The Irish government recently made the decision not to question Apple Inc. (NASDAQ:AAPL) or Google Inc (NASDAQ:GGO) over tax issues. According to The Register, Pearse Doherty of the Joint Committee on Finance tried to pass a motion this week that would allow for the Subcommittee on Global Taxation to identify corporations enjoying the ‘Double Irish’ loophole, and grill them over taxes.
Apple And Google Attracted Attention Over Their Tax Shelters
More specifically, Doherty wanted to put the focus on Apple Inc. (NASDAQ:AAPL) and Google Inc (NASDAQ:GOOG), two tech giants that garnered attention over their tax shelters in Ireland. Since his motion was denied, the subcommittee will not bring them in for questioning. Last May, Apple’s chief executive Tim Cook did testify to the United States Senate subcommittee on taxes.
‘Double Irish’ Loophole Easy to Exploit
Katie Marsal for Apple Insider added, “Of issue to some officials in Apple Operations International, is an Ireland-based entity owned by Apple that has allowed Apple Inc. (NASDAQ:AAPL) to pay a very low international tax rate. That’s because the law in Ireland states that only companies that are managed and controlled in the country are considered tax residents.”
Although Apple Operations International is incorporated in Ireland, it’s still not managed there. United States tax laws are based on where the company is incorporated. This allows AOI to pay zero taxes. Marsal added, “Whatever profits are collected through the second company are taxed at a rate of 12.5 percent, or nearly a third of the 35 percent international tax rate imposed by the U.S. government.”
“Double Irish” is the term used for Ireland’s use of protecting the earnings of international companies from Ireland taxes. The companies have to set up two companies in order to work within the loophole. There needs to be one company that owns the actual intellectual property rights and the second to license those rights to keep the profits on the low side.