Status: 08/30/2016 2:25 pm
For Apple, the deal with Ireland was impressive: billions of foreign profits were processed via Dublin on the Mini Tax – thanks to the “Double Irish” model.
Apple CEO Tim Cook calms down: During a visit to a California company’s plant in Cork, Southern Ireland, he recently showed himself resting. Cook says Dublin will challenge the decision if the European Commission decides it is against Apple or the Irish government.
Apple and the Irish Treasury Department have long strongly denied that they enjoyed any kind of preferential tax treatment from the U.S. giant tax authorities. So in the end the truth will come out, ”Cook added in Cork. But what does it look like?
Apple has been operating in Ireland since 1980
Flashback: In the 1980s, Apple co-founder Steve Jobs decided to set up a subsidiary outside the US – in Ireland. The local government made such settlements attractive through tax breaks. To date, Apple has legally operated most of its business outside the USA through various subsidiaries in Ireland. Profits from around the world flow to the Green Island tax-free. Theoretically, the entire corporate tax rate would apply there.
However, in practice, Apple pays very little, explains James Stuart, an economist at Trinity College Dublin: “In Ireland, all companies are required to pay a corporate tax of 12.5 per cent. But their profits could be diverted to tax havens like Bermuda or the Cayman Islands.
Two instead of 12.5 per cent tax
An economically viable tax arrangement nicknamed the “Double Irish”. As a result, Stuart was criticized, and Apple paid less than two percent tax on its international billion-dollar profit. The European Commission is also upset. Since 2014, Apple and Irish tax authorities have been investigating an agreement that was first made in 1991 and renewed in 2007. It now revolves around two major Apple subsidiaries. Brussels suspected that this generous arrangement was tantamount to state aid from Ireland. That would be anti-competitive. Dublin defends itself that Apple did not receive any extra sausages, so it was not considered better than other US corporations.
Not only the EU Commission has taken up the fight against creative tax exemptions, says analyst Simon French. “Fortunately, the OECD and the G20 are here: they want to tax where the profits of such multinational corporations are geographically collected. In this case, Ireland’s tax policy has been particularly aggressive in the past.”
“Double Irish” will be discontinued – with transition periods
Some time ago the government in Dublin decided – under international pressure – to phase out the so-called “Double Irish” system, albeit a period of transition of several years. This is because the Irish economy is highly dependent on foreign direct investment and continues to be so: not only Apple but many other tech companies have set up their European headquarters here. Foreign companies in Ireland employ over 150,000 people, more than one in ten.
The dispute between Ireland and the EU is likely to continue after Apple’s decision: perhaps before the European Court of Justice. There is no guarantee that Apple will actually contribute up to 13 13 billion to the Irish Treasury.
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