Ireland feels the heat from Apple tax row

DUBLIN Wed May 22, 2013 8:23am EDT

Apple Operations International, a subsidiary of Apple Inc, is seen in Hollyhill, Cork, in the south of Ireland May 21, 2013. REUTERS/Michael MacSweeney

Apple Operations International, a subsidiary of Apple Inc, is seen in Hollyhill, Cork, in the south of Ireland May 21, 2013.

Credit: Reuters/Michael MacSweeney

DUBLIN (Reuters) - Ireland called on Wednesday for an international clampdown on multinationals shifting profits around the world to avoid tax, after criticism that Irish loopholes helped technology giant Apple to shrink its tax bill.

A U.S. Senate investigation into the tax affairs of the maker of iPhones, iPads and Mac computers has shone an uncomfortable spotlight on Ireland's tax regime and forced the government to defend itself against accusations of being Europe's onshore tax haven.

Other European governments, notably France, have previously criticized Ireland's low rate of corporation tax - 12.5 percent - but the revelations from Washington focus on loopholes in the Irish tax code that are more difficult to defend.

Richard Bruton, the minister in charge of attracting foreign companies to Ireland, admitted that companies need to be reined in.

"They play the tax codes one against the other; that is tax planning, and I think we do need international cooperation through the OECD to deal with the aggressive nature of that," he told state broadcaster RTE.

"Tax has always been an element of the Irish offering, and this will continue to be so, but what you have to avoid is what is known as harmful tax competition. We scrupulously avoid that."

PROVOKING CAPITOL HILL

The U.S. investigation showed that Apple had paid just two percent tax on $74 billion in overseas income, largely helped by Irish tax law, which allows companies to be incorporated in the country without being tax resident. Britain had a similar rule but changed it over 20 years ago to stop tax avoidance.

Unlike Britain, however, Ireland is heavily dependent on foreign companies such as Google, Pfizer and Intel for employment - 150,000 of a labor force of around 2 million - and for its much-vaunted economic model of export-led growth.

While Ireland has successfully repelled attacks on its corporate tax rate from European neighbors, U.S. pressure is more difficult to ignore.

By closing its own loopholes, Washington could threaten Ireland's status as European hub for multinationals, and economists said it would be better for Ireland to act first.

"In the long run, the U.S. Congress, if they wanted to, could wipe out those 150,000 real jobs, and we don't want to provoke people by over-egging it, by doing things that are clearly upsetting the U.S.," said John FitzGerald, a professor at the Economic and Social Research Institute (ESRI), an Irish think-tank.

Ireland's Prime Minister Enda Kenny will face tough questions at a summit of European leaders in Brussels on Wednesday where the issue of tax avoidance will take centre-stage.

Bruton said scapegoating individual countries was not the answer and pointed to the fierce competition Ireland faces in trying to attract companies.

"When I go into the boardrooms either in Asia or the U.S., I am followed into those boardrooms by Swiss, by Singaporeans, by Dutch, by Belgians who are offering specially put-together deals on the tax front," he said.

"Ours is not a specially put-together deal; it is absolutely transparent, there are no side deals, no special arrangements."

"We make no apologies for having a regime that is designed to promote employment. It is a regime we have had for close to 50 years."

(Additional reporting by Padraic Halpin; Editing by Will Waterman)

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Comments (8)
timacheson wrote:
We now know for certain that executives of this corporation will look us in the eye and lie.

Cook knows that image is everything, and when he says things with a straight face many people will believe him — especially loyal Apple fans who desperately want to believe. But the truth in this case is readily apparent in the facts presented.

“We pay all the taxes we owe, every single dollar”

What a crooked and dishonest answer. Apple owes much less because they construct fictional scenarios and are dishonest (lying) in official documents. They lie to make the bill smaller. Nobody has ever disputed that they then do pay the artificial bill. This is the whole point, and he knows it. But rather than address the real issue, Cook makes a convoluted public statement trying to distort it into something else — Apple’s infamous “reality distortion field”.

It’s disgraceful. I take it personally when somebody takes us for mugs. But online reactions show people see through Apple’s dishonesty, so it may have backfired.

May 22, 2013 3:18am EDT  --  Report as abuse
whatshisname wrote:
Why, apple should locate all their offices, headquarters and all, to Ireland if that is necessary since the Irish are more friendly and welcoming to business.

Tim Cook, why do you still have Apple in the U.S if those self-serving political idiots there do not appreciate a good thing??

May 22, 2013 4:53am EDT  --  Report as abuse
StephanLarose wrote:
Typical race to the bottom corporate calculus. Corporations are sociopathic by nature, they do not wish to contribute to the infrastructure, consumers or workers that make their success possible, they just want to pit one country vs another to see who will offer them the lowest taxes and the most exploitative wage structure. Corporations want to be treated as people under the law, but have absolutely no morals or concept of social responsibility. Thus they must be regulated stringently to prevent them from using the tremendous political and financial might they have to nefarious, economy-and-society destroying ends. It’s not that all corporate heads are evil, it’s simply the system that dictates these measures, thus we must change the system with sensible rules.

May 22, 2013 5:34am EDT  --  Report as abuse
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