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Apple defends tax setup amid reports: 'Paradise Papers' reveals multinationals' tactics as GOP aims for corporate rate cut

Don Lee, Los Angeles Times on

Published in Science & Technology News

"I don't think the tax overhaul is going to really address the flaws in our international tax rules," said Eric Toder, co-director of the Urban-Brookings Tax Policy Center at the Urban Institute. "With a 20 percent (corporate tax) rate, I suppose that decreases the incentive to stash money overseas. On the other hand, you still want to get the rate down to zero if you can."

Few companies have been seen as aggressive -- and successful -- in pushing down corporate taxes as Apple, making it a target of government investigations in the U.S. and Europe. One particular focus in recent years was how Apple had booked its massive earnings, much of it intellectual property generated in the U.S., to offshore tax shelters in Ireland.

A Senate subcommittee in May 2013 claimed Apple had used various methods to avoid paying federal taxes on $44 billion of earnings between 2009 and 2012. Apple's chief, Tim Cook, said at the Senate hearing then that the maker of iPhones pays "every single dollar" of taxes that it owes.

But not long after that Senate testimony, Apple sought a new strategy and, with the help of the legal- and tax-advisory firm Appleby, eventually found a new tax haven on a tiny island in the English Channel called Jersey, according to published reports based on the Paradise Papers.

These leaked records, originally obtained by a German newspaper, have been shared with the International Consortium of Investigative Journalists, which is made up of media organizations such as the New York Times, the Guardian in Britain and CBC in Canada. The Los Angeles Times is not a media partner.

In its statement Monday, Apple contended that there were a number of inaccuracies in the reports by the consortium.

"The changes Apple made to its corporate structure in 2015 were specially designed to preserve its tax payments to the United States, not to reduce its taxes anywhere else," the company said. No operations or investments were moved from Ireland, said Apple, which noted that its effective tax rate on foreign earnings is 21 percent.

In addition to details of Apple's tax-restructuring strategy, the Paradise Papers included information about the use of shell companies and other tax-reducing strategies by corporations such as Nike, Uber, Facebook and Allergan, as well as individuals.

Last year, the Obama administration sought to crack down on companies moving headquarters overseas, so-called corporate inversions, to avoid paying U.S. taxes. Officials also sought to curb another tax-avoidance practice in which multinational firms make loans or shift finances between affiliates to strip out earnings in higher-tax countries or take advantage of tax breaks such as interest deductions.

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