With spotlight on it & Apple, Ireland calls for worldwide tax crackdownIreland is in the spotlight following the U.S. Senate's investigation of Apple's alleged tax avoidance, and the low-tax nation is now calling for an international crackdown on tax dodging by multinational corporations.
Apple's headquarters in Cork, Ireland, via Flickr user Sigalakos.
Irish ministers are doing double duty in the wake of Apple's appearance before the Senate, looking both to deflect blame from Ireland's multinational-friendly tax structure and to encourage other countries to close loopholes that allow large corporations to skirt the tax laws of the countries they operate in. The minister in charge of attracting foreign companies to Ireland is now saying that those companies need to be brought under control, according to Reuters.
"They play the tax codes one against the other," Richard Bruton told Irish state broadcaster RTE, "and I think we do need international cooperation through the [Organization for Economic Cooperation and Development] to deal with the aggressive nature of that."
Ireland has long drawn criticism from other European nations for its low corporate tax rate of 12.5 percent. That tax rate encourages companies to locate at least some operations in Ireland for tax purposes, which is what Apple does, along with Google and Yahoo, Pfizer, and Intel, as well as many others. Of Ireland's two million-strong labor force, about 150,000 work for foreign companies headquartered there for tax purposes.
The criticism has grown as countries across Europe are tightening their fiscal belts in light of the soft economy. The potential tax revenue lost to Ireland has led to more grumbling from the country's neighbors, though Ireland has so far turned back any attacks. Now, though, thanks to scrutiny from the U.S. Congress, Ireland is closer to pushing for tighter rules on multinationals. The United States wields more economic and political power than does any individual European nation and could unilaterally start making things more difficult for those foreign countries headquartered in Ireland.
"The U.S. Congress, if they wanted to, could wipe out those 150,000 real jobs," Irish think-tanker John FitzGerald told Reuters.
The U.S. congressional investigation found that Apple had paid just two percent tax on $74 billion in income made outside the United States. Those funds were also made largely outside of Ireland, but Irish tax law says that a company can be incorporated within the country without being a tax resident.
Apple maintains that it has broken no law, and CEO Tim Cook has continually maintained that Apple pays "all of the taxes we owe every single dollar."
Cook further asserted that he has no plans to have Apple repatriate its more than $100 billion in cash holdings until the United States lowers the tax rate on earnings made overseas.
"It would be very expensive to bring that cash back to the United States," Cook told the subcommittee. "Unfortunately, the tax code has not kept up with the digital age."
The U.S. isn't the only nation interested in Apple's dealings with Ireland. The relationship between the two has come under scrutiny from both Britain and Spain in the recent past. A British report last year said that Apple pays about half the taxes it should by basing its operations out of Ireland.
A similar report from Spain's El País showed Apple routing 99 percent of its Spanish sales through Apple Operations International, its Irish subsidiary. That arrangement allowed Apple to pay only 2.6 million euros in taxes for 2012, even though its Apple Store sales were up 86 percent.
It's unclear what specific action Ireland will call for in the coming weeks, but the issue is likely to be raised at a summit of European leaders in Brussels.
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