Our sweet deal for Apple leaves bitter taste for taxpayers
Some good news. Europe, which told Ireland to make payments to bondholders despite no legal obligation to do so, may be on the brink of giving us a financial break. We could be in line to collect a windfall from Apple. Hurrah!
No, wait, cancel the good news. It's premature to start cheering. The Irish State doesn't want any back taxes from the US multinational, especially not billions of euro dating as far as 2004.
In fact, if Europe insists, the Irish State has said it will go to the European Court of Justice to withstand this intolerable attempt to press money on us. You hang on to your mega billions, Apple. We'll put manners on those eurobullies for you.
Yes, indeed. The Government is indicating that it intends spending our taxes defending Apple's rights to pay hardly any taxes. Some 2pc is all it hands over currently, for two Irish subsidiaries according to a US Senate committee investigation. Apple is doing this legally, of course. As it says itself, it's abiding by tax rules. But the halo has well and truly slipped for the technology giant. We don't look too transparent, either, with Ireland branded a tax haven when that low, low figure emerged. So much for our hotly defended 12.5pc corporate tax rate - not every tree in the orchard is treated the same.
The European Commission is currently investigating two tax deals struck between Ireland and Apple in 1991 and 2007. It suspects those arrangements were preferential and amounted to illegal state aid. And now the signals drifting out from Brussels indicate the findings will go against Ireland, according to a recent Bloomberg report.
Clearly, the Irish authorities are concerned about Apple clearing off to another tax shelter if that happens. Ireland can't be responsible for Apple's behaviour, only its own. And by declaring itself determined to fighting the European Commission's findings if it doesn't like what it hears, Ireland will be defending a regime where Apple pays just 2pc tax on the earnings of two Irish subsidiaries. That's not a stand we ought to take.
If the basis of our corporate tax regime is a rate of 12.5pc, then that's what companies ought to pay. No case should be made for sweetheart deals. Ireland's protests that we're no tax haven can't be treated seriously if we aren't consistent.
This row has been simmering away for quite some time, amid misgivings that Ireland has been trading taxes for jobs. In 2013, the head of tax for the OECD told a conference in Dublin Castle that Ireland must make sure it actually charges the headline rate if it wants to retain its tax regime. "If you want to save 12.5pc, which would be the right strategy to attract the real business, you better make sure that it's not 2pc. Make sure that it's 12.5pc in Ireland," warned Pascal Saint-Amans. Europe has already pressurised Ireland to close off the 'double Irish' loophole allowing companies to be registered in Ireland but pay tax offshore. Ireland is not alone in having aspects of its tax system examined: others including Andorra, Lichtenstein and Luxembourg are also under scrutiny.
As a minnow of a country competing against whales, we are entitled to use any advantages we can to help us net revenues. There is nothing wrong with self-interest But it is not in Ireland's interests to have a reputation as another Bermuda. And the reality is that our tax arrangements, taken in tandem with those of other countries, are combining to create a taxation architecture open to exploitation by corporations with clever lawyers.
Meanwhile, the Apple revelation begs the question of how many other special arrangements have been agreed? Ireland operates as a low tax country for business. We make no secret of that, nor should we. But it is not defensible for our 12.5pc corporate tax to be slimmed down to considerably less, with rates renegotiated on the basis of jobs from multinationals.
Apple, the powerhouse behind the iPhone and iPad, employs a quarter of its 16,000-strong European workforce in Cork city, and those 4,000 jobs mean a great deal. But is there a hidden price tag?
The US Senate investigation told how Apple used Ireland as the base for its extensive network of offshore subsidiaries, funnelling profits into tax shelters without breaking any laws. EU Competition Commissioner, Denmark's Margrethe Vestager, who is studying Ireland's arrangements with Apple, is only interested in whether market conditions were met. But she says she believes the public has become more sceptical about selective arrangements for large corporations.
Last November, Finance Minister Michael Noonan suggested the Apple case was "weak" and would be dropped by Europe. But Ireland has a poor track record at predicting major decisions in Europe. Eurostat's determination that Irish Water should be counted as part of the State's balance sheet is an example. So Mr Noonan's views on Apple may be taken with a pinch of salt.
Google, Starbucks and Fiat have also come under fire in the international arena, and increasingly we hear the 'not legal but moral' argument advanced for higher contributions to be made.
There is a tendency in political circles to forgive much of firms that deliver job creation. It is the Holy Grail. If a company is large enough it appears to be treated more leniently on tax and regulation.
But tax trade-offs create a sense of unfairness that rankles with other countries - and taxpayers at home can feel short-changed, too.
Martina Devlin's new novel, About Sisterland, has just been published.
Irish Independent
