Sun, Jun 02, 2013 - Page 14 News List

Apple’s fortunes in contrast with those of Ireland

By Simon Bowers  /  The Guardian, LONDON

Eileen Stokes and her family live a basic life, one of 16 Irish Traveller families settled on an established halting site at the edge of Knocknaheeny, a run-down northern suburb of Cork, Ireland.

A brazier smolders outside their mobile home. Also within the small, breezeblock-walled yard is the family’s horse, Ginger. Children show off minnows they have caught in a jar and ask for photographs to be taken of themselves posing as boxers or on horseback.

Eileen’s husband pulls out a mobile phone to call his brother to come and talk to the Guardian. It is not an iPhone.

The Stokes are the nearest neighbors to Apple Inc’s Cork offices. Almost two-thirds of the company’s US$34 billion global profits for 2011 were earned by companies registered next door.

The past 10 years have brought “unprecedented success” as the popularity of its products has spread across the world, Apple chief executive Tim Cook said in Washington last week.

As a result, Apple’s Irish companies now sit on reserves of cash and investments worth about US$100 billion — a corporate kitty that would more than cover Ireland’s annual government expenditure.

Over the same 10 years, Ireland’s fortunes have taken a different turn, with the country engulfed in a banking crisis and forced to seek a bailout from the EU and IMF. Between 2006 and 2011, unemployment rates in Cork city and its suburbs doubled to 18 percent. The area includes nine of the country’s unemployment blackspots, the worst of which is Knocknaheeny, where the jobless rate according to the 2011 census was 43 percent.

On its multibillion dollar Irish company profits, Apple paid an average of less than 1 percent tax to Dublin, leading US politicians and tax professors to accuse the group — which vies with the oil giant Exxon Mobil Corp for the title of the world’s largest joint-stock company — of deliberately shuffling around its global profits in order to lower its tax bill.

These are earnings, tax experts say, that ordinarily would arise and be taxed, at Apple’s Silicon Valley headquarters; and to a lesser degree in markets around the world.

Foremost among Apple’s accusers are two US senators: Carl Levin, a 78-year-old Democratic senator from Michigan, and John McCain, 76, the 2008 Republican presidential candidate.

Leading the US Senate Permanent Subcommittee on Investigations, they discovered international selling rights to Apple products had been transferred out of the US to a handful of companies in Knocknaheeny.

“You shifted that golden goose to Ireland,” Levin accused Cook at a six-hour hearing last week. “You shifted it to three companies that do not pay taxes in Ireland... These are the crown jewels of Apple Inc... Folks, it’s not right.”

It was an interpretation Cook politely said he did not recognize.

“There is no [profit] shifting going on that I see at all,” the smiling Apple boss explained, sticking firmly to the company line.

“Apple has real operations in real places, with Apple employees selling real products to real customers. We pay all the taxes we owe — every single dollar... We don’t depend on tax gimmicks,” he added.

However, politicians and tax experts found this hard to believe.

“Apple does not use tax gimmicks? I about fell off my chair when I read that,” Dick Harvey, a professor in tax law and former adviser to the US Internal Revenue Service, told the Senate hearing.

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