Because the money is not made in the US
[1] https://en.wikipedia.org/wiki/Hollywood_accounting
[2] http://www.theatlantic.com/business/archive/2011/09/how-holl...
However, if Apple (Italy) sells an iPhone to an Italian customer, the 'double Irish' arrangement lets them avoid paying corporate income taxes on those profits.
There are two issues here:
1. Some might argue that because Apple is based in the US and the R&D for these products occurs in the US, that when Apple (Italy) sells an iPhone to an Italian customer, Apple (US) should pay taxes on those profits. This is somewhat questionable, I think.
2. When Apple (Italy) sells an iPhone to an Italian customer, they should pay Italian corporate income tax on those profits, instead of being able to wipe those profits out using licensing agreements with Apple (Ireland). This is more straightforward and is the loophole being addressed by this settlement.
Except they don't, really. They use the same "double Irish" scheme in the US. Apple has offshore holding companies that own the IP for that iPhone. When a US customer buys an iPhone, much of the actual profit gets shifted to the offshore subsidiaries as an expense. That's how they ended up with $200bn offshore and only $10bn or so in the US.
Wrong. They initiated a capital return program a few years ago and ran down their US cash holdings while taking on debt "against" part of their overseas holdings. Once you account for the debt issues, their net cash holdings are a lot lower (though still substantial). Please don't make wild accusations if you don't know what you are talking about.
http://appleinsider.com/articles/15/07/22/as-apples-offshore...
They still can't repatriate that money without paying taxes. And as of two quarters ago they still have $200bn offshore and $10bn in the US. That offshore tax horde is still growing and it's still growing as a result of Double Irish flim-flam.
Don't accuse other people of not knowing what they're talking about unless you know what you're talking about.
I won't respond to you again in this thread because I can't deal with people who lack basic reading comprehension, logic, and fact-checking skills.
So the 'film-flam' as you call it avoids no taxes with regard to the cash-horde.
"The offshore company continues to receive all of the profits from exploitation of the rights outside the US, but without paying US tax on the profits unless and until they are remitted to the US."
https://en.wikipedia.org/wiki/Double_Irish_arrangement
"However, tax experts say that strategies like the Double Irish help explain how Apple has managed to keep its international taxes to 3.2 percent of foreign profits last year, to 2.2 percent in 2010, and in the single digits for the last half-decade, according to the company’s corporate filings."
http://www.nytimes.com/2012/04/29/business/apples-tax-strate...
"Under a typical “Double Irish” structure, a U.S. parent company (USCo) forms two Irish subsidiaries, IrishCo1 and IrishCo2. IrishCo1 is a first-tier Irish subsidiary organized under Irish law but managed and controlled in a low-tax jurisdiction (e.g., Bermuda or the British Virgin Islands). While U.S. rules determine tax residency of a corporation based on its place of incorporation, Irish law often determines tax residency based on the country where the company is managed and controlled. Accordingly, IrishCo1 will be treated for U.S. tax purposes as an Irish corporation, but for Irish tax purposes generally will be structured so as to be treated as a nonresident of Ireland resident in, for example, Bermuda. USCo will retain all US rights in the relevant IP and will license to IrishCo1 the rights to develop and exploit the IP outside the US. IrishCo1 will then sublicense these IP rights to IrishCo2, which in turn will use the IP to manufacture/produce IP products and then sell those products to customers outside the U.S."
http://www.taxeswithoutbordersblog.com/2014/10/death-of-the-...
You clearly do not understand how the double Irish arrangement actually works or what taxes it is supposed to reduce. Hint: if Apple could wipe out their US income tax obligations so easily using this arrangement, they probably wouldn't have bothered to pay that $14 billion in corporate income tax last year.
http://graphics8.nytimes.com/packages/pdf/business/MemoOnOff...
>The Apple case study examines how Apple Inc., a U.S. corporation, has used a variety of offshore structures, arrangements, and transactions to shift billions of dollars in profits away from the United States and into Ireland, where Apple has negotiated a special corporate tax rate of less than 2%. One of Apple’s more unusual tactics has been to establish and direct substantial funds to offshore entities that are not declared tax residents of any jurisdiction. In 1980, Apple created Apple Operations International, which acts as its primary offshore holding company but has not declared tax residency in any jurisdiction. Despite reporting net income of $30 billion over the four-year period 2009 to 2012, Apple Operations International paid no corporate income taxes to any national government during that period. Similarly, Apple Sales International, a second Irish affiliate, is the repository for Apple’s offshore intellectual property rights and the recipient of substantial income related to Apple worldwide sales, yet claims to be a tax resident nowhere and may be causing that income to go untaxed.
That's not some guy in his pajamas, there. It's a Senate report. For most US companies the whole point of the lowered Irish tax rate is to pay that on profits you've moved offshore.
And while most of Apple's profit would probably still come from other markets if it weren't playing these kinds of offset pricing games, Apple has moved billions of dollars in profits out of the US to avoid taxes.
It's not just Apple, either. This is why the effective US tax rate for corporations is 12.6% even as the statutory rate is 35%. I suspect that figure would be a lot lower, too, if only multinationals were considered.
This is the elephant in the tax tent: The IRS has wide latitude when determining what's reasonable for companies to charge subsidiaries for goods and services (and vice versa). But it's easy to arbitrarily complicate these kinds of arrangements.
And it's pretty subjective to start with - how much should Apple pay Apple Sales International to use a patent that nobody else is licensing? How would you even determine the fair market value? There are rules, of course, but even assuming there's no undue influence by corporations (and you can't assume that), imagine writing a set of rules that covers every conceivable business arrangement between multinationals that doesn't leave any grey area. Can't be done.
That Apple uses various tax arrangements to wipe out profits from its international sales is not in question. However, these are sales made by Apple’s foreign subsidiaries to foreign customers. They weren’t moved offshore, they were offshore to begin with.
I can see how Apple (Italy) and Apple (Germany) end up transferring their profits over to Apple (Ireland). I don't see any mechanism for how this could apply to Apple (US).