Apple puts taxation policy back on agenda
13 March 2014
Posted by: Author: Paul Mills
Author: Paul Mills
On the domestic front it would appear that government, despite its commitments to reduce taxation before the next election, is really desperate to find other sources of taxation right now.
Government in its efforts to get enough money in the coffers, to ensure that its own and its fellow travellers inflated salaries and even more inflated pensions are met, is getting close to trying to get blood from a proverbial stone.
The Government is demanding that young and old babysitters alike should declare any income they earn from offering babysitting services. What’s next, a kissing tax? A pocket money tax? Or as somebody asked the other day, how soon before a newly-married couple will be asked to pay gift tax when their parents pay or help to pay for their wedding celebrations?
Then we also have Revenue determining which tea is ‘real’ tea aka the one we drink every day versus the more esoteric herbal teas that only ‘genteel’ folk drink. The point being that the tea we drink every day can remain at 0% Vat but that other teas, being luxuries, should attract Vat at 23%. It’s another case of scraping the barrel.
However, the big and, indeed, the more worrying doosie of them all is the news, or is it just more speculation, concerning the amount of corporation tax that Apple had avoided over the years through its Irish identity. You may remember some time ago, Tim Cook, CEO, mused out loud that Apple had a special deal with Ireland where its taxes were minimised when it funnelled its profits through its Irish entities — the implication being that the rate was less than the headline 12.5% tax rate.
He explained that Apple had paid an effective rate of 2% in 2012 on its foreign/ non-US earnings. It incensed two US influential senators, John McCain and Carl Levin, so much that they branded Ireland a ‘tax haven.’ That label, in tax terms, is like putting a hex on Ireland — not something we would want to see if we are to continue to attract high value adding foreign direct investment.
The Government, at the time, insisted that no such sweetheart deal existed and it was simply Apple exploiting loopholes in Irish tax law and other loopholes in US tax law and that of other jurisdictions, to its own advantage. Government continues to insist that this argument is accurate.
In recent days it has been suggested that Apple should have paid tax of €890m on profits of €7.11bn routed through Ireland based on the 12.5 % tax rate. It actually paid only €36m between 2004 and 2008.
However, it’s now being suggested that tax data on Apple’s returns obtained in Australia suggest that the Government’s strident explanations to the US Senate and to our European partners, may not have been as accurate as they could have been. It really depends on how you interpret them. As it stands, following on from Cook’s previous ‘foot in mouth’ moment, Tim Cook or Apple are fortunately saying nothing.
Unfortunately, even if government’s earlier arguments were accurate it’s probably fair to say that the tax genie is out of the lamp. Our European partners will be looking at our taxation system again, but this time with a microscope trying to upturn proverbial stones to see if there is anything buried beneath. The US will do likewise.
As a country depending to a very large degree on the considerable input of multinational companies, we are in for a tense time.
The one thing we can be sure of is the sacrifices that the Irish people have made to rescue European and American gamblers are long forgotten and no quarter will be given or should be expected. Government vigilance is imperative or the ‘bust’ could be with us a long time.
This article first appeared on irishexaminer.com.