The Irish government is trying to prevent the negative impact of the recent argument between Apple Inc. (NASDAQ:AAPL) and lawmakers in the United States during a recent hearing regarding the tech giant’s tax avoidance strategy through its operations in Cork, Ireland. Irish bondholders seemed unaffected by the issue.
Bloomberg quoted a comment from Owen Callan, analyst at Danske Bank A/S (CPH:DANSKE) (PINK:DNSKY) regarding the matter. According to him, “It’s lots of bluster so far, with no actual suggestion as to what the U.S. is going do. Bad headlines, but nothing behind it.” Danske Bank in Dublin is a primary dealer of Irish government bonds.
Apple Denied Tax Gimmicks Allegations:
Apple Inc. (NASDAQ:AAPL) denied allegations that it is using “tax gimmicks” and pointed out that there is no way that its Irish subsidiary reduces its tax liabilities in the United States. On the other hand, Irish Foreign Affairs & Trade Minister Eamon Gilmore said that Ireland tax regulations should not be blamed for any loopholes in international tax rules, which were used by the tech giant as a tax strategy.
Ireland Finance Minister Michael Noonan pointed out that the country is not a tax haven after the a Congressional hearing in Washington, which concentrated on the tax strategy of Apple Inc. (NASDAQ:AAPL). Lawmakers argued that the tech giant used its subsidiaries in Ireland to avoid taxes in the United States.
In his speech two days ago, Finance Minister Noonan said that Ireland doesn’t “want to be a whipping boy for misunderstandings” regarding the tax liabilities of Apple Inc. (NASDAQ:AAPL). Noonan also said, “Maybe there was a magician. But the magician wasn’t a resident down in Cork.”
Dermot O’Leary, economist at Goodbody Stockbrokers in Dublin opined, “When Irish politicians get into the realms of having to defend the country against these accusations, much damage has already been done.”
Ireland attracted overseas companies to establish a subsidiary in the country because it offers the lowest tax rate in Europe in hopes of reviving its economy from a recession. Data from Bloomberg showed that Ireland’s effective tax rate on gross income is only 6 percent compared with 29 percent in the United States, 22 percent in the United Kingdom, 27 percent in France, and 24 percent in Germany.
In his testimony at the Senate Committee hearing on Tuesday, Apple Inc. (NASDAQ:AAPL) CEO Tim Cook told lawmakers that the company did nothing wrong and it paid all its tax liabilities to the government. Irish bond markets were unmoved after the hearing as yield on two-year notes were changed slightly at 0.78 percent while the yield on 10-year bonds declined by one basis points to 3.54 percent. The decline of the Irish borrowing cost was not driven by the issue but because of actions implemented by European Central Bank president Mario Draghi, who promised last year that he will do whatever it takes to protect the euro.
Feargal O’Rourke, tax and legal services leader at PricewaterhouseCoopers in Dublin opined, “Ireland has a much broader tax offering, which will continue after this. It will not have one iota of an impact on Ireland’s real offering.”
On the other hand, Seamus Coffey, economics lecturer at the University College Cork said, “There’s merit in some of the complaints, but most of it is political posturing. Few substantive proposals are being made. There may be a reputational impact on how Ireland is viewed by other governments, but for international companies, the controversy could highlight the attractiveness of the Irish system.”