Apple's long IRS-Irish history

Summary:There's no avoiding the stories surrounding Apple's shifting tax rates, whether through stock-buybacks or by moving profits among its off-shore operations. However, Apple has been in Ireland for decades and in dispute with the IRS just as long.

The talk around Apple's taxes appeared to be everywhere this past weekend: from the Internet to angry jokes on the radio. There were new reports of Apple shifting billions from Australia to Ireland , and discussion around soon-to-retire CFO Peter Oppenheimer's strategies, including the dividend and stock-buyback plan that also saved billions in taxes. None of this is illegal, according to Apple and the reports, it's just that some see this as unseemly. 

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However, many young business reporters may not recall that Apple, like many other technology companies, have used Ireland as a manufacturing and operations base in Europe for decades. Apple constructed Apple II computers and Macs, fabricated circuit boards, and back in the days before software downloading, made shrink-wrapped software SKUs there.

Reading some issues of MacWEEK in the 1990s, it appears that Apple also learned much about international tax codes.

One 1993 business report talked about how Apple was battling a $290M claim by the Internal Revenue Service for back taxes from 1987.

The dispute centers mainly on "transfer prices" Apple's offshore affiliates charged for goods and services provided to the parent company. The IRS contends that the prices were artificially high, thereby reducing Apple's U.S. profits and, thus, its tax liability.

Sound familiar?

The IRS is also seeking to deny a variety of other deductions claimed by Apple, including cost of advertising, employee business expenses, computer hardware and software converted to Apple's own use, charitable contributions, disappearance of physical assets, legal expenses, capital investments, and research and development.

"We don't believe their claim is valid, and we are protesting the judgment," said Kate Paisley, an Apple spokeswoman. "We believe the outcome will be much different than the IRS' assessment." She said it is not uncommon for the IRS to present this type of transfer property claim.

In 1995, the IRS said that its claims against Apple were more than $1.3B relating to transactions between Ireland and Singapore.

In a 1996 story, Apple and the IRS disputed over U.S. taxes on sales from machines made in Ireland. Apple said its products weren't "made" in Ireland, rather, they were "assembled" there. It was impossible to tell whether this difference was accepted since Apple eventually settled the cases.

Around that same time, Apple cut back on its Elk Grove, Calif., manufacturing operation and outsourced the work to Singapore and Ireland. The company returned manufacturing to the mainland this past year with the Mac Pro.

Whatever the latest news, it is certainly unfair to hold Apple to a different standard than the rest of the computer industry. These practices have been done for decades by companies bigger than Apple was back then. Taking advantage of antiquated tax codes is something for legislators to deal with. It's not an Apple problem, despite all the "A-level" hype.

Topics: Apple, EU

About

David Morgenstern has covered the Mac market and other technology segments for 20 years. In the recent past, he founded Ziff-Davis' Storage Supersite, served as news editor for Ziff Davis Internet and held several executive editorial positions at eWEEK. In the 1990s, David was editor of Ziff Davis' award-winning MacWEEK news publication a... Full Bio

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