US laws allowing Apple to hold the majority of its cash pile abroad are “obviously deficient,” says Nobel economist Joseph Stiglitz in an interview with Bloomberg, adding that Apple’s attribution of significant earnings to a relatively small overseas unit is “fraud”.
“Our current tax system encourages companies to keep their money abroad, opens up a vast loophole through what is called the transfer-pricing system that allows them not only to keep their money abroad but, effectively, to escape taxation,” Stiglitz, who advises Hillary Clinton’s presidential campaign, said in a Bloomberg Television interview with Tom Keene.
As of the end of the fiscal third quarter Apple has $231.5 billion in cash plus marketable securities, and $214.8 billion or 93% of the total is outside the US, as noted by Apple CFO Luca Maestri during the earnings call with financial analysts.
As pointed out by Stiglitz, Apple is making use of existing gaps in the US tax system to move its earnings overseas to Ireland, where it enjoys low tax. You may recall that Apple’s tax affairs in Ireland are under the loop of the European tax regulators with a ruling expected sometimes this fall.
In Ireland the corporate tax is 12.5%, much lower than the US top statutory rate of 35%.
Apple on the other hand denies any tax gimmicks saying that it has paid every cent it owes both in the US and Ireland.