Noonan signals intention to take a small bite from Apple’s favourable tax status
Opinion: Move seen as attempt to limit reputational damage
Apple makes sleek, feelgood products but some aspects of its tax avoidance strategy look truly awful.
For one thing, it marks an exceedingly rare case of the munificent Irish corporate tax regime being pared back a little. As such, it is a departure from relentless expansion. Loopholes have been closed off before, but usually in a quieter fashion. This came in the Dáil on budget day with the world watching as Ireland readies its exit from the bailout.
For another, it comes only four months after Taoiseach Enda Kenny said no country could act unilaterally in the drive to extract more tax from global commerce. That, of course, is exactly what happened here. So what is going on?
While a number of discrete forces are at work, this boils down to a response of sorts to international pressure against questionable tax policies practised in Ireland by certain multinationals.
Having resolutely held the line for years that no move was warranted because the Irish system was entirely transparent and statute-based, this move by the Government marks a change of pitch, if not of substance in any fundamental sense. Yet questions are inevitably raised as to whether pressure within the EU, in Germany particularly, and at the level of the Group of Eight, leads down the line to further change from Ireland.
This is highly sensitive politically, given the totemic status of the 12.5 per cent corporate tax rate and its associated trappings and the pressing need to create more and more jobs. It is all the more so with concessions being held out in coalition talks in Germany as the price for any further Irish aid.
The first point to be made is that the decision made on Tuesday is quite narrow: it will prevent Apple and a small number of other firms from making Irish-registered subsidiaries “stateless” in terms of their tax residency to radically cut their tax burden.
The basic accusation against this particular scheme is that it provides legal cover for hugely profitable businesses such as Apple to minimise their tax exposure to the point that they pay only negligible amounts. Apple makes sleek, feelgood products but this kind of thing looks truly dreadful. The fact that it has carried on within the precise letter of the law for many years does not make it appear any better.
Elimination will take effect only in 2015. Irish officials expect it will be revenue-neutral from an exchequer perspective, but that is not really the point. This is more about Ireland’s standing in the international scene and the need to protect an economic model which has foreign direct investment at its very core.