What Apple tax controversy 'reveals'

Written By Unknown on Minggu, 14 Juli 2013 | 21.43

Reuters Jul 13, 2013, 03.21PM IST

(Ireland, which has courted…)

DUBLIN: Occupying a single floor of a three-storey building in a suburban Dublin office park, Western Union's offices are notably modest for the international headquarters of the world's largest money transfer firm.

The set-up is typical of swathes of US companies using Ireland to cut their tax bill. A Reuters analysis of Irish and US filings shows that more than 40 per cent of the S&P 500 have registered subsidiaries in the country.

That nexus, which has created over 100,000 jobs for Ireland, was laid bare when the US Senate revealed that technology giant Apple had paid little or no tax on tens of billions of dollars in profits channelled through the country.

Ireland, which has courted US business for decades, rejects the Senate's claims that it is a tax haven, but the case has damaged its reputation as it seeks to emerge from an EU-IMF bailout and its export-focused economy dips back into recession.

Company documents in Ireland and filings in the United States shows that many firms have multiple units in Ireland, where corporate income tax is 12.5 per cent - about a third of the top US federal income tax rate of 35 per cent.

In many cases, several subsidiaries are registered at the offices of Dublin-based law firms.

In Western Union's case, Unit 9, Richview Office Park houses 11 of its 12 Irish subsidiaries. The company made 92 per cent of its pretax income outside the United States last year, although a fifth of its staff work in the country.

That allowed the Colorado-based company to cut its effective tax rate to 12.2 per cent - about average for a large US company.

Companies, investors and some lawmakers argue it is a firm's duty to keep its tax bill as low as possible so it can invest to grow and return money to shareholders. Western Union said it pays full tax on all profits earned in Ireland.

"The (Irish) tax rate is not that relevant, because nobody pays 12.5 per cent," said Jim Stewart, a professor at Trinity College Dublin who specialises in corporate finance and taxation.

"It's about the ease of incorporation, the ability of Irish corporate law and tax law to fit in with IRS ( Internal Revenue Service) requirements, and the flexibility that is shown by the Department of Finance and Revenue to any of the multinationals' needs. If they have a problem, the law will be changed."

A spokesman for Ireland's Department of Finance said it did not change laws to suit multinational companies and that its focus was on the local economy.

"In each Budget and Finance Bill the government introduces a range of measures to support key sectors in the Irish economy," the spokesman said in an emailed statement.

Ireland's Office of the Revenue Commissioners, which assesses and collects taxes, said in a statement it did not do special deals on tax rates for any company.

Taxed at 0.004 per cent
Apple's ability to pay tax of just two per cent of its $74 billion in overseas income over the past three years hinged on an unusual loophole in the Irish tax code that allowed it to channel profits into Irish-incorporated subsidiaries that had no declared tax residency anywhere in the world.

US rules that allow companies incorporated abroad not to pay US taxes complemented the arrangement.

Apple, which employs about 4,000 people in Ireland, is just one of many companies that route money through the country to cut taxes on company profits and fund investments.

PepsiCo Global Investment Holdings Ltd, which provides financing to other companies in the drinks group and is one of 14 Irish subsidiaries, made a profit of almost $6 million in 2011 and paid tax of $215 to Curacao, giving it a rate of 0.004 per cent, Irish company records show.

A spokeswoman for PepsiCo said it fully complies with the tax laws where it operates and pays all taxes owed.

Company records also show that an Irish holding company of medical device manufacturer Boston Scientific, one of the country's top multinational employers, paid $60 million tax on profits of $1.4 billion in 2011, or about four per cent.

Boston Scientific declined to comment. Pharmaceutical company Bristol-Myers Squibb said in US Securities and Exchange Commission (SEC) filings that it had favourable tax rates in Ireland and Puerto Rico under grants not scheduled to expire before 2023.

Ireland's Industrial Development Agency (IDA), tasked with attracting foreign firms to the country, said it offers grants for employment, research and development, and training.

Ireland's Office of the Revenue Commissioners said it did not comment on the tax affairs of individual companies.

No questions asked
At least 206 of America's largest 500 companies by market capitalisation have one or more subsidiaries in Ireland, Reuters research showed.


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