Ireland will apparently announce plans to phase out its “Double Irish” tax arrangement that has allowed companies like Apple and Google to save billions, according to a Reuters report citing sources familiar with the matter.
Over the past 18 months, the country has been criticized by both the United States and Europe for tax loopholes that let companies slash their overseas tax rate to single digits. Preliminary findings by the European Commission recently slammed a “sweetheart” tax deal on the part of Ireland that allowed Apple to avoid paying taxes by building up a massive offshore cash pile of $137.7 billion in the country.
The complex tax structure let multinational companies move untaxed revenues to an Irish subsidiary, which in turn transfers the money to another company registered in Ireland but which is a tax resident elsewhere, usually a tax haven like Bermuda.
The new measures are set to be announced today, and would mean that all Irish-registered companies would have to be deemed tax-resident in Ireland. The move would bring Ireland in line with U.S. tax laws.
It is likely that companies such as Apple — which has had a base in Ireland since 1980 — will be given a grace period to change their accounting structures. New companies setting up in Ireland must abide by the new rules effective immediately.
Currently Apple’s multiple subsidiaries — like Apple Operations International, which is located in Cork — reportedly pay less than 2 percent in taxes. That’s substantially lower than the Irish 12.5 percent corporate tax and much lower than the U.S. corporate income tax, which ranks as the highest in the world.
Apple has denied any wrongdoing on its part for taking advantage of the loophole, previously pointing out that it “has received no selective treatment from Irish officials over the years.”