Two senior US senators lauded Ireland on Tuesday for its decision to close a loophole used by Apple to shelter over US$40 billion from taxation, but stressed questions linger about Dublin's role in corporate tax dodging.
"Ireland's promise to reform its tax rules to stop multinationals from using Irish subsidiaries to escape or defer paying taxes anywhere in the world is encouraging," senators Carl Levin and John McCain said in a joint statement. "Important questions do remain, however."
The Irish government said on Tuesday it planned to shut down a tax arrangement used by Apple, but would leave open a bigger loophole that means the computer giant may not pay more tax. Edward Kleinbard, a former chief of staff to the Joint Committee on Taxation of the US Congress and now a professor at the University of Southern California Gould School of Law, described Ireland's move as "a very small step".
"The specific legislation … proposed appears on its face to be relevant basically only to Apple," Kleinbard said.
Democrat Levin chairs a Senate panel that in recent years has run tax-avoidance investigations. McCain is the panel's top Republican member.
Apple came under fire in May from their Senate subcommittee on permanent investigations, which said that the technology giant had kept billions of US dollars in profits in Irish subsidiaries and paid little or no taxes to any government.
Levin urged closing loopholes like those he said Apple used to avoid US$9 billion in US taxes last year.
The subcommittee said Apple used Ireland as a base for a web of offshore holding companies and negotiated a deal with the Irish government for a tax rate of less than 2 per cent. The top US corporate income tax rate is 35 per cent.
At a May 21 Senate hearing, Apple chief executive Tim Cook made no apology for saving billions of US dollars in taxes through Irish subsidiaries. Irish Finance Minister Michael Noonan said on Tuesday he planned to make it illegal for a company registered in Ireland to have no tax domicile anywhere.
A spokesman for the Irish Department of Finance declined to explain the change but denied it was due to US pressure.
He added that companies could still nominate any country they liked as their tax residence, including zero tax jurisdictions such as Bermuda.
US high-tech groups Google and Microsoft have cut their overseas tax rates to single digits by establishing Dublin-registered units, which they have designated as tax resident in Bermuda. Google and Microsoft say they follow tax rules in every country where they operate. Apple has said it has paid all the tax it should have.