Ask: I've read lots on how Apple have Irish subsidiaries and stateless profit sinks etc. but how does it all actually work? And is what they're doing immoral? Or are they simply paying the right amount of taxes for each individual country they operate in?
An explanation specific to the methods Apple uses would be brilliant. It's been difficult getting my head wrapped around this thing.
Answer: While I can't outline specifics, the general gist is this;
Companies pay taxes on profits(revenue-costs). If you want to pay less taxes, you have to reduce your profits. One way to do that is by hiring a company that you own to do some work, that (basically) transfers your profit to a different jurisdiction where it is subject to less taxes.
Say you had $1,000,000 profit and the US wanted to charge 35% in taxes. If you kept everything in the US you'd pay 350,000 in taxes. However, Ireland only has a 10% tax rate, so you buy a company in Ireland and then hire them to do "consulting" for the US company for $500,000. Now you only have 500,000 in profits in the US so you pay $175,000, but you have 500,000 in profits in Ireland which takes 50,000. For a total of 225,000
So, at the end of the day, by doing some fancy accounting you managed to drop your tax rate from 35% to ~22%. Do this in more extreme ways and you can drop it even lower.
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