In-depth Business Project: Analysis of Apple's Global Tax Strategies

This case study provides a detailed analysis of Apple's global tax strategy, emphasizing the significance of cost-sharing agreements in reducing tax expenses and enhancing profitability. It explores why many of Apple's Irish businesses lack a country of tax residence, attributing this to a loophole exploited by the company to minimize tax payments, specifically through the use of Apple Operations International (AOI). The report further investigates why AOI, which captures most of Apple's global profits outside the Americas, does not pay taxes to either Ireland or the United States, citing the 'check-the-box' regulation that treats AOI as a disregarded entity for US tax purposes. The analysis concludes that Apple legally leverages its global tax strategy to optimize tax efficiency and increase profitability, taking advantage of international tax regulations and agreements.

Business Project
Analysis
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INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
What is the single most important element of Apple’s global tax strategy?..........................3
Why do most of Apple’s businesses in Ireland not have a country of tax residence?...........4
Why does Apple Operations International (AOI)— the Irish subsidiary that captures most of
Apple’s global profits outside the Americas—not pay taxes to Ireland or the United States?5
CONCLUSION................................................................................................................................5
REFERENCES................................................................................................................................6
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INTRODUCTION
Apple is a multinational technology company which is having specialisation in computer
software, consumer electronics and online service (Haines, 2021). This report include discussion
upon the single most important element of Apple Global tax strategy and the reason of Apple
business in Ireland do not have a country of tax residency.
MAIN BODY
What is the single most important element of Apple’s global tax strategy?
Apple is performing its business operation as an American multinational technology organisation
which is having specialisation in computer software, consumer electronics and in online services.
This is one of the largest information technology company and is world's most valuable
organisation. It has been identified that Apple was founded in the year 1976 by Steve Jobs, Steve
Wozniak and Ronald Wayne. This company headquartered in California, United States and have
516 retail stores by the year 2021. This organisation offer its products and services worldwide. It
has been identified that main products of company include iPad, iPhone etc. Taxation plays
important role for organisation especially for those who are operating its services worldwide. n
addition to this it has been underlined that taxation is vital for companies as it helps them to
contributes towards society around the world (Khan Niazi and Krever, 2021). If business
organisation is moving beyond borders in this it is essential for them to make sure that they have
transparent and non discrimination taxation system within organisational workplace structure,
which not only helps them to perform business operations in transparent manner but also benefits
them in terms of investment flow open trade and more.
As per the case study analysis it has been identified that the single most important form of
element which is identified from the Apple Global tax strategy is cost sharing agreement. It has
been evaluated from the given case study that effective organisation global strategy aimed to
reduce the tax expense with the help of incorporating their subsidiaries in lower tax rate
countries for example Ireland. In addition to this it has been identified from the case study
evaluation that cost sharing agreement is mainly acts as an agreement between Apple Inc. and
AOI in Ireland. This duly identifies that research and development cost is duly shared on the
basis of global sales of the product. Furthermore, from the evaluation of respective case study it
has been identified that this strategy plays important as well as effective role for Apple as with
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having agreement with Irish government in order to make entry in the market with significant
low tax rate (<2%) than other companies (12%) the overall tax expenses of Apple is being
significantly reduced (Killian, 2021). Thus, from the above mention analysis it had been
underlined that the most important as well as effective element of Apple Global tax strategy
which is identified from the case study is cost sharing agreement which effectively helps Apple
to reduce tax expenses and assures more profitability.
Why do most of Apple’s businesses in Ireland not have a country of tax residence?
Apple is an American multinational technology company which offers a wide range of products
and services in the industry of computer hardware, semiconductors, financial technology,
artificial intelligence, digital distribution, cloud computing, consumer electronics. Along with
this, respective organisation was established in the year 1976 and currently having
revenueUS$274.515 billion and operating incomeUS$66.288 billion with total number of
employees 147,000 boy 2020 (Killian, 2021). It has been identified that Apple remains Ireland
largest company and offers wide range of products and services. In addition to this it has been
identified that from the case study analysis that the most of Apple’s business in Ireland does not
have country of tax residency is due to the fact that this is mainly loophole which has been newly
founded by Apple in order to make reduction in their tax payment. Along with this from the case
study analysis it has been duly underlined that the reason being most of the Apple businesses in
Ireland do not have a country of tax residency is AOI or ASI neither fall into Irish tax Residency
as well as not in United States tax Residency. Furthermore, from the case study it identifies that
in context with Irish law to develop a tax residency in this organisation is required to be duly
controlled or either managed in Ireland. However in context with AOI it has been identified that
this is not control and not managed in Ireland. Furthermore, it has been identified that on the
other hand United States need an organisation to be duty incorporated in United States in order to
be in tax residency requirement. This again states that AOI is not. Therefore it states that AOI
has no tax residency.
