple, which currently has a remarkable $230 billion in cash, was able to avoid paying $9 billion in cash in US taxes in 2012 alone.  How did the multi-billion dollar corporation manage to do this? you might ask.

It was possible by setting up related Irish companies,  because Ireland does not have transfer pricing rules in its tax code as does the United States. The double Irish tax strategy uses payments between related companies to move income from a country that charges high taxes to one that charges lower or no taxes. However, this loophole is being phased out. As of January, 1, 2015, this strategy is actually no longer available for companies not already using it, but companies already using it can continue to do so until 2020. But as one loophole closes, you can bet corporations are looking for new ways to save their bottom lines.

Technically legal, Apple managed to save billions by registering in Ireland.  Companies registered there are not tax resident in any country.

Apple CEO Tim Cook’s comments on the matter haven’t exactly won him any favor with the general tax-paying population.  In a recent interview, he reportedly told The Washington Post that Apple has to keep its billions in profits abroad because American taxes are simply too high to bring them back.  I can’t say that the Cook is wrong.  If the US wants companies like Apple and Facebook to pay up, the 35% corporate tax rate needs to be reduced.  As long as these guys are making money, they are always going to find tax attorneys and highly skilled professionals to help them around paying anything they don’t think is fair.

It is said that in the best compromises, both parties are left unhappy; so perhaps if the US brought their tax rates down and brought these large multi-billion dollar corporations back into the fold, we would find that we have the perfect negotiation. The US, which hates losing money, (in this case, a reduced tax rate) and the billion-dollar corporations, which coincidentally also hate losing money, (i.e. paying taxes at all) could find common ground and negotiate a fair rate.  It’s a win-win.

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.