Chickens coming home to roost over Apple ruling

AFTER 25 years of questionable corporate tax policy the chickens are coming home to roost for Ireland. The EU’s Apple Tax ruling has massive implications for Ireland. However, rather than prompting us to take a long hard look at our tax affairs it has led to a chorus of misguided and misleading outrage.

Much of this has centred on the claims that the ruling is nothing more than a sneak attack on Ireland’s famous – or should that be notorious – 12.5 per cent corporate tax rate.

Certainly, our corporation tax rate is an issue for our European partners and it has been for decades but to narrow the focus on the Apple ruling down to that is to grossly simplify the issue.

If Apple had been paying 12.5 per cent tax on the international earnings of its ‘stateless’ Irish-based subsidiaries then the Government would not have found itself in its current predicament.

The chief issue for the EU was that Apple was paying far less than 12.5 per cent on the profits it booked in Ireland. Somehow this is being lost in the wash of Government spin.

In reality, and with the agreement of Revenue officials, Apple was, since 2003, paying less than two per cent.

Indeed in 2011 Apple affiliates in Ireland, which have no employees and manufacture nothing, paid tax at just 0.05 per cent.

These figures have been disputed by Government who have expressed shock and outrage at the EU commission’s findings.

Quite why they are so shocked is a mystery. These minute taxation rates were revealed to the US Senate in 2013 by none other than Apple’s Head of Tax Policy Philip Bullock.

Following that US Senate investigation, a report was issued which declared, in no uncertain terms, that “Ireland has essentially functioned as a tax haven for Apple”.

Of course, Ireland is not a tax haven on the level of say Switzerland, the Cayman Islands or Bermuda. But make no mistake, Irish policy has helped numerous companies avoid huge tax bills.

Our Government, and the mandarins in the Department of Finance and Revenue, may bristle at the suggestion that Ireland facilitates tax avoidance but that is how we are viewed by many.

There’s a reason the phrase ‘Double Irish’ became shorthand for tax dodging on Wall Street. Irish corporate tax policy may have been designed to foster job creation in Ireland but the side effect has been aiding global tax avoidance on a massive scale.

Ireland and the Irish like nothing more than basking in the praise of the international community. Unfortunately this time we are receiving attention for all the wrong reasons. Just because our tax system is legal doesn’t mean it is right. The results of our tax policy are now being seen, not just in the EU Apple ruling. The bizarre situation earlier this summer when Ireland’s GDP growth was listed at a staggering 26 per cent is also directly linked to the taxation policies at the very core of the current crisis.

The Irish government is stuck between a rock and a hard place and has little option but to appeal the EU Apple ruling. However, that does not mean we should bury our heads in the sand and ignore how we got here. The best way to salvage our reputation isn’t to attack our European and international trading partners.

It is to admit to our mistakes and take steps to fix them. Who knows that might even help swell our sorely depleted coffers a little.