Economist: Apple’s profit reporting in Ireland a ‘fraud’

Nobel economist Joseph Stiglitz said U.S. tax law that allows Apple to hold a large amount of cash abroad is “obviously deficient” and called the company’s attribution of significant earnings to a comparatively small overseas unit a “fraud.”

“Our current tax system encourages companies to keep their money abroad, opens up a vast loophole through what is called the transfer-pricing system that allows them not only to keep their money abroad but, effectively, to escape taxation,” Stiglitz, who advises Hillary Clinton’s presidential campaign, said in a Bloomberg Television interview.

He was answering question about whether policy makers like Clinton and Senator Elizabeth Warren, a Democrat from Massachusetts, could develop a plan to encourage companies like Apple to bring their accumulated foreign earnings back to the U.S. Under current law, companies can defer U.S. income tax on their foreign earnings until they repatriate them, or return them to the U.S. About $215 billion of Apple’s total $232 billion in cash is held outside of the country, third-quarter earnings results showed this week.

What’s more, the EU, Europe’s anti-trust and consumer investigation agency, has claimed that Ireland, Luxembourg and the Netherlands have attracted investment and jobs by helping big companies avoid tax in other countries, including EU members. The commission suspects Ireland was too lenient in rulings it gave to Apple and which helped the company shield tens of billions of dollars in profit from taxation. 

At 12.5%, Ireland’s corporate tax rate beats the U.S. rate of 35%. However, participating companies don’t pay that 12.5% under the double Irish structure. Irish Finance Minister Michael Noonan has said that Ireland will fight any negative commission decision to the EU courts. The government will “vigorously defend’’ any adverse Apple tax decision, he added.

The Woodline Case from Pad&Quill: Kevlar meets wood in a stunning new iPhone case