Ireland rejects blame for Apple's low tax
Ireland says it is not to blame for Apple Inc's low global tax payments and had no special rate deal with the company after the US 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 US multinationals with low taxes as a key part of its economic policy since the 1960s, said on Tuesday (local time) 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.
In a 40-page memorandum released ahead of an appearance by Apple Chief Executive Tim Cook before Congress today, 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 US$37 billion (NZ$45b) 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 today, he said.
The Senate report said a subsidiary with a mailing address in Cork, Ireland's second-largest city, received US$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 US tax residency rules.
'NO SPECIAL RATES'
Apple said it did not use "tax gimmicks". It said the existence of its subsidiary Apple Operations International in Ireland did not reduce Apple's US tax liability, and the company would pay more than US$7 billion in US taxes in fiscal 2013.
A number of US 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 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."