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The Silicon Six and their $100 billion global tax gap, was a report published in December 2019 by the Fair Tax Mark which examined the tax conduct of Facebook, Apple, Amazon, Netflix, Google and Microsoft over the last decade.
It concluded that the corporation tax paid by the Silicon Six was much lower than is commonly understood. Over the period 2010 to 2019:
* the gap between the expected headline rates of tax and the cash taxes actually paid was $155.3bn
* the gap between the current tax provisions (the amount the companies were expected to pay) and the taxes actually paid was $100.2bn
The report suggested that the bulk of the shortfall almost certainly arose outside the United States. Profits continued to be shifted to tax havens, especially Bermuda, Ireland, Luxembourg and the Netherlands.
Amazon had paid just $3.4bn in income taxes this decade, whilst Apple had paid $93.8bn and Microsoft had paid $46.9bn. This is a staggering variance, especially as Amazon’s revenue over this period exceeded that of Microsoft’s by almost $80bn.
Out of the six, Apple was sixth worst (Amazon was the worst).
According to the report, it presented itself as “the world’s largest taxpayer” and it certainly made the largest tax contribution of the Silicon Six, having paid $93.8bn in income taxes this decade (albeit on profits of $548.7bn and revenue of $1,888.0bn). However, cash tax paid as a percentage of profit over the decade was still a relatively low 17.1%.
The trend of low current tax provision in connection with foreign profits continued in 2019, with just $3.9bn booked on $44.3bn of foreign profit, giving a booked current tax rate of just 8.9%.
TaxWatch estimated that Apple has avoided £2.6bn of taxes in the UK over the years 2012-2017 inclusive.
The Republic of Ireland (and more recently Jersey) was said to be a key part of Apple’s tax avoidance strategies, especially for the sizeable European revenue that is booked directly in Ireland. The Paradise Papers revealed that the income flowing through Ireland was even stateless for a time, from a tax point of view.
Five of the nine ‘significant’ subsidiaries recognised in Apple’s 10-K filings were Irish incorporations. In a landmark case, in August 2016, the European Commission concluded that Ireland (to where Apple directs the vast bulk of its foreign earnings) had granted the company undue tax benefits of up to €13bn. This sum, plus interest of €1.2bn, sat in an escrow account pending appeal resolution at the time of writing.
In the UK, Apple’s subsidiaries were forced to pay additional tax following tax audits. In January 2018, it was reported that both Apple (UK) Ltd and Apple Europe Ltd (which is UK incorporated) would pay £81.3m and £137m respectively in additional taxes to HMRC in relation to years prior to 2015, and much more tax thereafter.
Previously, the Apple Europe Ltd subsidiary (which is incorporated in the UK) had a transfer pricing arrangement in place that resulted in the provision of zero current tax year after year. As with Google, this settlement was widely viewed as being modest, especially given the much more substantial back taxes secured by France subsequently, amounting to €500m.
The company therefore lost half a mark under Tax Conduct.