Apple, who is sitting on cash reserves of over $150 Billion has been exposed ripping millions of dollars out of the Australian economy by literally selling goods between when they are made by Chinese manufacturers to a tax haven subsidiary before they are landed in Australia.
The method by which Apple is avoiding paying hundreds of millions in tax was exposed during a US Senate inquiry.
The ownership of the goods which on paper only changed hands are then sold to Australian retailers netting billions for Apple Australia who last year had revenues of over $4.88 billion in revenues from its Australian division in the year to 24 September 2011. That figure was up $1.29 billion compared with the previous year.
The Irish subsidiary, known as Apple Sales International [ASI], resells the product to Apple retailers in Australia at a substantial profit, despite never actually taking delivery of the products.
“ASI never took physical session of the products it ordered from the third party manufacturer,” the congressional report claimed.
“ASI took title to the manufactured products while they were being shipped to Apple’s Asian distribution centres. When they arrived, ASI sold the products to Apple Singapore at a substantial profit.”
Prior to a reorganisation in 2012, the same structure applied except without the inclusion of Apple’s Singapore subsidiary. Products would be resold directly to Australian retailers.
The report said “For example, ASI purchased the finished goods from the manufacturer in China and then resold them to an Apple retail store in Australia, with ASI taking ownership of the products while in transit to Australia, then reselling them at a substantial profit to the Apple retail entity upon arrival.”
US investigators who are trying to get access to tax on more than $64 billion that sit in offshore accounts have claimed that Apple uses a global network of subsidies to shuffle profits around the world through low tax jurisdictions, such as Ireland and Singapore.
US investigators said the company’s use of “disregarded entities” such as the ones in Ireland and Singapore were used to avoid US income rules around foreign company sales.
“The rules are designed to prevent multinational corporations from setting up intermediary entities in tax havens for no purpose except to buy finished goods and sell them on to related entities,” they said.
“Dodging these rules allowed Apple to concentrate profits from the sales revenue in the tax havens.”
The tax Apple is avoiding having to pay in Australia is enough to fund a schools program, build a road or pay for care for people with disabilities.
