Apple will feel effects of U.K. tax avoidance crackdown

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U.K. Treasury announced its new policy this week.
Photo illustration: Ste Smith/Cult of Mac

The U.K. Treasury has announced plans to crack down on tech giants which use overseas profit-shifting strategies to cut down on the amount of tax they have to pay.

Chancellor Philip Hammond announced that the country will now charge a 20 percent income tax rate on any British earnings held overseas, starting April 2019.

The announcement was made as part of Wednesday’s 2017 budget, and reflects continued popular concern over multinationals getting around paying their share of taxes.

“Multinational digital businesses pay billions of pounds in royalties to jurisdictions where they are not taxed. And some of these royalties relate to UK sales,” Hammond said. “So from April 2019, and in accordance with our international obligations, we will apply income tax to royalties relating to UK sales, when those royalties are paid to a low tax jurisdiction.”

No tech giants were explicitly named, but a source in the Treasury told Business Insider that it will apply to companies such as Apple, Amazon, and Uber. The change is likely to raise around 200 million British pounds ($266 million) per year.

Apple’s tax strategies

Apple has been regularly criticized over its tax avoidance strategies. Last year, the European Union handed Apple a massive tax bill of $17.6 billion, claiming that the company took advantage of illegal state aid that allowed it to route profits through Ireland.

The investigation alleged that Apple paid the equivalent of as little as 0.005 percent on all European profits in 2014. Last month, the European Commission took Ireland to court for failing to collect the money as owed.

Apple was also named in the recent “Paradise Papers” leak, showing details about how wealthy individuals and companies move large quantities of money overseas to bypass taxes.

For its part, Apple has always insisted that it properly pays all of its tax obligations — and pointed out that it is the largest single taxpayer in the entire world. (Which, as the biggest company, is to be expected.)

Recently, in the wake of the “Paradise Papers,” it published a press release titled “The Facts About Apple’s Tax Payments.”