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Ireland may eliminate tax loophole exploited by Apple, others

updated 04:55 pm EDT, Tue October 15, 2013

Change expected to have little practical benefit for government budgets

The Irish government is considering the elimination of a tax loophole exploited by a number of foreign corporations, most notably Apple, reports say. Currently, Apple's Cork-based subsidiaries -- including Apple Operations International (AOI), Apple Operations Europe, Apple Sales International, and Apple Distribution International -- are "stateless" for Irish tax purposes, since they're managed and controlled from outside the country. This has allowed Apple's to dodge Ireland's 12.5 percent standard corporate tax rate, and pay less than 2 percent in taxes in the US. Between 2009 and 2011 Apple funneled billions of dollars through AOI without paying taxes to any government.

According to a new statement from the Irish government, one proposed measure for the country's 2014 Finance Bill would institute "a change to our company residence rules aimed at eliminating mismatches -- that can exist between tax treaty partners in certain circumstances -- being used to allow companies to be 'stateless' in terms of their place of tax residence." The government also says that it's working with the European Union and the Organization for Economic Co-Operation and Development on stopping "aggressive tax planning" within Ireland.

Speaking with Reuters, a Department of Finance spokesman denied that the change is being made because of US political pressure. The person in fact notes that Apple will probably be able to find a new loophole, since they can choose any country they like as their tax residence, including zero-tax regions like Bermuda.

Earlier in 2013 Apple faced scrutiny from the US Senate for its tax dodges, which have kept hundreds of millions of dollars out of federal budgets and public services. CEO Tim Cook commented in testimony, however, that the company's practices are fully legal. A Securities and Exchange Commission probe ultimately decided not to take any action.

by MacNN Staff



  1. prl99

    Mac Enthusiast

    Joined: 03-24-09

    Ireland can do what they want to do but like many US states, start charging companies high taxes and they will go elsewhere. I don't believe Apple needs to have a major foothold in Ireland anyway. The people screaming for changes might get their wish and then will have to deal with the loss of many jobs and the 2% they were getting.

  1. Inkling

    Senior User

    Joined: 07-25-06

    Quote: "Between 2009 and 2011 Apple funneled billions of dollars through AOI without paying taxes to any government."

    If we'd done anything similar with our modest incomes, we'd be in prison now. You'd think someone in Apple's management would feel just a tiny bit guilty about this. Government isn't free. The taxes they don't pay are taxes others have to pay.

  1. ctt61

    Fresh-Faced Recruit

    Joined: 06-21-05

    Government is not free, but it become too big and to expensive to run without any positive result.

  1. ctt61

    Fresh-Faced Recruit

    Joined: 06-21-05

    Government is not free, but it becomes too big and too expensive to run without any positive results.
    May be we should investigate the government and cut payment to them instead.

  1. jslove

    Fresh-Faced Recruit

    Joined: 07-15-07

    "Without paying taxes to any government" is not what they said. They said that taxes were paid in the jurisdictions where the money was earned, so money earned in Italy would be subject to Italian taxes. What they did not have to do was pay any government additional taxes on money that was earned outside them. So if money was earned in Italy, it could be used to open Apple stores or facilities in another country (including as it happened, the USA) without also having to pay taxes on that money as income in the destination country.

    If Apple brought back the money from (say) Italy to the U.S., they would have to pay U.S. income taxes on it in addition to the taxes already paid in the jurisdiction where it actually was income. My understanding is that this is not quite double taxation, because the taxes paid to the country where it was earned are deductible, but if Apple earns the money in Italy and wants to spend it in Singapore or France, why should they pay U.S. taxes on it? Technically, it isn't the Apple in California that earned it as income anyway; multinationals are typically networks of ownership of separate corporations, since they pretty much have to separately incorporate in each jurisdiction. One of the nice things about doing business in the U.S. is that a company like Apple doesn't have to separately incorporate in each state, although some more regulated things like banks do do that.

