Apple's Irish tax loophole facing closure

Going "double Irish" and using tax havens allow firms to avoid huge tax bills, but the net is slowly being tightened on these activities.

One of Apple's Irish tax loopholes is soon to close, as an arrangement allowing the tech giant to keep $40bn from taxation will soon become illegal.

A number of companies have been able to use Irish subsidiaries to keep tax rates to a minimum. In the iPhone maker's case, rather than paying over 30 percent on U.S. home soil, the use of Irish loopholes allowed the company to pay only several percent in tax on profits -- while having no tax residence in any country.

However, on Tuesday, the Irish government said it planned to make it illegal for a company to have no tax domicile. While this may indicate the narrowing patience of lawmakers in relation to companies including Amazon, Starbucks and Apple who use these techniques to avoid hefty tax bills, companies will still be able to nominate low-rate countries as their tax residence -- such as Bermuda, which requires no tax to be paid.

Ireland's Finance Minister, Michael Noonan, said the country is committed to reform, commenting:

"Let me be crystal clear. Ireland wants to be part of the solution to this global tax challenge, not part of the problem."

In May, Apple CEO Tim Cook testified in front of the U.S. Senate Permanent Subcommittee in order to explain the iPad and iPhone maker's tax arrangements. Congress found that Apple created a complex web of subsidiaries worldwide in order to dodge hefty tax bills -- blaming Ireland for allowing the firm to create the "holy grail of tax avoidance."

In response, Ireland's EU affairs minister Eamon Gilmore said that he and his country did not want "to be the whipping boy for some misunderstanding in a hearing in the U.S. congress."

Google, Microsoft, Starbucks and Apple say they follow tax rules in every country where they operate. While true, tax evasion is often possible for large firms due to the difference in taxation laws in various countries.

Via: BBC

Image credit: Apple

This post was originally published on Smartplanet.com