It has been quite a week with two U.S. senators, John McCain and Carl Levin, trading barbs with the Irish government over whether Ireland is a tax haven or not.
The now familiar tale of how Apple managed to exist in a no man’s land of neither paying U.S. or Irish tax while domiciled in Ireland has caused quite a stir.
Apple appears to have brushed up right against the line on what constitutes acceptable behavior for a massive multinational which can easily afford to pay properly designated taxes in whatever region they operate in.
Unfortunately the damage has been done to Ireland. The country has emerged from this latest brouhaha with a definite sense among powerful American politicians and media that something untoward is afoot in the Emerald Isle with regards to corporate tax.
The reality is that it will not give pause to aggressive new startups looking for tax havens wherever they locate, but older and more civic-minded companies may have food for thought.
The damage to Apple’s reputation as the good guys of Silicon Valley is already considerable, and included the CEO Tim Cook defending the indefensible before Congress.
Ireland has now become the poster child for tax avoidance no matter what Apple or Irish authorities want to call it.
There is no question that Apple paid absolutely minimum tax on massive profits attributed to its Irish subsidiary.
The damage is containable, but if it emerges that other companies also enjoyed massive sweetheart deals then the European Union among others may try to act.
The EU has long been cross at Ireland’s sweetheart tax status, the outcome of a brilliant initiative launched by the IDA there back in the 1970s.
The EU anger has been mostly sour grapes to this point. There is not a country in Europe that would not like to have Ireland’s impressive array of top-notch companies.
But the Apple fiasco may give EU authorities the legal recourse to force Ireland to change its tax policies.
If that were to occur -- despite all the blather about the young, highly educated Irish work force -- the multinationals would disappear off to Estonia or Latvia or wherever the lowest tax base country is.
Ireland is poised to benefit greatly from Britain’s sudden reluctance to commit to the EU in the future and to hold referendum on membership.
That gives Irish government agencies a powerful tool, presenting themselves as the only English speaking country definitely committed to the EU for the immediate future.
But that is now leavened with concern with what the tax imbroglio will do to Ireland’s reputation.
That is still impossible to say, except to note that Ireland doth protest too much that it is not a tax haven. The indignation in Europe and the U.S. is a reflection of their own realization that they have missed a massive tax trick of their own.
The ideal solution would be for Apple to fess up and pay a similar amount of tax to other corporations there. They have been too clever by half and have damaged their own reputation in the process.
The Irish government would also benefit by losing the scarlet letter suddenly affixed to their head by the U.S. It would be good news all around.