Tax avoidance is not a crime; tax evasion is a crime. Whilst the international community has made plenty of soothing noises about ensuring that multi-nationals pay their fair share of taxes where they operate and that more needs to be done to close loopholes and combat tax evasion, little concrete action seems to have happened.
You may be forgiven for imagining that a nation’s tax inspectors would be busy ensuring that multi-nationals pay what they owe, but it’s not quite as simple as that. A major multinational setting up a corporate HQ in your country brings with it employment opportunities and many spin-offs from new construction to an influx of (often) well paid expatriates. Indeed, prior to the Global Financial Crisis, the Irish economy went from strength to strength, in part, because its low corporate tax rate (12.5%) attracted many companies to base their headquarters in the Republic.
The European Commission has entered into the fray claiming that Apple Corporation owes the Irish government €13 billion in back taxes; something both the government and the company intend to challenge. The Commission’s position is that by allowing Apple to pay very much below the standard corporation tax rate, the Irish government was effectively granting it state aid which is illegal under EC rules. Their investigation determined that Apple had paid 1% tax in 2003 and 0.005% in 2014.
The US government is unhappy about the latest developments as it fears that any additional tax paid in Ireland may be written down against US tax liabilities and so the US Treasury will be out of pocket. To put matters in context, it is estimated that the Irish government spend approximately €13 billion a year on health care. No individual worker would ever get such a tax break from a government, so surely it is reasonable to expect corporations to pay a proper share of their profits in tax to the states where they were generated.