    If you want to look at the strange laws, the U.S. has laws that let money come in from Apple's Irish subsidiary and be invested in the U.S. without being considered income here. The loophole that lets them spend money here without technically having to repatriate it is in the U.S. tax code. Congress put it there. Apple didn't spend much money on lobbying until fairly recently; I'm pretty sure if lobbyists are the reason for some of these strange features of the law, some other corporation with deep pockets bought this perversion long before, and Apple just discovered it and used it.

    In a time when "activist investors" actually bring lawsuits against the management of publicly traded companies when they do things other than maximize short-term profits and pay them out as dividends, and win those lawsuits, it's totally unrealistic to expect a corporation to honor moral imperatives that we hold people to. If I cause a death, I could spend life in prison, though a smaller number of years may be likelier depending on the circumstances. If a corporation causes a death, they might have to pay a $2,000 fine. How's that for an out-of-whack incentive?

    We would do well to have a tax code with lower rates but fewer loopholes and subsidies, which could actually bring in more money and also drive fewer firms away. Part of the reason we can't get a tax code that is more sane is the lobbyists protecting their patrons' tax breaks, but the other reason is groups like Grover Norquist and his minions chanting "no new revenues". If it's possible to bring sanity to Washington, it's not clear how.

  1. The Vicar

    Junior Member

    Joined: 07-01-09


    All Ireland would need would be a tax rate which is lower than elsewhere to keep companies there. It doesn't have to be 2%. In fact, if they wanted to be REALLY devious, they could simply set up the tax code to have penalties for companies which move their headquarters out of the country which would be larger than (say) the benefit of moving to another country with lower taxes over 5 years. That would prevent companies like Apple from being able to move out without facing lawsuits from "activist investors".


    Agreed! Let's cut the military/security budget by 80% immediately, since that's where the majority of the money goes. (Over 60% of the discretionary budget in 2013, and over 55% of Obama's requested budget for 2014.) Then let's raise tax rates back to Reagan-era levels, so the rich actually pay as much, by percentage, as the poor, rather than paying less (as they do now). And close the corporate loopholes which let large companies do business here without paying any tax at all (like GE and Exxon have repeatedly done). If we did those 3 things, we'd have a massive budget surplus.


    "not clear how"? It's incredibly obvious what needs to be done, people just don't want to do it. How about this: any state which has taken in more money in federal assistance in the last year -- we'll be generous and not count FEMA emergency assistance -- than it paid in taxes, no longer gets a voice in Congress. And the same is true over 4-year periods for the Presidential election. (They can vote, but unless they were responsible, their representatives just don't get to vote in Congress and their Presidential votes don't count.

    Voila: the number of idiot right-wingers gumming up the works goes down almost to 0.

  1. Charles Martin

    MacNN Editor

    Joined: 08-04-01

    Vicar: BRAVO.

  1. Spheric Harlot

    Clinically Insane

    Joined: 11-07-99

    Originally Posted by InklingView Post

    Quote: "Between 2009 and 2011 Apple funneled billions of dollars through AOI without paying taxes to any government."

    If we'd done anything similar with our modest incomes, we'd be in prison now. You'd think someone in Apple's management would feel just a tiny bit guilty about this. Government isn't free. The taxes they don't pay are taxes others have to pay.

    That's crap, sorry.

    These "loopholes" exist for a reason. They are explicitly set up by politics for businesses to use.

    In the case of Ireland, these tax breaks were installed at a time when the Irish economy was completely in the shitter. They were intended to attract businesses and boost the economy. And it was pretty effective.

    As for loopholes that allow corporations within the US to make massive profits without paying taxes are, again, put there for a reason. You may not be privy to those reasons, and they may well be at least partly due to generous financial donations, dinner invites, cronyism, or outright corruption. Or there might have been a real political or economic incentive to implementing them.

    But that is a different situation than the Irish taxation of foreign businesses.

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