Doing nothing ‘wrong’?

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9 September 2016 | 0

Paul HearnsMore than a week on, and we are still not very much wiser on the Apple Tax debate.

Despite the Dáil being recalled and discussing it at length for a day, during which several motions were made, with most being defeated, all we know for sure is that the Government will appeal the decision, as its motion to do so was widely supported.

So the facts remain pretty much the same.

“Apple and the Irish Government keep saying, ‘we have done nothing wrong’. This is incorrect. They should be saying we have not done anything illegal”

At the time of the two critical rulings on Apple’s Tax affairs, attribution of profits to a stateless company was legal under Irish tax law, and not illegal under EU tax rules relating to an individual member state’s tax laws.

Apple set up structures to take advantage of this.

Apple paid an effective corporate tax rate of 1% on its European profits in 2003, going down to 0.005% in 2014.

The Government was fully aware of this and accepted the practice.

Under immense pressure internationally, not least of which came from the United States, in 2014, Ireland changed the laws to stop stateless companies, but gave a very generous compliance timeline.

I think in all this one clarification should be made. Apple and the Irish Government keep saying, ‘we have done nothing wrong’. This is incorrect. They should be saying we have not done anything illegal.

It is wrong for a corporation to pay so little tax on its profits — end of story. There is no argument, under any circumstances by which any commercial entity can justify such a position.

It may be doing its duty to its shareholders to take all legal measures to reduce its tax burden, but, in every real sense what Apple has done is wrong, aided and abetted by the Irish Government.

In the fullest sense of nothing illegal being done, I fully suspect that the Irish Government did not give special treatment to Apple, I would contend that similar arrangements have been made, and accepted, by a lot of other multinationals — not just technology companies either. I suspect that financial services in particular, but also pharmaceutical and medical companies too, have done just as Apple has done, abetted by the Government.

This will come out in the wash, and I suspect that while this will ultimately prove to be a fruitless exercise as far as prosecutions go, it is a rather more realpolitik gambit on behalf of the European Commission, as it will push such practices out into the open where the public outcry will force politicians to close loopholes and make these corporations pay their share.

The point of this exercise, I would argue, is not to have Apple pay its back taxes, though that would be good. Rather, I suspect that it is to highlight the grossly unfair practices that are allowing billions in profits to be moved about without ever paying the kind of tax to which we mere mortals are subject.

I know I will certainly be having a word with local representatives to express my utter disgust at the practices. Not that that will do any good, but if everyone who feels this way expresses it in no uncertain terms to their local representative then it may become a chorus, which may well become policy.

And take no notice of the doom mongers. Even if multinationals were force to pay tax at the full rate, we still have one of the lowest corporation tax rates in a developed economy. Rather than flee elsewhere if we tighten our regime, they will likely put up and shut up as other territories also follow suit but will be unable to let their higher rates drop due to the public scrutiny orchestrated by the Commission.

Check? Maybe, for now.



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