25-year-old deal led to Apple's tax bill from hell

25-year-old deal led to Apple’s tax bill from hell


Irish flag
Apple has been one of the biggest employers in Cork since the 1980s.
Photo: Ste Smith/Cult of Mac

Apple landing Europe’s biggest tax bill in history may be hot news today, but the tax arrangement behind it dates back 25 years.

In 1991, eleven years after Apple first opened its Ireland office, it came to a favorable arrangement with the Irish government — at a time when Apple’s market share had collapsed, but it was still one of the biggest employers in Ireland.

Notes from a meeting at the time describe how:

“[The tax adviser’s employee representing Apple] mentioned by way of background information that Apple was now the largest employer in the Cork area with 1,000 direct employees and 500 persons engaged on a subcontract basis. It was stated that the company is at present reviewing its worldwide operations and wishes to establish a profit margin on its Irish operations.

[The tax adviser’s employee representing Apple] produced the accounts prepared for the Irish branch for the accounting period ended […] 1989 which showed a net profit of $270m on a turnover of $751m. It was submitted that no quoted Irish company produced a similar net profit ratio. In [the tax adviser’s employee representing Apple]’s view the profit is derived from three sources – technology, marketing and manufacturing. Only the manufacturing element relates to the Irish branch.”

In other words, Apple was reminding the Irish government how important it was to Cork, and hinting that it could go elsewhere if it did not get a favorable deal. The 1991 deal resulted in Apple getting a far lower tax rate in Ireland, compared to the one it would have to pay in the United States.

That tax deal remained relatively unscrutinized until Apple became the massive success that it is today. Circa 2016, Apple remains the largest private employer in Cork, with more than €100 million invested in the region since 2009.

Last week it announced plans to create an extra 1,000 jobs at its Hollyhill site in County Cork, Ireland over the next 18 months — substantially increasing on the 5,000 employees the company currently has in Ireland.

Source: Business Insider