It’s not the first time Apple has been accused of sheltering its overseas profits from taxation, and a new report from Bloomberg posits that Americans are paying the Cupertino-based tech giant millions to “shelter” these overseas profits.
“Over the years, Apple Inc. has become the poster child for U.S. multinationals accused of sheltering overseas profits to avoid the IRS,” reads the report. “What’s gone largely unnoticed is that it’s been paid more than half a billion dollars by the U.S. government to do just that.”
Even though Apple’s headquarters are located in the United States, loopholes in the tax codes allow most of its $216 billion in overseas profit to remain untaxed. A large proportion of its overseas profits are sent to Apple’s subsidiaries in Cork, Ireland, a popular corporate tax haven.
In practice, however, Apple‘s internal investment firm, Reno-based Braeburn Capital, manages the money, buying U.S. treasuries, which are held in custody with New York-based banks.
U.S. taxpayers end up paying Apple and other companies to park cash in government debt, and the total amounts to about $6 per taxpayer over the past five years. These interest payments then flow back to Apple’s Irish accounts. The U.S. Treasury Department has paid Apple roughly $600 million in the form of interest.
From the perspective of the government, “it’s as if you are paying someone to borrow a bike that’s actually yours to begin with,” said Reuven Avi-Yonah, a professor specializing in corporate and international taxation at the University of Michigan Law School. “The whole thing is full of uneasy compromises in order to dance around the reality that most of the money isn’t actually offshore—it’s really here.”
Moody’s Investor Services released a report today, saying a “comprehensive tax reform could have the unique effect of being good for both creditors and shareholders, if it leads to lower debt levels and higher capital returns. A repatriation holiday, though, could have varying effects based on how companies use the cash,” referring to President-elect Donald Trump’s plan to offer a one-time tax holiday for companies like Apple to bring overseas cash home, at a lower corporate tax rate.