A British charity that investigates tax avoidance has named Apple as one of seven tech giants it says pays too little UK tax.
It says that collectively Apple, Microsoft, Meta, Amazon, Adobe, Cisco, and Google owner Alphabet paid around four times less tax than should have been due – but doesn’t blame the companies …
There’s an old joke: What’s the difference between tax evasion and tax avoidance? About 10 years in federal prison.
What tech giants like Apple are accused of is tax avoidance. This is perfectly legal, but caused a PR storm in the UK and other European countries when some of those avoidance mechanisms became public knowledge.
Apple, for example, claimed that all Apple Store sales across 27 European countries were actually made in Ireland, because that’s where its European HQ was based – and it then paid a very low rate of tax in that country.
The Cupertino company has since backed off from its more aggressive tax avoidance measures, but TaxWatch says that it and the other tech giants listed still only pay about one quarter of the UK tax that would be due without avoidance mechanisms.
TNW reports.
In new research, the group analysed the finances of seven tech giants: Apple, Microsoft, Meta, Amazon, Adobe, Cisco, and Google owner Alphabet.
TaxWatch estimates these companies made almost £15bn (€17.3bn) of profit from British customers in 2021 alone. However, international tax rules allow these firms to shift most of these profits to other countries. As a result, they were only liable for annual UK taxes of around £753mn (€869mn).
If the profits had not been moved elsewhere, that figure could have quadrupled. TaxWatch estimates that the tax due would have been around £2.8bn (€3.2bn).
While the companies themselves deliberately engage in these tactics in order to reduce their tax liabilities, the charity says that we really need to blame the antiquated tax laws that make this possible.
“The international tax rules were developed when trade was based on trading manufactured tangible goods, whereas we now have a services-based digital economy where data, algorithms, and AI are delivering much more profit,” said TaxWatch director Claire Ralph […]
Another factor is the propensity for services to be provided by one tech group company and “traded” within the group. Transactions are rarely kept at arms-length — which makes it harder to calculate a normal allocation.
“The market dominance of some global giants is distortionary,” Ralph said.
In Apple’s case, for example, the company’s accountants declare that for every iPhone sold in the UK, an intellectual property fee must be paid to Apple in Cupertino, reducing the taxable value of that sale in the UK. Apple Inc. decides how much it is owed by Apple UK, without any independent calculation of how much – if anything – is reasonable to transfer in this way.
The Organization for Economic Cooperation and Development (OECD) is trying to agree worldwide rules that will not only be consistent across countries, but which also keep up with the way that multinationals conduct business today. This approach has the support of Apple CEO Tim Cook.
TaxWatch isn’t convinced the OECD will completely solve the problem, but does think that transparency is key: when taxpayers can see the tactics being used by large companies, then there will be pressure on them to behave reasonably.
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