Apple was 90 days away from filing bankruptcy the day Jobs walked back in the front door. Fifteen years later Apple was the most valuable company in history.
In large part due to a tax strategy known today as the Double Irish.
Everyone knows Jobs cut products to only four and laid off a lot of people. Few realize that one of the first things Jobs did was change tax professionals. Soon after than, Apple rolled out Apple’s famous DOUBLE IRISH & A DUTCH SANDWICH tax strategy. That single move saved Apple an estimated an estimated 1 to 2 $billion in taxes. Without those savings, Apple would never have become the most valuable company in the world. Apple wasn’t the only company doing that king of thing. Caterpillar has 300 subsidiaries in Luxembourg alone.
The NYT initially broke the story in 2010. It culminated In 2013 with Congress hearings grilling Apple for avoiding tax on $44 billion of sales with a “web of tax shelters” including the ”Double Irish and a Dutch Sandwich”.
How much did Apple save? It’s been variously reported as low as $400 million. But Apple’s profit margin varied from 39% & 20%. At 20%, Apple’s untaxed profits were $4.5 billion. A combined tax rate of 40% would yield tax savings of approximately $2 billion.
No charges were brought.
No laws were broken.
Everything Apple did was thoroughly & completely legal. .
Judge Learned Hand, a famous court of appeals justice, famously said, “It’s perfectly legal to rearrange one’s affairs to pay less income tax.
Tax strategy is a way of operating your business that escapes income tax and/or regulatory fees legally without breaking any laws. Apple’s Double Irish Tax Strategy required Apple to operate several different corporations in several different countries, moving the money back and forth between them. When everything was said and done, they met legal requirements to cut taxes, probably by billions.
In Apple’s case, all that cash sitting on their balance sheet is trapped overseas. Without $2 billion of tax savings, Apple would not have reached the value that propelled them to most valuable company in the world. Of course, all their competitors have their own tax strategies. Everyone at the Fortune 500 does it. No privately owned company does. But that’s another story for another time.
Respect … Apple & Jobs.