Apple Scrutinized on Tax Avoidance

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Audio Transcript:

Marco Werman: I'm Marco Werman and this is "The World", a co-production of the BBC World Service, PRI, and WGBH in Boston. Apple is the world's most valuable company. It also makes things many of us love, so some of you may even be taking it personally that Apple is on the ropes today. The public scrutiny is over charges that Apple Inc. avoids paying billions of dollars in taxes every year. Tim Cook, the CEO of Apple, today denied that. He was being grilled by a Senate sub-committee that released a report detailing the accusations. The report said Apple has three international subsidiaries based in Ireland, but claims no tax residency there. The Senate sub-committee is investigating if Apple broke any laws. Recently similar tax avoidance strategies were used by Google, Starbucks, and Amazon causing anger in the United Kingdom. Margaret Hodge is member of British Parliament. She chairs the Public Accounts Committee and is working to bring these tax-avoiders to what she calls "justice". Margaret Hodge, how much money are we talking about?

Margaret Hodge: Do you know, that's a very good question to which we haven't got the answer because what we're uncovering here in the UK, and it's mirrored in what appears to be uncovered in the Apple case in the US, is that there is a systemic abuse really of the tax system across all companies in that they artificially arrange their tax affairs in such a way so the profits get located in very low tax jurisdictions or in tax havens and they therefore avoid paying a fair rate of tax on the profits they earn in jurisdictions like the UK and, in Apple's case, in the US.

Werman: Now, you're in Westminster. We're hearing the session of parliament taking place in the back. Is this something that has been talked about today in London?

Hodge: Oh yes. What is so interesting is that we chanced on the agenda of tax-avoidance. It was really through, boasts some very good investigative journalism by Reuters who started this looking at how Starbucks arranged their accounts in such a way to export profits in the UK to other jurisdictions and it also came out of the work of whistleblowers who worked for some of these global companies who were concerned that they weren't paying their fair share of tax. But we have sort of captured the public mood on this issue because as this is happening globally, we're in tough times here in the UK, people are seeing their living standards falling, and in that climate people get particularly exercised when they feel that big corporations or very rich individuals take advantage of very artificial ways of arranging their tax affairs across jurisdictions to avoid paying their fair share on the profits they make within the UK.

Werman: And yet according to US tax code, Apple and other companies, their tax strategies are legal. How do you fight something that is legal?

Hodge: Let me say something about the UK which may be different from the US. The way in which companies choose to locate their financial arrangements, that system may be legal, but there is then a real question mark certainly under UK law as to whether the reality and practice reflects the form of structures that they've established. So, for example, if you take the Google example in the UK, Google claim that they do not do any selling of advertising space here in the UK, yet we had evidence from whistleblowers who are people who have worked for Google, we had evidence from customers, advertising agencies who bought from Google, all of whom believed that Google doesn't sell into the UK, it actually sells in the UK. So the form of what they say they do is different from the substance. If that's the case, I think the tax authorities here in the UK should more aggressively question what actually happens on the ground within these companies to see whether or not they are being consistent with the legal arrangements that they have set.

Werman: Margaret Hodge, chair of the British Parliament's Public Accounts Committee. She has been looking into tax-avoidance by multinational corporations. Thank you.

Hodge: Thank you.