Holy grail of Tax avoidance - Ireland, a Tax Haven?
AN apple a day keeps the doctor away, says an old proverb.
You can keep everyone away but not a Taxman and that is precisely what the American multinational corporation learnt recently.
According to a report issued on Monday by the US Senate Permanent Subcommittee on Investigations, Apple is holding almost USD102bn of its USD145bn in cash overseas.
The report estimates that the California-based company avoided at least USD3.5bn in US federal taxes in 2011 and USD9bn in 2012 by using the strategy. It paid USD2.5bn in federal taxes in 2011 and USD6bn in 2012.
Apple uses five companies located in Ireland to carry out its tax strategy, according to the report. While all five companies were incorporated in Ireland, only two also have tax residency in that country, allowing three companies to not be required legally to pay taxes in Ireland.
The report says Apple capitalises on a difference between US and Irish rules regarding tax residency.
In Ireland, a company must be managed and controlled in the country to be a tax resident. Under US law, a company is a tax resident of the country in which it was established.
Apple has so far denied claims of tax evasion in its testimony saying that the current legislation "has not kept pace with the advent of the digital age and the rapidly changing global economy."
The tech giant argued that as 61 percent of the company's revenue last year came from international sales, foreign funds are needed for expansion, promotion and competition. It also added that the US system claims too much from the business - 35 percent of the income, hence the company has to keep much of its funds abroad.
Ireland's deputy Prime Minister said that the country is not to blame for the low rate of tax paid by Apple. He added - "They are issues that arise from the taxation systems in other jurisdictions and that is an issue that has to be addressed first of all in those jurisdictions."
Sound bites for our Politicians to chew upon!