Apple’s 2% Tax Deal with Ireland—Legal?

Apple, like many companies, is always looking for ways to reduce expenses, including taxes. Apple has struck a deal with Ireland that apparently will give it, in effect, a 2% tax rate in a country where the published corporate tax rate is 12.5%. Tax attorney Rob Wood discusses the situation in this report and in his Forbes article “If Apple's 2% Irish Tax Deal Is Illegal, Fines Could Be Billions."

Rob Wood

Rob Wood

Wood notes that Apple could be facing billions of dollars in fines if the arrangement is found to be illegal. Wood cautions that his comments are based on what has been made public about the deal in the EU report. “The EU . . . has taken umbrage at what it sees as Apple’s extraordinarily favorable deal with Ireland.” Wood points out that Ireland’s low corporate tax rate has attracted interest from companies such as Google, Facebook, and Twitter, causing them to put some kind of entity in Ireland.

What this is all about, says, Wood, is whether Apple is getting an inappropriate tax break from Ireland and whether Apple did something wrong. The essence is that Apple will get a tax break in exchange for bringing a lot of business to Ireland. Apple is saying that it did nothing wrong, that the deals are perfectly legal, and that Apple has an obligation to its shareholders to get the best tax deal it can get.

The concern from the EU standpoint is illegal corporate financing. “Under EU law, state financing for individual companies is heavily restricted.” Apple denies that it is receiving any state aid from Ireland. Wood points out that tax deals in exchange for corporate consideration are common in the U.S., where various states compete vigorously for new corporate money by providing all sorts of tax breaks.

This story will be interesting to watch as it plays out.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

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