Apple has become the latest company to come under fire over its tax arrangements, after the revelation that it pays only a tiny amount on its massive overseas earnings.
While the corporate tax rate in the US is 35 percent, the company’s getting away with paying less than two percent on its profits abroad, according to its filing with the Securities and Exchange Commission.
It paid $713 million in the year to 29 September on foreign pre-tax profits of $36.8 billion, a rate of just 1.9 percent.
Nobody’s suggesting that the company’s tax avoidance is illegal – just a bit sneaky, perhaps. It involves techniques such as the ‘double Irish’ or ‘Dutch sandwich’ whcih allow it to channel profits through countries with low tax rates.
In Europe, for example, Facebook funnels much of its business through the Republic of Ireland, where corporation tax is much lower than in most other countries, at just 12.5 percent.
Apple is just the latest in a series of American companies found to be paying little or no corporation tax in the UK. First Google, then Amazon, eBay and Starbucks, for example, have been ‘outed’ in recent weeks.
In response to these accusations, Her Majesty’s Revenue and Customs service (HMRC) has issued a statement.
“Non-resident trading companies which do not have a branch in the UK, but have UK customers, will therefore pay tax on the profits arising from those customers in the country where the company is resident, according to the tax law in that country,” it reads.
“The profits will not be taxed in the UK. This is not tax avoidance: it is simply the way that corporation tax works.”
All the same, though, the British government says it’s concerned, and today is hauling Google, Amazon and Starbucks in to explain their low tax payments to a government committee.