Apple's Tax Practices in Ireland Draw Ire of Some UK, European Politicians

By Ed Silverstein May 23, 2013

While it’s true that hardly anyone likes to pay taxes, sometimes the amount of money that big companies pay to governments is downright embarrassing.

Just look at an Apple subsidiary in Ireland called Apple Operations International (A.O.I.), which the U.S. Senate alleges earned a net income of $30 billion between 2009 and 2012 – but paid no taxes on that money. In the bigger picture, Apple avoided paying an estimated $44 billion in taxes in the United States by keeping its money in other nations.

Many American politicians are annoyed and concerned. This week, a U.S. Senate subcommittee charged that Apple was able to get a "special" tax rate in Ireland of about 2 percent.

Also, in Britain and Ireland several political and economic leaders are outraged at how little the company – and many other multinationals – are paying in taxes by using Ireland as a tax shelter.

But the current pro-business tax laws were defended by supporters this week. Also, Irish Prime Minister Enda Kenny claimed in a public statement that "Ireland doesn't do, let me repeat, doesn't do special tax [relief] for companies.”

Yet, supporters are slow in enacting any reforms to the system. Many say it needs to be addressed by several nations at the same time. U.K. Prime Minister David Cameron’s pro-business government says it will bring up the subject with the Group of Eight – made of major industrial nations. It may not be a top priority. In fact, Cameron is pushing for the lowering of the corporate tax rate in the United Kingdom.

The European Union – facing a debt crisis in much of Europe – is also looking at the issue. Yet little has been done, given how difficult it is to get many nations to agree on a single policy.

Apple is not the only company involved. Starbucks, and Google are among the other companies that have gotten some attention.

Just look at these numbers: Starbucks paid $13.1 million in U.K. corporate taxes since 1998. The relative lack of its taxes paid to the U.K. government led to public picketing outside of its stores – which in turn led to the chain promising to voluntarily pay more in taxes.

In addition, Google paid $15 million in U.K. corporate taxes over the past three years. Google’s tax bills were recently criticized by U.K. Labor Party leader Ed Miliband – who is always looking out for topics of disagreement with Cameron.

Officially, Ireland now has a 12.5 percent corporate tax rate. (The corporate tax rate is 29 percent in the United States, 22 percent in Britain, 27 percent in France and 24 percent in Germany.) But laws in Ireland exist so that corporate tax bills can be far less – as with the case of Apple.

Apple defended itself against charges of impropriety this week.

“Apple complies fully with both the laws and spirit of the laws,” Apple CEO Tim Cook testified before the U.S. Senate this week. “And Apple pays all its required taxes, both in this country and abroad.”

It’s just the case that Apple can pay little or nothing by keeping the money in Ireland.

“That's just good business, right? Well, yes if you're an Apple shareholder, and no if you're part of a cash-strapped government that needs to increase income taxes, rather than corporation taxes, to fund a budget deficit or keep government services like health and education running at the same levels as last year,” Stephen Kinsella, who teaches economics at the University of Limerick, wrote recently in the Irish Independent. “To get a sense of scale, $30 billion is 1.5 Irish health services, two education systems, or about 20 percent of Ireland's national output.”

The economic situation in Ireland is far from ideal. Unemployment is at 15 percent and the government has to repay $103 billion for a loan given by the European Union and the International Monetary Fund in 2010. Ireland is now trying to convince Germany to help out financially with the Bank of Ireland and Allied Irish Banks – as news of the Apple tax bill is spread worldwide.

"There is something wrong with this picture — the revenues of these companies keep increasing while our workers are getting crushed," said Peter Mathews, an accountant who also serves in the Irish Parliament for the Fine Gael party, was quoted by CNBC. "Apple's cash pile is about the size of our national income. Why not have them pay a 4-percent levy to contribute to our national recovery?"

One of the biggest problems with the tax issue is that of public perception – even among supporters of the current tax system in Ireland.

“The tax inquiry by a powerful U.S. Senate subcommittee into computer giant Apple and the financial advantages it enjoys in Ireland comes as bad news indeed for Dublin,” said Arthur Beesley, the Irish Times’ Political News editor. “Even if everything is carried on within the exacting letter of the law, it does not look good when a company’s operations here make vast profit and it pays next to nothing in tax.”

Edited by Alisen Downey

TechZone360 Contributor

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