An island nestled between France and the United Kingdom is reportedly home to a significant portion of one of the most powerful tech corporations on the planet.
Jersey rests in the English Channel, a bit closer to France than the U.K., and, according to information obtained by the German media outlet Süddeutsche Zeitung, distributed by the International Consortium of Investigative Journalists, and published by The New York Times, it is the tax home to subsidiaries of Apple that helps the company limit what it pays in corporate taxes.
In response to the report, Apple released something of a report of its own, claiming that the company “pays billions of dollars in taxes to the U.S. at the statutory 35 percent rate on investment income from its overseas cash.”
“When a customer buys an Apple product outside the United States, the profit is first taxed in the country where the sale takes place,” according to the company statement. “Then Apple pays taxes to Ireland, where Apple sales and distribution activity is executed by some of the 6,000 employees working there. Additional tax is then also due in the US when the earnings are repatriated.”
But reporting by the International Consortium of Investigative Journalists alleges that Jersey has more to do with Apple’s tax situation than the company wants to let on.
The island is one of those places the average person isn’t likely to know much about unless they a) were born there, b) spend a lot of time coming up with offbeat vacation destinations, or c) are working with (or are a member of) a ginormous company looking to hold on to as much of its profits as possible.
The island is home to barely 100,000 people, making it about the size of Roanoke, Virginia. It’s a “British Crown Dependency” where the people speak English, but also Portuguese, Polish, and Jèrriais, a language native to the island. Being a “dependency” means the United Kingdom represents the island on the world stage, but it’s hardly British. According to its government website, “Jersey is self-governing and has its own financial and legal systems and its own courts of law.”
That autonomy is reportedly why Apple Operations International and Apple Sales International — both Apple subsidiaries — have made this tiny island their tax home.
Those offshore companies initially had their tax home in Ireland, which reportedly allowed Apple to escape the tax laws of both Ireland and the United States. Companies in Ireland that were managed elsewhere had to pay hardly any income tax, while subsidiaries of U.S. companies not themselves based in the U.S. weren’t considered “tax residents” in America.
But the European Union and others got tired of this game and, in 2013, Ireland decided that Irish companies couldn’t simply not have a tax home anywhere on the planet. The New York Times reports that Apple had about $111 billion stashed outside the U.S. at that point.
During a CNBC interview back in May, Apple CEO Tim Cook indicated why the company didn’t want to bring those earnings back to the U.S.
“if you earn money globally, you can’t bring it back into the United States unless you pay 35 percent plus your state tax,” he said.
Apple says “no operations or investments were moved from Ireland,” but reporting by the consortium indicates that the company sought out a new tax home as Irish law began to change, and found it in Jersey.
Self-governed and largely independent of the United Kingdom, the island doesn’t fall under the banner of many European Union laws. A reportedly idyllic setting, and not just because it’s surrounded by water.
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