An island nestled between France and the United Kingdom is reportedly connected to an important part of one of the most powerful tech corporations on the planet.
Jersey rests in the English Channel, 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 has been the tax home to subsidiaries of Apple that help 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.”
Jersey is one of those places the average person isn’t likely to know much about unless they a) were born there, or b) spend a lot of time coming up with offbeat vacation destinations. It’s 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 why Apple Operations International and Apple Sales International — both Apple subsidiaries — reportedly made this tiny island their tax home, though the company says it made the switch “to ensure that tax obligations and payments to the U.S. were not reduced,” and noted that Apple Sales International has been dormant since 2014 and that Apple Sales International is a holding company.
Those offshore subsidiaries 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 could avoid a chunk of Irish income tax, while subsidiaries of U.S. companies not themselves incorporated 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 did seek 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.
UPDATED at 9:20 p.m. ET with comments from Apple.