Opinion

Taxing issue has two senators up in arms

NOW here's a warning to anyone in Stormont who figures on setting up the kind of corporate tax breaks that keep American CEOs awake at night counting dollar signs leaping over fences where the sheep ought to be.

Marshal Levin and Sheriff McCain have your number.

The two, Senator Carl Levin from Michigan, and Arizona's Senator John McCain (he of the Antrim roots) certainly have Dublin's number - or more is the point, they are taking strong exception to Dublin's numbers when it comes to corporate tax as a hook for US mega-corporations such as Apple.

The bottom line is that the Republic's government and the Senate Permanent Subcommittee on Investigations, chaired by Democrat Levin, and on which McCain is the topranking Republican, have been at odds over whether or not the Republic is a tax haven.

Words have been flying, and a letter too, from Irish ambassador Michael Collins to the senatorial duo who are now presenting the lately rare Capitol Hill sight of bipartisan solidarity on a financial matter.

Collins stated strongly in his letter to Levin and McCain that the Republic was not an offshore tax haven for US corporations and that the Republic's government did not cut special tax deals for companies such as Apple, which was a primary focus of a recent subcommittee hearing chaired by Levin.

Wrote Collins in part: "I fully recognise that the purpose of the hearing was to examine the options for reform of the US tax code, in which Ireland has no role. It is important, nevertheless, to address two points particularly that arose at the hearing and that relate specifically to the Irish tax system.

"First, Ireland's tax system is set out in statute - so there is no possibility of individual special tax rates being negotiated for companies. All tax resident companies in Ireland are liable to corporation tax on their chargeable income at the rate of 12.5 per cent on trading income and at 25 per cent on non-trading income.

"The tax rates attributed to Ireland in the memorandum appear to be calculated by reference to the companies' entire profits, as if those companies are tax-resident in Ireland. This is despite the fact that the memorandum clearly states that the companies concerned are not taxresident in Ireland. The tax rates attributed to Ireland are wrong and misleading.

"Second, building on this analysis, the memorandum refers to Ireland as a 'tax haven'. As you will be aware, the OECD has identified four key indicators of a tax haven. None of these criteria applies to Ireland."

The senators weren't buying it.

Levin is standing by his earlier assertion that Apple cut a deal with the Republic's government to pay taxes far below the already low Irish corporate rate of 12.5 per cent, itself a frequent target of criticism from US and European leaders because it is so much lower than prevailing rates in other EU countries and the US.

Regardless of what transpires between the Republic's top diplomat in the US and the senators, there is now a perception that the Republic might be pulling a fast one on taxes, at least in the context of Apple and other big corporations.

"The secrets of how Apple avoided billions of dollars in taxes lie in a low-slung building of glass and brick in the hills of County Cork," a front page New York Times report stated in the opening line of a story that coincided with the subcommittee hearing that highlighted the Irish tax issue.

The newspaper report went on: "There, in the Hollyhill Industrial Estate and elsewhere in Ireland, Apple employs a mere 4 per cent of its global workforce. But there, too, Apple recorded a staggering 65 per cent of its worldwide income - $26 billion last year - enabling the company, according to Senate investigators, to markedly reduce its tax bill in the US and the rest of the world.

"Such arrangements are not uncommon in Ireland, where for years authorities have not only tolerated but encouraged multinational companies like Google, Facebook, Pfizer, Johnson & Johnson and Citigroup to set up shop and provide good jobs, in return for helping those companies pay less tax around the world."

The New York Times reported that Senator Levin had said Apple was "exploiting an absurdity" by using three Irish subsidiaries to legally avoid taxes.

"Legally" is a key word here. No laws, Irish or American, have been broken. But Capitol Hill is clearly thinking that, when it comes to corporate taxes, Dublin has done a number on Washington - and the US Treasury is the poorer for it.