No, Apple isn\’t avoiding tax in the UK

Sigh.

Apple is estimated to have avoided more than £550m in tax in Britain in 2011. Its latest accounts show UK turnover at just over £1bn and profit at £81.3m, generating a tax bill of £14.4m.

However, analysis of its filings in America suggest a more realistic figure for UK turnover is £6.7bn. This would imply an estimated profit of £2.2bn and, at the then corporation tax rate of 26pc, a £570m tax bill, the Sunday Times reports.

Yes, yes, we all know the difference between tax avoidance and tax evasion. But this isn\’t even tax avoidance.

Corporation tax, when selling into any of the EU 27, is due at that one brass plate that is the corporate HW within the EU 27. Selling from Ireland, or Luxembourg, into the UK, is simply not tax avoidance. It is what the system was set up to encourage people to do.

Even HMRC insists that this is not tax avoidance. Why is this so difficult for people to understand?

17 comments on “No, Apple isn\’t avoiding tax in the UK

  1. Thank God someone sensible has spoken out in the Telegraph.

    http://www.telegraph.co.uk/finance/financetopics/davos/9830629/Accountant-joins-backlash-against-tax-dodge-attacks.html

    Aside from the joys of the incorrigibly immoral lecturing us on morality, the problem is that Cameron wants us in the EU and knows we haven’t a prayer of changing EU tax laws but still moans about their consequences.

    Perhaps if we charged 5% CT we’d get a few more billion in. Oh, wait, that’s a Laffer thingy and we’ve all been told by He Who Nose that it don’t exist.

  2. “Corporation tax, when selling into any of the EU 27, is due at that one brass plate that is the corporate HW within the EU 27.”

    True-ish but misleading. That works when you’re doing the Amazon thing, where your sale contract is with a company that sits in Luxembourg.

    But Apple UK Limited exists, has sales of a billion quid, profits of 81 million quid, and pays its taxes in the UK, because that’s the law. If it didn’t do that, it would be both avoiding and evading tax.

    The question is – what’s the difference between the billion quid revenue of the UK company and the 6.7 billion quid that the Sunday Times believes is Apple’s UK revenue?

    If all of that 5.7 billion is made up of digital downloads sold by iTunes SARL of Luxembourg, then this is the same setup as Amazon, and they are indeed being tax-compliant.

    But there is no way that digital downloads account for more than 80% of Apple’s total UK revenue, given that the entire European online content market is only GBP5bn and that Apple is still mostly a purveyor of the shiny.

    I’m quite happy to believe that the ST has stuffed up its interpretation of financial statements, and/or that the Telegraph has stuffed up its interpretation of the ST report.

    But on the evidence presented by the Telegraph article, we simply *don’t know* whether Apple is being compliant or tricksy.

  3. Perhaps if we charged 5% CT we’d get a few more billion in.

    No, that only works if you don’t have a sizeable corporate base already. When Ireland cut its corporation tax to bugger-all, that didn’t hurt revenues because there weren’t any Irish companies worth bothering with, because at the time the country was a theocratic agrarian swamp.

    In the UK, the loss of revenue from companies that have to be there and aren’t dodging tax would far exceed the gain in revenues from multinationals shifting brass plates around.

  4. Monoi: I’ve no idea whether corporation tax in the UK is currently at its revenue-maximising level. It’s possible that cutting it slightly could increase revenues. It’s possible that raising it slightly could increase revenues.

    However, it’s certain that cutting it to 5% would reduce revenues (you’d need to quadruple the tax base, since you’re quartering the rate – and there’s no way, given the number of countries with effectively 0% rates, that you’d capture the whole brassplate market, which is basically what you’d need…)

  5. John b;
    A lot of the Apple sales are wholesale (to mobile operators and to electronics chains). It would not surprise me if those are done centrally and Apple UK is “just” a retailer of the Apple goods in the UK.

  6. Ctax

    Commit to a gradual reduction to 15% over the next 10 years.

    Let companies plan their investments.

    Trouble is you need credibility and continuity, two commodities in terribly short supply.

  7. “I’ve no idea whether corporation tax in the UK is currently at its revenue-maximising level. It’s possible that cutting it slightly could increase revenues. It’s possible that raising it slightly could increase revenues”

    Reading stuff like that so reminds of a sales technique called “selling on an objection”. The gullible punter is induced to dispute between two irrelevant options & by doing so, swallows the central scam of buying the crap being touted.
    WTF do they need all this tax in the first place?

  8. Emil: ZING. Apple Distribution International, of Cork.

    Tim adds: Erm, why is that at “zing”? It’s exactly the point I am making. Apple treats the EU as a single market and supplies from one base to all the market. This is what the system expects, desires, encourages, it to do.

  9. @ John Miller

    The problem with that article about yr’man speaking out, is that it repeats that line about companies having a duty to pay as little tax as possible. That’s not true.. or, a least, is a gross oversimplification which misses out a number of essential caveats… and people repeating it is a gift to the Murphyists.

  10. There’s a far more fundamental point to this, which is that now with the state of 50+% of the entire economy, Statists still wail that there isn’t enough money, that designated groups are being disadvantaged, that the vulnerable are suffering and so on..

    These moans are the equivalent of the zombie lust for brains. i.e. Utterly indiscriminate. They will not be satisfied until the state has all the money and decides who gets it.. Thus they are commie pricks…

  11. The scum of the state and their hangers on thrive on slogans–call ‘em memes if you like–something simple and stupid that the nitwits out there can repeat. “Four legs good–two legs bad”etc. Sorry Tim but no amount of reason can defeat that kind of shite.

  12. So, who’s running the book on how long it’ll be before PaulB comes along to say ‘Ooh, that £81.3m looks a bit hinky’?

    And where can I get some of the action?

  13. Tim: ZING because Emil was absolutely right, not for any other reason. And no, the system doesn’t expect you to do all intra-EU supply from a single site in Ireland. You can tell this from the fact that most companies in the EU still trade through national subsidies.

    John Miller: what the hell are you talking about? UK corporation tax is 21%, so if you take it to 5% you’re near as dammit quartering the amount that each company pays on their relevant profits. That means that you’ll have to increase relevant profits by a factor of four to get the same revenue.

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