Sunday, June 9, 2013

Apple Dodges Taxes and Blames Ireland

In the US Senate committee hearing on May 21, 2013 – read my blogpost yesterday – the Apple CEO had put the blame on Ireland, saying that he was "recruited" by the country in the 1980s to base a subsidiary there – a move that would allow the company to save billions in corporate taxes over the next few decades. As the story went, Apple was not the only company that went to Ireland. Back in the late 1970s and early 80s, Ireland was facing sluggish GDP growth and double-digit unemployment. Then, it hired some US consultants who recommended it to try what was then an innovative strategy: incredibly low taxes for companies. (Hey, it worked for Puerto Rico, the consultants argued.)

I read that Ireland's corporate tax rate of 12.5 percent is less than half that of most other European countries. The average tax rate for the countries in the Organization for Economic Co-operation and Development was 24 percent in 2012.

The US Senate said the tech company actually paid an even lower rate of 2 percent – a result of what Apple said was a "negotiated" rate with the Irish government. (It was a negotiation Ireland had vehemently denied).

Perhaps Apple was getting such a good deal because Ireland couples its low rate with another inducement: Looking the other way as corporations move money around from their Irish subsidiaries to even more lucrative tax havens in locations such as Jersey, Bahamas, British Virgin Islands, Luxembourg. In Apple's case, the Irish subsidiaries listed "no declared tax residency anywhere in the world," a perfectly legal maneuver that allowed the company to wriggle out of almost its entire tax burden.

Didn’t I say Apple was not alone? Google paid just 22.2 million euros in taxes on its 9 billion euros in Ireland-registered European profits, and Irish subsidiaries allowed Microsoft to shave $2.43 billion off its American tax bill.

There are those who say that Ireland shouldn’t be blamed – it was only trying to boost its economy and I admit, it worked. Besides there are plenty of other worldwide tax havens these errant companies can go to. Maybe so but I repeat, the acts of tax evasion are immoral, unethical and debauched.

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