Apple, like most large corporations in the world, has utilized loopholes in the system to lower their corporate tax. This was the primary reason behind moving their European Sales office to Dublin – as Ireland has a corporate tax rate of 12.5 %, about half that of other European countries. However, in August 2016, an investigation team led by the European Commission (EC) accused the iPhone maker of receiving unfair tax incentives form Irish Government. The EC ruling demanded that Apple pay back Ireland the entire amount of taxes it evaded for over a decade. On 18th September, 2018 – the Irish Finance Ministry announced that it had received the entire amount, a whopping $17 billion, from Apple.
When Apple first moved its European Sales office to Dublin, it attempted to exploit the perfectly legal “Double Irish” loophole. The loophole enabled large corporations to use Irish subsidiary companies to shift profits to low or no tax jurisdictions. However, an EC led investigation found that Dublin charged Apple less than 1% effective tax for several years – amounting to illegal state aid. While ordering Apple to pay back the tax amount in less than four months, the EC initiated a lawsuit against Ireland for its delay in collecting the funds. Finally, in 2018, Ireland’s Finance Ministry began collecting the back taxes in a series of payments. The final amount summed up to a mammoth $17 billion, with $15.3 billion in disputed tax and $1.4 in interest.
Following reports of the European Commission’s investigation in 2013, Apple surreptitiously moved its practices to the English Channel island of Jersey in 2015. The company has stated that the complex financial maneuvers were fully legal and that it “pays every dollar it owes in every country”. However, a BBC report has divulged that in 2017, Apple earned $44.7 billion outside the US and paid just $1.65 billion in taxes. With profits of more than $250 billion stashed on the island of Jersey, one could easily estimate the large amount of tax money it has avoided paying to the government. Nonetheless, following Donald Trump’s corporate tax cuts, Apple announced in January 2018 that it would bring the overseas cash back to the United States and pay $38 billion in taxes.
A caustic culture of greed among U.S businesses has seen them revert to corporate tax avoidance for decades. One prevalent method to achieve this was to shift a company’s assets, intellectual property, and straight cash to tax havens across the world. In the 80’s, several American corporations registered their headquarters in Panama to utilize their lower tax brackets and avoid paying larger amounts to the government – a strategy dubbed as the “Panama Scoot”. The turn of the century witnessed several American tech giants, including Apple, Facebook, Twitter, and Google, set their European operations up in Dublin owing to Ireland’s relatively low tax rate. Thus the “Panama Scoot’ evolved into the “Double Irish”.
Meanwhile, Ireland has vehemently criticized the European Commission’s ruling, citing that it would thwart foreign investment in the country. In addition, both Apple and the Irish Finance Ministry have appealed against the ruling – stating that the tax treatment was in line with Irish and EU laws. Paschal Donohoe, Ireland’s Finance Minister said the government “fundamentally disagrees with the Commission’s analysis”. As the issue is expected to take several years for European courts to resolve, the large sum of money is set to be held in an escrow fund for the time being. If the courts rule the appeal in favor of the tech company, an amount that is large enough to fund Ireland’s health service for a year will be returned back to Apple.