Apple's tax-dodging offshore billions are sunk into Treasury Bills that pay out using Americans' taxes

Apple -- which is one of the multinational poster children for tax dodging, along with Google, Amazon, Ikea and others -- has billions of dollars "offshore" and in theory they can't bring that money into the USA without paying tax on it; but thanks to some fancy accounting, much of that money is sunk into US Treasury Bills (floated by the government Apple is starving through tax evasion), and the US taxpayers pay Apple, about $600M so far.

This trick is legal.

Donald Trump has promised to allow companies like Apple to bring their profits back to the USA at very low tax rates -- not available to law-abiding firms that lacked the accounting sophistication or the unpatriotic sentiment to avail themselves of this loophole.

Apple typically directs Wall Street bond dealers and big money managers like BlackRock Inc. and Pimco to buy Treasuries at debt auctions and in the secondary market on behalf of its Irish subsidiaries, all from a nondescript, three-story building in Reno, Nevada—a state with no corporate taxes, the people said. That’s where its internal investment firm, Braeburn Capital, is housed. Apple established the unit in 2005 to manage its cash and short-term investments.

As for Ireland, Apple isn’t alone. Nine of the 10 U.S. companies with the most cash abroad have foreign subsidiaries there.

Over the years, lax Irish regulations have encouraged multinationals to pursue aggressive accounting practices that enabled them to shift much of their profits to those subsidiaries and minimize U.S. tax liabilities, according to tax experts.

In one of the more notable examples that’s drawn particular scrutiny, companies will book a disproportionate amount of revenue as “offshore” by claiming the underlying technologies are owned by their Irish units—even if the intellectual property originated in the U.S.

Apple went even further. According to a 2013 report by the U.S. Senate Permanent Subcommittee on Investigations, it exploited gaps in U.S. and Irish laws so that it didn’t have a tax home anywhere.

The company is already in hot water with the European Union. Regulators ordered Apple to pay $14.5 billion in back taxes in August after concluding it paid an effective tax rate of 0.005 percent in 2014 because of preferential Irish treatment. Last week, Apple called the EU decision “seriously flawed.”

Americans Are Paying Apple Millions to Shelter Overseas Profits [Andrea Wong/Bloomberg]

Notable Replies

  1. petr says:

    In the 50s corporations paid 30% of taxes, by the 70s it was 20% and now it is 2%
    The rest is all passed on to the suckers who pay. And the Double Irish, Dutch sandwich is not just Google or Apple
    it is pretty much most of the large multinationals who have the accounting sophistication - forget patriotism the allegiance is to the bottom line. Although small business employs a lot more people and is not sophisticated enough to play this game.

    Just reading Treasure Islands which estimates that something like $29 trillion US is hidden in
    offshore accounts and it is not just corporations, or rich individuals or organized crime, it is governments (in fact one of those treasure islands is Manhattan because the US allows foreign corporations to do the same.

    The Elf affair in France was a real eye-opener for French investigators because it shows just how much money was kept in slush funds in Gabon for decades of various French governments to use (both left and right) when they wanted to pay someone off or supply arms etc. And of course the losers there were the various citizens of those African post colonial countries whose resources were stolen while they lived in poverty. As they say the British and French left the colonies via the front door but came back in through the side window.

    Another interesting factoid (maybe this from a Freakonomics) podcast about cash is that the current estimated amount of US currency is $1.5 trillion and while in the 70s something like 20% was 100 dollar bills, now it is 80%. How often do people use a $100 bill? The implication here is that is easy to carry in briefcases or pallets etc for various illegal tax avoiding transactions.

  2. I'm not sure what the outrage is. Treasury bills are patriotic; if you don't want people buying them, then work towards a balanced budget.

    The off-shore funds, while totally legal, should not be rewarded with a tax holiday. But that's a totally separate matter than where they are invested.

  3. Old says:

    Anybody who buys T-Bills is effectively subsidizing the American Government, not ripping it off.

  4. Well, do you want an OLED touch bar? Or do you want usable roadways? That's what I thought. Now kiss the Apple Watch, serf.

  5. thekaz says:

    Maybe starving is a strong word, but the gov't is required to pay Apple that money back with interest, no? Last I checked, the gov't isn't giving me my tax money back with interest...

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