updated 01:34 pm EDT, Fri July 5, 2013
Local laws allow companies to dodge normal tax rates
The Irish parliament has rejected a motion to allow a Subcommittee on Global Taxation to call representatives from corporations like Apple and Google to testify, according to reports. Pearse Doherty, a member of the Joint Committee on Finance, Public Expenditure and Reform tried to get the motion passed earlier this week, but was denied. The Subcommittee is considering how foreign companies exploit Irish tax laws to avoid paying fair taxes in Ireland or elsewhere.
"Given the fact that multinational corporations have appeared at committees in Britain and the United States to give evidence about their tax affairs in Ireland, it is ridiculous that politicians here in Ireland would vote down a proposal for them to do the same here," said Doherty in a post-vote statement. "If the committee is to do its job properly it is important that it is free to invite the relevant people and companies to provide all the relevant information."
Irish law states that only companies managed and controlled in the country are tax-resident. Much of Apple's international revenues flow through an Irish subsidiary called Apple Operations International, which is incorporated in Ireland but not managed or controlled there. At the same time US tax laws are based on where a company is incorporated, creating a loophole which lets Apple dodge paying any significant share of taxes. In total Apple uses three offshore businesses to reduce its effective tax rate to just 15 percent, less than half of the 35 percent effective tax rate in the US, where Apple is genuinely based.
The loophole is sometimes referred to as a "Double Irish," since it technically requires two businesses -- one to hold intellectual property rights and another to license them while keeping profits low. The second company is taxed at a rate of 12.5 percent.