Apple has become one of the subjects of The Paradise Papers, which is a collection of 13.4 million leaked documents exposing the overseas financial paperwork of public figures and major companies. In Apple’s case, the controversy surrounds Jersey, a small island lying in between the United Kingdom and France.
According to information from German media outlet Süddeutsche Zeitung, distributed by the International Consortium of Investigative Journalists, and published by The New York Times, the island has served as a tax home to subsidiaries of Apple, helping the tech giant limit what it pays the US government in corporate taxes.
In response to the claims, Apple released a statement in which they denied these accusations of tax evasion, saying that the company “pays billions of dollars in taxes to the U.S. at the statutory 35 percent rate on investment income from its overseas cash.”
The statement also said,
When a customer buys an Apple product outside the United States, the profit is first taxed in the country where the sale takes place. Then Apple pays taxes to Ireland, where Apple sales and distribution activity is executed by some of the 6,000 employees working there. Additional tax is then also due in the US when the earnings are repatriated.
The location of Apple’s tax haven is entirely conspicuous. Jersey is home to only about 100,000 people, which means it is largely out of the global public’s eye. It is also considered a British Crown Dependency, meaning that the island is represented by the United Kingdom on a global scale but it isn’t necessarily considered a distinct part of the country, especially considering that the population speaks English, Polish, Portuguese, and Jèrriais, a language native to the island.
As per the Jersey government’s website, the island is “is self-governing and has its own financial and legal systems and its own courts of law,” basically indicating that it’s autonomous from the British government. The independence from major countries made it an ideal destination for the Apple subsidiaries in question (Apple Operations International and Apple Sales International) to be their tax home.
Apple claims that their reasoning for using the island for these purposes was “to ensure that tax obligations and payments to the U.S. were not reduced.” They also indicated that Apple Sales International serves as a holding company and that Apple Operations International has been inactive since 2014. Apple originally set roots in Ireland to serve as a tax home, where subsidiaries of US companies not placed in the United States are not considered to be tax residents of the US. However, this was broken up by the European Union in 2013 after Apple reportedly had approximately $111 billion in tax money hidden from the US.
Via an interview with CBS News, Apple CEO Tim Cook indicated that the company didn’t bring their hoarded money back into the US because, “If you earn money globally, you can’t bring it back into the United States unless you pay 35 percent plus your state tax.”
Apple said that “no operations or investments were moved from Ireland.” However, just as Irish law on the matter began to change, the company left the country and settled in Jersey. Since the island isn’t considered to be part of the European Union, Apple wouldn’t have to worry about breaking laws similar to those in Ireland.
Things are looking really, really fishy. And no, that’s not a “small island” pun. Okay, maybe it is, but you get it.