Thus, from the above-mentioned analysis according to the case study the reason most of
the Apple’s business in Ireland does not have country of tax residence is that neither AOI or ASI
have country of tax residency fall into Irish tax residency neither in United States tax residency.
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This helps organisation to duly manage their global tax in a well-defined and effective manner
which effectively assist company to enhance overall profitability on global terms.
Why does Apple Operations International (AOI)— the Irish subsidiary that captures most of
Apple’s global profits outside the Americas—not pay taxes to Ireland or the United States?
Apple offers wide range of products and services to consumers, as it is a multinational
technology company which is holding specialisation in computer software, consumer electronics
and online services. It is one of the largest information technology company and is ranked among
the world most valuable organisation. From the given case study analysis it has been duly
identified that Apple Operations International the Irish subsidiary which captures most of the
global profits of Apple outside America do not pay tax to the United States or Ireland (Ní
Chasaide, 2021). The case study states that first of all by Apple opinion, there AOI do not unduly
have a tax residency anywhere on the globe or Earth. Furthermore, it has been evaluated from the
case study that they do not pay tax to the United States of America and to the Ireland due to the
use of check-the-box. It has been evaluated that check-the -box is being duly formulated or
created in a manner to simplify the US tax code in the year 1996. It allowed organisation to
define foreign corporate entity as a disregarded entity. Furthermore, it has been identified that
this resulted that only organisations under AOI being duly considered or termed as disregarded
entity. And in this the payment that has been made between unit under single entity such as AOI
do no organised by the tax regulation of United States. This identifies that United States tax
authorities only determine AOI since their income is buying, active and reselling (White, 2021).
In this apple is duly allowed to defer their taxes on profit. Thus, it has been evaluated from the
case study that Apple of operations International, does not pay taxes to Ireland and the United
State despite capturing most of the global profits of company outside the America due to the fact
that, it is considered as disagreed agreement and the use of check-the- box.
CONCLUSION
According to the above mentioned report it has been concluded that from the analysis of
three questions that, global tax strategy of Apple allow organisation to duly perform their
business operations under a cost sharing agreement which allow organisation to save maximum
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taxes and conduct their roles and responsibilities while assuring higher profitability. With the
help of taking advantage of Apples global strategy organisation reduce their tax expenses and
identifies loophole organisation to do not have tax residency neither in the United States and or
in the Ireland. Furthermore, this report identifies that AOI is not recognised by the US tax
regulation which allow Apple t to differ their taxes on profit. Furthermore, from the analysis of
the case study it has been identified that Apple did not get illegal tax advantage from Ireland as it
is performing their operations under legal path. This helps organisations to save and undertaker
advantage of their global tax to assure higher profitability.
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REFERENCES
Books and Journals
Haines, A., 2021. This week in tax: Budgets, consultations and the EU Apple case. International
Tax Review.
Khan Niazi, S.U. and Krever, R., 2021, September. Bespoke tax rulings and profit shifting in the
European Union: assessing the EU's options. In Australian Tax Forum (Vol. 36, No. 3,
pp. 347-368). Sydney, NSW: Tax Institute.
Killian, S., 2021. Ireland and the EU. Ireland and the European Union: Economic, political and
social crises.
Killian, S., 2021. Sovereign or not sovereign: Tax policy, Ireland and the EU. In Ireland and the
European Union (pp. 43-56). Manchester University Press.
Mangada Real de Asúa, E., 2021. The importance of the CCCTB framework: consequences and
opportunities in light of Apple tax case ruling (July 15 th 2020).
Ní Chasaide, N., 2021. Ireland’s tax games: the challenge of tackling corporate tax
avoidance. Community Development Journal, 56(1), pp.39-58.
White, J., 2021. ITR Global Tax 50 2020-21: The Apple state aid case. International Tax
Review.
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