We all pay at least 20% income tax on earnings above the annual threshold. Most corporations pay 20% corporation tax on annual profits. But it’s a different story for Apple the world’s richest company.
Apple’s tax arrangements are once again under scrutiny, with the European Commission investigating whether the company has received illegal state aid in Ireland. Rumours of a deal to keep tax rates low between the technology giant and the Irish government have probably saved the company £billions in tax.They own a number of companies registered in Cork Ireland, where they enjoy a tax rate of less than 2%. In point of fact, before 1991, the company paid no tax in Ireland at all.
Apple’s effective UK tax rate is 1%
In the UK last year, Apple paid just £11.4 million in corporation tax after declaring £100 million in revenue and just £59 million in profit. However, some expert estimates of UK sales are as high as £10.5 billion, a tenth of Apple’s global market. Based on revenue, that’s a tax rate of just over 1%. By comparison, the UK corporation tax rate has been lowered from 21% to 20% since the beginning of the current financial year.
A caveat: Normally tax is a percentage of profit, not revenue. However, because so much of Apple’s expenditure is paid to itself, estimates are based on their stated revenue instead. Tax filings over the last ten years show that untaxed revenue from other overseas Apple companies is redirected to Ireland, in return for intellectual property rights and other intangibles.
This is the same sort of arrangement that Starbucks has come under fire for and these methods are complex, but not illegal and is exactly why we urgently need reform not only in the UK but from governments worldwide of tax policies. EU law rules out special deals from governments and if the European Commission finds evidence that Apple’s tax structure in Ireland constitutes state aid, it could reclaim billions against the illegal support.
Last year Apple’s chief financial officer, Luca Maestri, told the Financial Times that the company had not broken any laws. “There’s never been any special deal, there’s never been anything that would be construed as state aid.” While Maestri is technically correct and Apple have not broken any laws, but that is exactly the problem and why people like tax campaigner Richard Murphy of Tax Research UK and the Tax Justice Network have been campaigning for years to try and get successive UK & US governments to reform our tax laws.