Joel Muckett 7 Nov 2017 04:23pm

Apple shifts profits to Jersey

Apple shopped around for a new tax refuge after a crackdown on shadow companies in Ireland

Apple secretly moved key parts of its company to Jersey amid widespread criticism and a crackdown on tax loopholes in Ireland, an analysis of leaked documents by the International Consortium of Investigative Journalists (ICIJ) show.

The so-called ‘Paradise Papers’ showed how Apple moved two of its Irish subsidiaries, including one holding most of its $252bn (£192.20bn) untaxed earnings, to the island of Jersey.

An inquiry by the bipartisan US senate committee into Apple’s use of Irish subsidiaries to avoid paying billions of dollars in taxes and international pressure led to Ireland planning to crackdown on shadow companies in October 2013.

In response to the measures, the world’s most profitable company contacted Appleby, the firm at the heart of the leaks, in 2014 through advisers at Baker McKenzie.

Baker McKenzie emailed several questionnaires to Appleby offices in notable offshore tax havens, including the Cayman Islands, the British Virgin Islands, Bermuda, Isle of Man, Guernsey and Jersey.

The offices were asked 14 questions which were designed to highlight the advantages of Apple moving their subsidiaries there.

One question asked if the Irish subsidiaries would be able to conduct management activities “without being subject to taxation” in their jurisdiction, while another asked for assurances on the political climate remaining friendly.

The iPhone maker eventually chose Jersey as its destination. The small island would play a vital part in Apple’s newly configured tax structure.

At the start of 2015, the company restructured its affairs in Ireland, and changed the tax residency of Apple Sales International (ASI) and Apple Operations International (AOI) to Jersey, allowing them to maintain their ultra-low tax rates.

ASI had made more than $120bn (£91.52bn) – nearly 60% of Apple’s earnings worldwide – and had become their biggest profit generator, and most of the profits had been transferred to AOI as dividends.

Before the change in tax residency, the two subsidiaries helped Apple hold $137bn (£104.59bn) in cash, mostly coming from barely taxed non-US profits.

In a statement, Apple said that it paid “every dollar it owes in every country around the world” and said changes to its corporate structure in 2015 were to preserve tax payments in the US rather than lower them elsewhere.

“The changes we made did not reduce our tax payments in any country. In fact, our payments to Ireland increased significantly and over the past three years we’ve paid $1.5bn in tax there – 7% of all corporate income taxes paid in that country,” said an Apple statement.

“At Apple we follow the laws, and if the system changes we will comply.”

The use of offshore tax havens by the world’s elite has been brought to light as a result of the Paradise Papers, with the likes of the Queen, Lord Michael Ashcroft and Wilbur Ross being involved.

Appleby has denied any wrongdoing and insists they were targeted by an “illegal computer act”.