Apple's offshore trail to Australia
Documents filed by US congressional investigators on Wednesday claim Apple products made in China are resold to Apple retailers in Australia after an Irish subsidiary takes ownership of the products mid-transit - but only on paper.
The Irish subsidiary, known as Apple Sales International, resells the product to Apple retailers in Australia at a substantial profit, despite never actually possessing the product.
"ASI never took physical possession of the products it ordered from the third party manufacturer," the congressional report says. "ASI took title to the manufactured products while they were being shipped to Apple's Asian distribution centres. When they arrived, ASI sold the products to Apple Singapore at a substantial profit."
Before a reoganisation last year, the same structure applied except without the inclusion of Apple's Singapore subsidiary. Products would be resold directly to Australian retailers.
"For example, ASI purchased the finished goods from the manufacturer in China and then resold them to an Apple retail store in Australia, with ASI taking ownership of the products while in transit to Australia, then reselling them at a substantial profit to the Apple retail entity upon arrival."
The revelation is one of many contained in the documents, which outline how Apple uses a global network of subsidies to shuffle profits around the world through low tax jurisdictions, such as Ireland and Singapore, to avoid paying higher taxes elsewhere.
US investigators said the company's use of "disregarded entities" such as the ones in Ireland and Singapore were used to avoid US income rules around foreign company sales.
The documents were based on testimony from Apple executives.
Apple chief executive Tim Cook defended his company to legislators on Tuesday, after senators accused his company of avoiding paying billions in US tax.
"Our foreign subsidiaries hold 70 per cent of our cash because of the rapid growth of our international business," he said.
"We use these earnings to fund our foreign operations, such as spending billions of dollars to acquire new equipment to make Apple products, and to finance construction of Apple retail stores around the world."
Frequently Asked Questions about this Article…
The US Senate inquiry's documents say Apple used offshore subsidiaries to bolster offshore profits for products sold in Australia. Products made in China were shown on paper as being owned mid-transit by an Irish subsidiary, which resold them at a substantial profit through other overseas entities before they reached Australian retailers.
According to the congressional report, Apple Sales International (ASI) took legal title to products while they were being shipped to Apple's Asian distribution centres, but never physically possessed them. ASI then resold those goods at a substantial profit to other Apple subsidiaries, such as Apple Singapore, or to retailers on paper.
The report says ASI never took physical possession of the products it ordered from the manufacturer. Ownership was recorded as transferred to ASI while items were in transit, and ASI subsequently resold them without ever holding them physically.
Before the reorganisation mentioned in the documents, the same ownership-on-paper structure was used but without routing through Apple Singapore — ASI resold products directly to Australian retailers. After the reorganisation, Apple Singapore was included as an intermediate reseller in the chain described.
US investigators said Apple used 'disregarded entities' in places like Ireland and Singapore to move profits through low-tax jurisdictions and to avoid certain US income rules governing foreign company sales, as detailed in the congressional documents.
The documents filed by US congressional investigators were based on testimony from Apple executives and outline how subsidiaries were used in the supply and sales chain to shift profits.
Tim Cook defended the company, saying Apple's foreign subsidiaries hold about 70% of its cash because of rapid international growth. He said those earnings are used to fund foreign operations, including buying equipment and financing construction of Apple retail stores around the world.
Everyday investors should be aware the inquiry highlights regulatory scrutiny of Apple's use of international subsidiaries and profit-shifting through low-tax jurisdictions. The documents and executive testimony have prompted public and legislative attention, and Apple’s leadership has publicly defended its practices as funding global operations.
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