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Apple avoids billions in tax - Business School research

13 Mar 2014

The University of Sydney Business School research soon to be published in the prestigious British Tax Review, has found that US based computer giant, Apple, has successfully sheltered some US$ 44 billion from tax by shifting revenues around the world.

Independent assessments put the profits shifted out of Australia in order to avoid tax here at nearly AU$ 9 billion over the past decade.

G20 economic minister meeting in Sydney recently vowed to close international loopholes that allowed Apple and other multinationals including Microsoft and Google to transfer revenues to tax havens including Ireland.

"Apple, famous for its innovative products, is a prime example of a US corporation that has also shown an outstanding ability to be just as innovative with its tax arrangements," said Business School researcher and tax law expert, Dr Antony Ting.

To explain Apple's tax minimisation strategy, Dr Ting uses the example of an iPad manufactured in China and sold to a company outlet in Australia via an Ireland based subsidiary.

"Apple Australia is required pay Apple Ireland $550 for a device that sells here for around $600," says Dr Ting. "In this way Apple Inc is able to transfer revenue from Australia to its Irish subsidiary which is no more than a shell company. To rub salt to the wound, out of the $550 received by the Irish company, about $220 is not subject to tax anywhere in the world."

Dr Ting says that country-by-country reporting would go a long way to strengthen the armoury of tax authorities in their battle against what it known as 'base erosion profit shifting' by multinationals like Apple.

Country-by-country reporting would require companies to disclose essential tax information (such as turnover and profits, tax payments, the number of employees) for each jurisdiction in which they operate.

"Country-by-country reporting has two main advantages," said Dr Ting. "Armed with information about the tax positions of multinationals in different countries, tax authorities can identify questionable low effective tax rates in taxpayer-friendly countries like Ireland," he said. "Country-by-country also has a deterrent effect, and prevention is always better than a cure."

Treasurer Joe Hockey, who is also know to favour country-by-country reporting, has made it clear that under Australia's leadership, the G20 will be working over the next year to dismantle the intricate tax avoidance structures erected by the world's most profitable multinationals.

For more information

Dr Antony Ting discusses global tax avoidance by multinationals with ABC's Joe O'Brien. Watch now

Dr Ting also wrote an op-ed for the Conversation about Apple's tax avoidance around the globe.