We conclude the three-part article describing how Apple and other multinational firms avoid paying a large part of their taxes.
But the plan to use Jersey faced a potential snag: In mid-2014, again under pressure from other governments, Irish ministers explored ending a tax shelter known as the “double Irish,” used by scores of companies, including the Appleby clients Allergan and Facebook, as well as Google, LinkedIn and other businesses.
The double Irish allows companies to collect profits through one subsidiary that employs people in Ireland, then route those profits to an Irish mailbox subsidiary that is a tax resident of an offshore haven like Bermuda, Grand Cayman or the Isle of Man.
Grand Cayman Isles
Isle of Man
Irish officials explored a ban on Irish companies claiming tax residency in tax havens. Executives at Allergan — which had used a double Irish for at least a decade, records show — tried to derail the rule change. Terilea Wielenga, then Allergan’s head of tax, was also international president of the Tax Executives Institute, a trade group. She argued to the Irish finance ministry in July 2014 that any such changes should occur slowly.
The campaign seemed to work. “For existing companies, there will be provision for a transition period until the end of 2020,” Mr. Noonan declared in October 2014. The gradual phase-in would apply not just to existing companies but to any new ones created by December of that year.
This gave Apple just enough time. By the end of the year, Jersey had become the new tax home of the Irish companies Apple Sales International and Apple Operations International.
But a third Apple subsidiary, Apple Operations Europe, became resident in Ireland.
Apple would not say why. But tax experts offer one possible reason. While media attention focused on Ireland’s crackdown on the double Irish, officials announced a new measure: The country expanded its tax deductions for companies that move rights to intellectual property — like patents and trademarks — into Ireland. If an Irish company spent $15 billion buying such rights, even from a fellow subsidiary, it could claim a $1 billion tax deduction each year for 15 years.
Apple declined to say whether it has availed itself of the new benefit.
But J. Richard Harvey, a Villanova law professor and former I.R.S. official who reviewed the Appleby documents, concluded that there was a strong possibility the company moved intellectual property into Ireland to take advantage of the generous tax rules. Based on Apple’s American securities filings, he estimated that the transfer was worth about $200 billion.
That would mean that any income that Apple now generates in Ireland could be partially offset by more than $13 billion in tax deductions each year for 15 years.
Apple’s hunt for a tax haven is a familiar tale, said Reuven Avi-Yonah, director of the international tax program at the University of Michigan Law School, who also reviewed the Appleby documents.
“This is how it usually works: You close one tax shelter, and something else opens up,” he said. “It just goes on endlessly.”
U.S. Companies Hold Trillions of Dollars of Profits Offshore
The top 20 S&P 500 companies by earnings parked overseas:
Apple $236 billion. . . Pfizer $178 billion. . . Microsoft $146 billion . . . General Electric $82 billion . . . Google $78 billion . . . IBM $71 billion . . . Merck $71 billion . . . Johnson & Johnson $66 billion . . . Cisco Systems $66 billion . . . Exxon Mobil $54 billion . . . Oracle $54 billion . . . Procter & Gamble $49 billion . . . Citigroup $47 billion . . . Intel $46 billion . . . Chevron $46 billion . . . PepsiCo $45 billion . . . Hewlett Packard Enterprise $41 billion . . . HP $41 billion . . . JPMorgan Chase & Co. $38 billion . . . Gilead Sciences $38 billion
Simon Bowers is a reporter for the International Consortium of Investigative Journalists