“Leprechaun economics” is the term Nobel-prize winning economist Paul Krugman used. With all due respect to Ireland–that greenest land of wind, stories, and music to soothe the soul–their tax law sucks bilgewater.
The Republic of Ireland has managed, in the last fifty years, to transform itself into the world’s largest tax haven. Meaning a place that allows multinational corporations, particularly those formed and operating in the U.S., to use creative accounting to pay very little in taxes. How little? How about 0.005%?
Apple Chooses Between Single Malt or Double Irish
Apple is a company that has always thought far in advance about packaging and design–including on their financial statements. Back in 1980, about the time when they were prototyping the Macintosh, Apple opened a small office in Cork, Ireland, lured by a deal to pay no taxes for several years. Such local tax arrangements aren’t that unusual–Twitter moved into a derelict building in downtown San Francisco for the same “no tax for years” deal, while Delaware has long been known as a favorable legal and financial place for companies to incorporate.
What Apple was also able to do, over decades, was use its growing economic power to support an Irish shift into a myriad of favorable tax strategies–favorable to corporations, that is. A so-called Base Erosion and Profit Shifting (BEPS) plan allows companies to put their huge patents as giant assets on their balance sheets, in Irish subsidiaries. These patents, the stock and trade for tech companies, are amortized (charged out over time) in a convoluted way that allows the income received to be located in Ireland–with very low tax rates–even if it was earned somewhere else.Continue reading “I is for Ireland”