Senators stand by tax haven claims

Ireland has rejected claims by two US senators that Ireland is a tax haven and had handed Apple Inc a special tax deal, a charge the pair stood by last night.

Ireland’s ambassador to the US Michael Collins has written to the two senators, Carl Levin and John McCain, arguing that Ireland’s tax system is transparent, according to the text released by the finance ministry.

However, Levin and McCain said records obtained by their committee showed Apple, which has about 4,000 employees in Ireland with the bulk of them based in Cork, paid a nominal rate far below Ireland’s statutory rate of 12.5%.

“Testimony by key Apple executives, including CEO Tim Cook and head of tax operations Phillip Bullock, corroborates that Apple had a special arrangement with the Irish government that, since 2003, resulted in an effective tax rate of 2% or less,” the senators said in a statement.

“Most reasonable people would agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven.”

Ireland has been forced to defend its low corporate tax rate after the Senate heard last week that the iPhone and iPad maker paid little or no tax on tens of billions of dollars in profits channelled through Irish subsidiaries and had effectively negotiated a special rate of less than 2%.

“Ireland’s tax system is set out in statute, so there is no possibility of an individual special tax rate being negotiated for companies,” Collins wrote in the letter dated May 29 which was also sent to other members of Levin’s Senate subcommittee.

“The memorandum to the Permanent Subcommittee refers to Ireland as a ‘tax haven’. As you will be aware, the OECD has identified four key indicators of a tax haven. None of these criteria applies to Ireland.”

Dublin has begun a diplomatic offensive to repair the damage done to its reputation from the allegations. Finance Minister Michael Noonan said Ireland would not be the “whipping boy” for the US Senate.

Ireland has said that if Apple paid tax at such low rates, it was down to tax planning where it had found a gap to exploit between two tax jurisdictions.

Apple’s Cook told a conference the company did not have a special deal with the Irish Government.

Yet the Senate’s investigation showed the iPhone maker had paid tax worth just 2% of $74bn in overseas income, largely helped by Irish tax law,

The Senate subcommittee identified three Irish-registered Apple subsidiaries that have no tax residency in Ireland. One of these, a holding company that includes Apple’s retail stores throughout Europe, paid no tax at all in the last five years.

— Reuters