The latest annual report from Apple, filed last week in the United States, indicates a substantial increase in the amount of tax it may be paying in Ireland.
The technology company made the largest profit in its history in the year to the end of September and Ireland is its chief profit centre outside the US.
The Apple accounts for the year to the end of September 2015 show $47.6 billion (€43.8 billion) of its total pretax earnings of $72.5 billion (about €66 billion) were booked outside the US.
The accounts also show the average rate at which Apple paid corporation tax globally increased due to it paying tax at a higher rate on its non-US profits.
Ireland has seen
corporation tax receipts surge this year, with figures to the end of October showing receipts in this category of €4.75 billion, more than €2 billion ahead of forecasts.
The Department of Finance has said the “overperformance in the year to date is broad-based and primarily relates to improved trading and some timing factors”.
There is speculation that the jump in Ireland’s corporation tax receipts may in part be connected to a US multinational booking profits here that previously were booked offshore.
Apple’s accounts for its year to the end of September show that the multinational’s effective tax rate, ie the average rate at which its profits are taxed given it books profits in various jurisdictions with varying tax rates, increased to 26.4 per cent, from 26.1 per cent in 2014.
The equivalent figure in 2013 was 26.2 per cent.
The accounts say the effective rate is below the US rate of 35 per cent because a substantial proportion of its foreign earnings are not being repatriated to the US, which means they are not subject to US tax.
“The higher effective rate during 2015 compared to 2014 was due primarily to higher foreign taxes,” the company states.
The accounts also say “substantially all” of its unrepatriated foreign (ie non-US) profits were generated by subsidiaries “organised” in Ireland.
A request for a comment from Apple met with no response.
The accounts show the provision for corporation tax for 2015 was $19.12 billion, a huge jump on the preceding year’s $13.9 billion.
Net profit grew 35 per cent.
According to the accounts, Apple’s provisions for foreign - ie non-US - corporation tax payments is based on foreign pretax earnings of $47.6 billion, $33.6 billion and $30.5 billion respectively for 2015, 2014 and 2013.
Tax system redesign
The global tax system is in the process of being redesigned by way of the OECD’s Beps project, which is, among other factors, seeking to close down the use for tax-planning purposes of offshore subsidiaries that book substantial profits but have little business substance.
Ireland and Apple, meanwhile, are awaiting the results of a European Commission inquiry that could rule that Ireland’s taxation of key Apple subsidiaries over the years constituted a form of State aid.
The Apple accounts say the company believes the commission’s assertions are without merit.
A ruling against the company could require Ireland to recoup up to 10 years’ taxes from the company. Such an amount, the Apple accounts say, would be “material”, although the company is unable to estimate its impact.
Ireland has already changed its laws in response to a US inquiry into Apple’s tax affairs that heard assertions that it had Irish subsidiaries that were “stateless” for tax purposes.
The change to the law means that this can no longer be the case.