Will Apple’s Irish “sweet 16” end in multi-million dollar tax hangover?

guiness

Superstar technology company Apple may have to back-pay tax on the billions of euros it has earned in revenues since setting up a base in Cork, Ireland in 1991.

Regulators in Brussels ruled that the 16-year-long “sweetheart deal,” which EU commission experts say has seen Apple pay just 3.7% tax on its £19 billion of non-US profits, constitutes illegal state aid.

Seamus Coffey, an economics lecturer at University College Cork, told the Guardian: “The EC can demand back payments for 10 years, which would take it back to 2004.

This would mean that the commission, which enforces EU law, could demand repayment of anything from €100m to €850m, depending on how the profit is calculated, he says.

Meanwhile, the US government is also agitating for a bigger slice of Apple’s pie. Complex tax arrangements saw profits funnelled through a company called Apple Sales International, which is legally based in Ireland but has a US board and, until 2012, no employees. This allowed it to pay just 0.045% in tax on its $22bn of “non-US-based” Apple activities.

The facts are abundantly clear: Apple developed its crown jewels – lucrative intellectual property – in the United States, used a tax loophole to shift the profits generated by that valuable property offshore to avoid paying US taxes, then boosted its profits through a sweetheart deal with the Irish government,” said Senator Carl Levin, who chairs the Senate Permanent Subcommittee on Investigations.

Apple’s Irish tax rate has no rational basis; it was determined by what Apple was ‘prepared to accept’ – with the threat that it would cut jobs in Ireland if it didn’t get its way. That low tax rate came on top of Apple’s ploy of saying its three main Irish subsidiaries are not tax resident anywhere. Hopefully this finding will help persuade Congress that we should close the loopholes in our tax code that allow Apple-type gimmicks whose sole purpose is to avoid paying US taxes.”

Coffey agrees. “Apple owes a lot of taxes – but to the US government, not the Irish government,” he said.

 

 

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