A probe into Apple Australia’s tax affairs has exposed that the tech giant has paid a miniscule $193 million on $27 billion worth of products purchased in the country since 2002, a mere 0.7% of its turnover.
The company has reportedly minimised its tax bill by channelling around $9 billion offshore through subsidiary companies in low tax jurisdictions, such as Apple Ireland, a practice which at present is considered a tax loophole, albeit a legal one.
The profit transfer system is set up in such a way so that 92% of the cost of an iPad, for example, is filtered through Apple’s Irish operations – essentially a shell company with few employees and low costs – which allows them to avoid paying tax anywhere in the world on 37% of the cost of each iPad. Overall, this practice means that 40% of all Apple product payments made in Australia escape taxation completely.
Neil Chenoweth, investigate journalist at The Financial Review, charged the US Government with, in a sense, ‘giving its blessing’ to the tax loophole Apple uses, as it has allegedly been aware that US tax law facilitates US companies’ avoidance of tax but has not done anything to change it.
In addition to this, income accrued through the purchase of an Apple product which can be deemed to be a payment for the intellectual, patent protected property provided in Apple’s products, can be passed off as a royalty payment, which Apple can then legally pay back to itself via offshore operations in low tax jurisdictions where they’re not taxed.
As a result of the taxation situation, The Federal Government and Finance Ministers in the G20 have made tax avoidance a key issue in their agendas, iterating that it is only fair that companies pay a full and proper level of taxation in the jurisdiction where their profits are made. Positive steps in this direction have been made already by G20 nations promising to allow exchange of tax information between nations. The OECD is also addressing the issue.
Worldwide, Apple has avoided paying tax on a total of US$44 billion since 2010.