Taoiseach Enda Kenny has defended Ireland’s partnership with multinational corporations and has insisted that this week’s summit of European Union leaders will not put the country in a difficult position despite Apple’s perceived flouting of tax regulations attracting scrutiny from lawmakers across the continent.
Speaking to reporters on Tuesday Kenny defended his Government’s implementation of tax codes, insisting that, “Ireland’s corporate tax rate is statute based, is very clear; is very transparent; and we do not do special deals with individual companies in regard to that tax rate.”
Kenny, whose comments reiterated points made in a statement by the Tanaiste and Minster for Foreign Affairs Eamon Gilmore earlier on Wednesday, was confronted by journalists as he made his way to the airport to board a flight to Brussels, where he will meet with other European leaders, many of whom have been fiercely critical of Ireland’s low corporation tax rate in the past.
French president Francois Hollande, whose predecessor fought and argued vigorously for a change in Ireland’s corporation tax rate to be made a prerequisite of bailout cover, declared that his government would “fight against tax evasion by individuals and companies”. Swedish Prime Minister Fredrik Reinfeldt said that multinationals need to “pay their taxes” given the investment demands they place on countries; and British Prime Minister David Cameron has described the amount of cash lost to exchequers on the continent as “staggering”.
Although multinationals’ willingness to locate in Ireland for its advantageous tax breaks and 12.5 per cent corporation tax rate has drawn fire from politicians from across the water for some time, the latest scandal is unique as Apple – the world’s richest company by revenue – is accused not just of circumventing corporation tax rules, but to paying as little as 2 per cent tax on its global profits.
The Taoiseach’s comments come as Apple chief executive Tim Cook continues to defend his company’s tax practices after being called to explain a gaping hole in its US operational income by the Senate’s Permanent Subcommittee on Investigations on Tuesday.
“We pay all the taxes we owe – every single dollar,” Cook told the Subcommittee in a testy confrontation.
Cook was quick to rebuke panel suggestions that the company had paid less than 2 per cent tax in the last four years, and that it uses its Irish base to hide its profits, saying that the company adheres to the 30.5 per cent US rate it is supposed to. “Not only do we comply with the laws, we comply with the spirit of the laws,” he protested after being questioned by Arizonan senator and former presidential candidate John McCain.
Apple, which holds $100 billion in overseas profits – not taxable in the US – evaded $74 billion in taxes in the US between 2008 and 2012, the panel alleges. Sixty-four per cent of Apples pre-tax income was paid in Ireland during that period it claimed.
The panel highlighted the disparity in payments between Apple’s US operation and its Irish equivalent. “Ninety-five per cent of the productivity that goes into these products happens in California, but two-thirds of the profits are in Ireland,” Subcommittee chairman Carl Levin, a Michigan based Democrat, told the floor. Levin added that Apple paid just $38 billion in tax in the US last year, while in Ireland it registered $74 billion – despite only one per cent of its customer base being located there.
Since the hearing the CEO added that he has no plans to pull the company’s profits from Ireland any time soon.
Apple, a company which considers its image and character above all else, may wonder if its sterling reputation could be damaged by the accusations. If so, the tens of billions in profits which have lifted it above tech behemoths like Google and Microsoft, and beyond the reach of former titans like Yahoo and Research in Motion, may be in jeopardy. In the meantime, the company – revered by techies the world over for its sleek and imaginative products – may be forced to answer yet more questions that could lead to further awkward exchanges between its management and authorities, and more concerns for its hardcore fan base.