Ireland has pledged to close the tax loophole that has allowed US technology giant Apple to hide $40 billion of its profits from taxation by funnelling income through Irish subsidiaries with no declared tax residency.
Large technology companies around the world are in an interesting position with country-based taxation as their profits are easily moved around the world to find the best rates, with Apple, Google, and Amazon all coming under pressure in recent months to “pay their fair share”.
Ireland has been a popular location for companies wishing to avoid taxation of their profits in other EU countries like the UK, with a number of technology companies setting up offices in the country. However, under the new rules proposed by finance minister Michael Noonan, the Irish government plans to make it illegal for a company to have no tax domicile, telling parliament:
“Ireland wants to be part of the solution to this global tax challenge, not part of the problem”
However, whilst this may close a loophole in the law, the changes would still allow companies like Apple to make 0% tax countries such as Bermuda their tax domicile, making little difference in reality as the money would just be funnelled there.
This move comes after a US Senate committee described Ireland as a particular problem in helping companies lower their corporation tax bills, accusing Dublin of allowing Apple to pay a preferential rate of just 2% or less in tax, well below their already low rate of 12.5%.
Apple continue to comply with the letter of the law with their tax structures, and such companies will continue to avoid paying taxes from where they generate profits by funnelling it to low low or zero-tax countries until the big economies of the US, Europe, and China come together to agree a more equitable solution that better serves nations.