Apple denies ‘special tax deal’ with Irish Government

Chief executive Tim Cook defends company’s corporate tax code

Apple chief executiveTimothy Cook testifies in Washington. Photograph: Chip Somodevilla/Getty Images

Apple chief executiveTimothy Cook testifies in Washington. Photograph: Chip Somodevilla/Getty Images

 

Apple boss Tim Cook has denied his company enjoys a special tax arrangement with the Irish Government.

Mr Cook also rejected accusations the iPhone maker was engaged in “tax gimmicks” to avoid paying tax on sales of its products outside of North America.

Nonetheless, he said he favoured “gutting” the existing US corporate tax code and establishing a less complex system “to bring offshore profits back to the US”.

The technology giant has been accused of avoiding tens of billions of dollars in US taxes by sheltering profits in its three Irish subsidiaries.

At a senate hearing in Washington last week, executives admitted the company paid a top tax rate of 2 per cent on $74 billion of sales outside North America over the past three years, largely through its use of tax structures in Ireland.

“We have no special deal with the Irish Government that gives us a 2 per cent flat tax rate,” Mr Cook said in an interview at the All Things Digital conference, an annual gathering of technology and media executives in the California coastal resort town of Rancho Palos Verdes.

Defending the company’s corporate tax code, he said Apple was fully compliant with IRS (Internal Revenue Service) rules in the US.

Mr Cook said his company pays more than $6 billion in taxes annually to the US government, the highest of any corporate.

“The basic thing that’s being debated is for a company like Apple or any other company that sells things across the world and develops them in the US…some people believe that all of the profits, all around the world, should accrue to the US and be taxed in the US.”

He said Apple, like many other multinationals, had a deal with its Irish subsidiary whereby the latter invested money in research and development.

“You basically have two entities contributing money to develop product and then each of those sell products within their regions, and they either accrue the losses associated with that or they accrue rewards.”

Since the company set up its main offshore subsidiary in Cork in 1980s, Mr Cook said, there had been times when both entities were losing money and “now they are times when both are making tonnes of money”.

He said some people believed that all of the profit accruing from product development in the US should be taxed in the country.

“A policy that suggests if development is done here it’s all taxed here, this would not be good for jobs in the US.”

Ireland’s reputation has taken something of a battering in recent days after it was labelled a “tax haven” by US Senators investigating the offshore tax practices of Apple.

The Government has insisted,however, that no special tax deals were ever done with Apple or other multinational investors, and that it complied with international tax norms.

EU tax commissioner Algirdas Semeta said earlier this week that some EU states had made it too easy for companies to avoid taxes by shifting income to countries outside the 27-nation bloc.

“Some member states have fairly loose or relatively liberal double-taxation agreements with third countries,” Mr Semeta said in a Brussels speech to the Friends of Europe group.

“These very loose agreements actually allow aggressive tax planners to shift their profits through EU member states to third countries and to avoid taxation in general.”

Mr Semeta said he was not calling for an end to tax competition among EU members. At the same time, he said countries should not create “specific incentives to foreign companies or wealthy individuals” who want to escape taxes.

In his interview, Mr Cook also defended the company’s record of innovation since he took over from the late Steve Jobs, saying he expected it would release “several more game changers” and hinting that wearable computers could be among them. “It’s an area where it’s ripe for exploration,” he said.