Apple enjoyed a 10-year Irish tax holiday

Former senior Apple executives have revealed the tech giant enjoyed a 10-year tax holiday in exchange for establishing manufacturing operations in Ireland during the 1980s.

Reuters reports Apple paid 0% corporation tax rate for its operations in Ireland between 1980 and 1990, when its tax rate increased to 4%.

“There were tax concessions for us to go there,” says former Apple vice president of manufacturing, Del Yocam. “It was a big concession.”

“We had a tax holiday for the first 10 years in Ireland. We paid no taxes to the Irish government,” one former Apple finance executive said.

The initial 10-year tax holiday was granted by Ireland’s Industrial Development Authority (IDA) in a bid to attract more manufacturing jobs, with the agency offering a 0% corporation tax rate to companies establishing operations in Ireland, prior to the practice being banned by the EU in 1981.

“Any multinational attracted into Ireland that was focusing on the export market paid 0% corporation tax,” said IDA Ireland chief executive Barry O’Leary.

While the introduction of the 4% tax rate saw Apple shift its manufacturing operations to Singapore, the company maintained its Irish offices as a low-tax operational base for Europe.

The news comes as tech giants including Apple, Google and Microsoft are coming under increased scrutiny for their tax minimisation strategies.

Last week, SmartCompany reported a US Senate committee estimated that Apple avoided paying another $US9 billion in taxes in 2012 using an offshore profit-sharing corporate tax minimisation strategy.

Apple’s international profits are routed through Apple Operations International (AOI), a holding company wholly owned by Apple (through some affiliates) that has a mailing address in Cork, Ireland. AOI in turn owns five other Irish companies, of which several have no tax residence in any country at all.

The strategy has left Apple with an effective worldwide tax rate estimated to be just 9.8%, with just 1.9% of its income outside the US taxed.

Meanwhile, Google’s executive chairman, Eric Schmidt, recently defended the use of similar tax strategies by Google.

“When a company only operates in one country, it’s obvious where its profits are generated and thus where its taxes should be paid. But for multinational companies with a global presence, it’s much more complicated,” Schmidt said.

“Most of Google’s engineers are based in the US and that’s where much of our product development takes place. So we pay more taxes in the US than in any other country – around $US2 billion in corporate income taxes to the US government in 2012.”