02 September 2016

Apple's Irish Tax Scam

The company whose name is on two of the laptop computers and three of the phones in my family pays almost no taxes, largely due to an arrangement that books most of its income to Ireland which has graciously consented to tax almost none of that income in exchange for investments that boost the local economy.  The tax rate imposed by Ireland on Apple's profits is a mere 0.005%.  The boost is not insubstantial.  Apple's European headquarters is in Ireland and it's operations there create thousands of good Irish jobs.

How big of a tax break is Apple getting?  According to the European Union which says that the tax break violates E.U. treaties, about $14.5 billion.  In other words, about $3,000 of taxes avoided for every man, woman and child in Ireland.

Ireland, meanwhile, is doing its damnedest not to collect any of it, because it knows that Apple's love for Ireland is runs no deeper than the tax break it gets.

U.S. diplomats, in turn, also wants the E.U. to back off, not because it loves the fact that Apple can park tens of billions of dollars of untaxed cash in affiliated foreign companies, but because the U.S. Treasury will get a piece of the action should Apple ever wish to repatriate the funds.

The arguably legal techniques that Apple is using to indefinitely defer its income in a foreign tax haven are not new.

When I was an intern for a Congressman on the Ways and Means Committee while I was in college, one of the projects that was perennially on the to do list in the office, but never got tackled because it was such a daunting issue to understand well enough to know how to reform it, was the indefinite deferral of taxation of income allocated to tax havens of foreign affiliates of major U.S. companies.

A quarter of a century later, the tax break is still there and it has gotten obscene.

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