Ireland has announced that it is to close one of the tax breaks that
Here's what they're doing:
Ireland has pledged to close a widely-criticised tax loophole used by technology giant Apple to avoid payments on more than $40bn (£25bn) of income.
Michael Noonan, Ireland's finance minister, said on Tuesday that he planned to make it illegal for any company registered in Ireland to have no tax domicile.
So that's the change. As background, Apple runs all of its non-US income through two Irish companies. One is tax resident and domiciled in Ireland. The other is not: but it is also not resident or domiciled in the US, where Apple claims it is managed from. In fact, that second one does not claim a tax residency or domicile anywhere. So, the money comes in from around the world into the first Irish company, is then passed over as royalties and fees to the second. And as that second is not tax resident or domiciled anywhere then no national tax jurisdiction has a claim on the tax due or not due on those profits.
Do note that this is nothing at all to do with the US tax system. As long as Apple keeps these profits offshore, does not bring them into the US to pay to shareholders as a dividend or to conduct stock buybacks, then under US law this is all entirely untaxable. And even if us foreigners did tax these Apple foreign profits more, that would only reduce the amount of US tax that Apple had to pay if it did then bring those profits onshore. For, if they onshore the profits then the US tax due is the US corporate income tax minus whatever foreign profit taxes have already been paid upon those profits.
Whatever you think about Apple's tax strategy, reducing the US tax bill comes from, entirely legally, keeping the profits out of the US. It does not come from anything that is being done in Ireland, nor this particular loophole that Ireland is closing.
But this is going to have absolutely no effect whatsoever on how much tax Apple does pay in the future. For what Ireland is banning is a company having no tax residence or domicile at all. And all Apple has to do is shift the domicile of that Irish company from none to, say, Bermuda (as does
Apple will pay no more tax in Ireland than it does now, no more in any of the other countries that it sells in and no more in the US. And none of those tax jurisdictions will get a penny more in tax either. There might be a Bermudan accountant or two that gets a decently paying gig but that's about it.
Well, Ireland also gets to claim that it's cracking down on loopholes in the taxation of multinational corporations as well I suppose.
And do note: if Apple brings these profits onshore into the US to pay to shareholders then the US corporate income tax will have to be paid. If it does not it will not. This Irish change makes no difference to that at all.
