The fall- out from Apple – will Irish eyes be smiling?


That was the word that ricocheted around my skull as I read the US congressional report into Apple Inc’s tax arrangements.

Here are a few choice quotes:

“Apple Inc established an offshore subsidiary, Apple Operations International, which from 2009 to 2012 reported net income of $30bn, but declined to declare any tax residence, filed no corporate income tax return and paid no corporate income taxes to any national government for five years.”

It is as though a bunch of alien techies arrived from Mars, sold us $30bn (£19.6bn) worth of smartphones and laptops, and then took all the moolah up to the stratosphere, where they simply circled the earth.

Also, another Apple affiliate, based in low-tax Ireland, Apple Sales International, buys Apple’s finished products from a manufacturer in China and then re-sells them “at a substantial markup” to other parts of Apple’s empire, and retains the profits.

So Irish-based Apples Sales International generated around $74bn (£48.5bn) in profits but “may have paid little or no income taxes to any national government on the vast bulk of those funds”.

According to the senators on the Permanent Subcommittee on Investigations, Apple transferred offshore into low-tax countries the economic rights to its intellectual property – its valuable and usually patentable knowhow – with the result that it avoided around $10bn (£6.5bn) of US tax every year (what the senators characterise as $44bn, or £29bn, of US tax avoidance over the past four years).

What is the point of all this? Well the senators point out that Apple has continued to accumulate vast amounts of cash in places other than the US, and those cash holdings now exceed an eye-popping $102bn (£67bn).”

So wrote Robert Peston on the BBC website yesterday. I think it sums up how those not in the tax profession bunker view the almost daily revelations about multinational tax planning. It is difficult to see how the politicians can back down from being seen to do something about this.

He then goes on to say:

“It is perhaps a bit odd therefore that the investment institutions which own big multinationals have sat idly by for years while all this tax avoiding took place.” Which is similar to what I blogged earlier this week.

But then the end of his blog is fascinating and leads straight into the EU summit today:

“Second, the huge noise – on the internet especially – generated by the congressional and parliamentary investigations of tax avoiders is probably not good for brand Ireland.

If the Irish state is seen as perhaps the main facilitator of Apple and its ilk not paying their fair share in the US and UK, consumers and politicians in the rest of the world may not have quite such warm feelings towards any product or service badged Irish.”

I must admit that as a Brit I’ve been annoyed for some time by Irish business lecturing me about how un European the UK is. Now obviously the UK has a sceptical view of the integrationist aspects of the European agenda, but it hasn’t acted as the conduit for US tax planning into Europe and changed its law to facilitate this in 2010. I’ve always supported the low Irish corporate tax rate, but some of the other aspects of its tax regime are beginning to look rather odd.

Going back to the summit in Brussels, many have assumed that outbound US tax planning would only be dealt with by the US or with the US. This is not strictly the case, as the EU member states could remove some of the key building blocks of outbound planning without the US. So I would imagine that a considerable amount of pressure is being put on Ireland and others to stop facilitating tax avoidance into the EU by removing the conduit elements and the treatment of hybrid entities.

In the lead up to the G8 in June it seems barely a day passes without tax being on the front page.

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