Stop blaming companies for using legal tax systems

Apple's profits might bypass tax coffers of the US and UK, but it doesn’t mean the money is gone

Apple’s tax arrangements in Ireland made international headlines. Photograph: Mark Lennihan/AP

Apple’s tax arrangements in Ireland made international headlines. Photograph: Mark Lennihan/AP

Thu, Jul 31, 2014, 11:53

In May 2013, Apple was one of several US multinationals in the hot seat before a bipartisan US senate subcommittee investigating the use of corporate tax avoidance schemes.

Apple’s tax arrangements in Ireland made international headlines, as Apple chief executive Tim Cook revealed that the company paid a sixth of Ireland’s multinational tax rate of 12.5 per cent.

The Irish Government was quick to deny assertions that it was providing a “tax haven” to such companies.

Two of the senators leading the investigation retorted with a joint statement, insisting: “Most reasonable people would agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven.”

In the same year, a similar scenario played out before a parliamentary subcommittee in the UK. Companies highlighted this time included Google and Amazon. Over there, it was noted, Amazon paid just £2.4 million in corporate taxes in 2012 on sales of £4.3 billion.

Ireland came up in those discussions too, as a base through which many of these companies with UK subsidiaries funnelled their tax (lets set aside that if, as UK tax campaigners have argued, Amazon and its compatriots were taxed in each country on the basis of what each country contributes to overall revenue – about 10 per cent in the case of Amazon UK – Amazon in the UK would be entitled to a large tax credit now due to recent global losses).

The fact is, all this huffing and puffing of government investigatory committees remains just so much grandstanding.

Last week, an American president finally had the courage to argue, in a hard-hitting speech in Los Angeles, that the time has come to – yes – change the American tax system to prevent American corporate profits from heading off on productive international tours. Ireland, of course, got yet another mention.

Gaming the system

“What we are trying to do is to say that if you simply acquire a small company in Ireland or some other country to take advantage of the low tax rate [and] you start saying, ‘we are now magically an Irish company’, despite the fact that you might have only 100 employees there and you have got 10,000 employees in the United States, you are just gaming the system. You are an American company,” President Obama said.

He also identified one of the other hallmarks of the US corporate system whereby many benefit from subsidies and market supports,even now and then, full-on bailouts, at the expense of the US taxpayer.

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