* U.S. Senate subcommittee says Apple paid no tax on $29.9
* Dividends routed through Irish subsidiary
* Irish Deputy PM says 'other jurisdictions' to blame
By Conor Humphries and Padraic Halpin
CORK/DUBLIN, May 21 Ireland said on Tuesday it
was not to blame for Apple Inc's low global tax
payments and had no special rate deal with the company after the
U.S. Senate said it paid little or no tax on tens of billions of
dollars in profits stashed in Irish subsidiaries.
The Irish government, which has seen the luring of U.S.
multinationals with low taxes as a key part of its economic
policy since the 1960s, said its system was transparent and
other countries were responsible if the tax rate paid by Apple
was too low.
"They are issues that arise from the taxation systems in
other jurisdictions, and that is an issue that has to be
addressed first of all in those jurisdictions," deputy prime
minister Eamon Gilmore told national broadcaster RTE on Tuesday.
In a 40-page memorandum released ahead of an appearance by
Apple Chief Executive Tim Cook before Congress on Tuesday, a
Senate subcommittee identified three subsidiaries that have no
tax residency either in Ireland, where they are incorporated, or
in the United States, where those companies are managed.
The main subsidiary, a holding company that includes Apple's
retail stores throughout Europe, has not paid any corporate
income tax in the last five years, the report said.
Apple's arrangement has allowed it to pay just 1.9 percent
tax on its $37 billion in overseas profits in 2012, despite the
fact that the average tax rate in the countries of the
Organisation for Economic Co-operation and Development (OECD),
its main markets, was 24 percent in 2012.
The report said "Ireland has essentially functioned as a tax
haven for Apple".
Gilmore said Ireland was pursuing the issue of international
tax avoidance "very strongly" at the European Union and the
OECD, which is spearheading initiatives.
The issue will be discussed at a meeting of European Union
officials on Tuesday, he said.
The Senate report said a subsidiary with a mailing address
in Cork, Ireland's second-largest city, received $29.9 billion
in dividends from lower-tiered offshore affiliates from 2009 to
2012, comprising 30 percent of Apple's global net profits.
It said it exploited a difference between Irish and U.S. tax
"NO SPECIAL RATES"
Apple said in a comment posted online on Monday it did not
use "tax gimmicks". It said the existence of its subsidiary
Apple Operations International in Ireland did not reduce Apple's
U.S. tax liability, and the company would pay more than $7
billion in U.S. taxes in fiscal 2013.
A number of U.S. multinationals including web search leader
Google, online retailer Amazon.com and coffee
chain Starbucks have come under criticism for arranging
their affairs in a way that leaves them liable to low rates of
tax on billions of dollars of overseas sales.
Apple's auditor, Ernst & Young, which also audits Google and
Amazon.com, declined immediate comment.
According to the congressional report, Apple's Tax
Operations Head Phillip Bullock told the subcommittee that the
company had obtained a special low tax rate through negotiations
with the Irish government below the already low standard rate of
12.5 percent. Apple said this had been 2 percent or less for the
last 10 years.
Ireland's Prime Minister Enda Kenny denied there was any
special rate agreement.
"Ireland does not, I will repeat, does not do special tax
rate deals with companies; we don't have any special extra-low
corporate tax rate for multinational companies."
A spokesman for Ireland's finance department said Ireland's
tax system was statute based, so there was "no possibility of
individual special tax rate deals for companies".
A spokeswoman for the Office of the Revenue Commissioners
said she could not comment on individual cases as that would
breach taxpayer confidentiality, but she also denied that the
tax authority agreed special low tax rates with multinationals.
"All companies in Ireland pay the standard 12.5 percent rate
on their trading profits arising in Ireland, and they pay a
corporation tax rate of 25 percent on their Irish non-trading
income," she said.
Unemployed Cork local Tom Falvey, 55, who got 10 weeks' work
attaching cladding to the exterior of Apple's three-storey
headquarters in the early 1990s, said Ireland's jobless would
pay the price for any rise in taxes.
"The companies will just say 'take a jump' and move
somewhere else more obliging. Our unemployment is high enough as
it is," he said, as he walked his dog past the sprawling complex
5 kilometres (3 miles) from the city centre.
A dozen or so casually dressed Apple workers, most in their
20s and 30s, who were smoking cigarettes outside the 1990s
office building, said they could not talk to the press.
Alongside, builders are working on a sleek new glass and
concrete extension. Michael Ambrose, a 58-year-old former
construction worker walking by, said the government was
powerless to get more tax out of Apple.
"We're a small country and feel we can't say no. We know
they'll just go off to one of these Asian countries ... They're
a law unto themselves."
Apple said last year it would add 500 more people to its
Cork workforce of 2,800.
Ireland's pro-business tax structures have attracted U.S.
multinationals including Google, Microsoft and Facebook
, big employers who have helped offset an unemployment
rate stuck above 14 percent, but its low corporate tax rate of
12.5 percent has drawn criticism elsewhere in Europe.
The government regularly touts its success in attracting
international investment as one of its main achievements, and
multinationals, which account for almost 10 percent of Ireland's
workforce, have taken the sting out of austerity measures
prescribed under an EU/IMF bailout by creating jobs.
U.S. firms invested $30 billion in Ireland last year, more
than in China and the rest of emerging Asia combined, according
to the American Chamber of Commerce.
In the 1960s Ireland turned around its economy by attracting
foreign businesses with tax holidays. After joining what later
became the European Union, it was no longer able to do this and
instead shifted to a system of low tax rates - currently 12.5
percent - and a light touch approach to tax administration that
allows companies to reduce their effective rate much lower.
A raft of mainly U.S. companies have taken advantage of
Ireland's tax regime to minimise their tax bills.
Microsoft's Irish base, along with another operation in
low-tax Singapore, helped the company pay tax of just 9.4
percent on $21 billion of non-U.S. earnings last year. Google
channels most of its overseas profits through Ireland, a
practice that allowed it to pay tax at a rate of just 2.6
percent on $6 billion of foreign profits in 2012.
Patrick Coveney, the chief executive of Greencore,
one of Ireland largest companies, told RTE radio that it was
politicians across the world who were responsible for these tax
treaties and tax structures.
"I find it frankly a little frustrating that it is them who
are piling in and criticising international traded businesses
who are merely availing of the tax environment that they have
put in place," said Coveney, a former president of the Dublin
Chamber of Commerce.
Irish opposition party Sinn Fein, which has 14 seats in
Ireland's parliament, said the companies should be invited
before a parliamentary committee when it holds hearings shortly
to discuss corporation tax.
"This Government continues to protest that our tax system is
transparent. It is transparently flawed. Our tax code has been
written for the benefit of large companies and the wealthiest in
society. This is what I want to get to the bottom of in the
Committee hearings," said the party's finance spokesman Pearse