Measured praise from U.S. senators on Irish tax loophole change


By Kevin Drawbaugh

Oct 15 (Reuters) - Two senior U.S. senators on Tuesdaylauded Ireland for its decision to close a loophole used byApple Inc to shelter over $40 billion from taxation,but stressed questions linger about Dublin's role in corporatetax dodging.

"Ireland's promise to reform its tax rules to stopmultinationals from using Irish subsidiaries to escape or deferpaying taxes anywhere in the world is encouraging," senatorsCarl Levin and John McCain said in a joint statement.

"Important questions do remain, however," they said.

The Irish government said on Tuesday it planned to shut downa tax arrangement used by Apple, but would leave open a biggerloophole that means the computer giant may not pay more tax.

Edward Kleinbard, a former chief of staff to the U.S.Congress's Joint Committee on Taxation and now a professor atthe University of Southern California Gould School of Law,described Ireland's move as "a very small step."

"The specific legislation ... proposed appears on its faceto be relevant basically only to Apple," Kleinbard said.

An Apple spokeswoman declined to comment.

Levin, a Democrat from Michigan, chairs a Senate panel thatin recent years has run the U.S. Congress's hardest-hittingtax-avoidance investigations. McCain, a former presidentialcandidate from Arizona, is the panel's top Republican.

High-tech titan Apple came under fire in May from theirSenate Subcommittee on Permanent Investigations, which said thatthe company had kept billions of dollars in profits in Irishsubsidiaries and paid little or no taxes to any government.

Levin urged closing loopholes like those he said Apple usedto avoid $9 billion in U.S. taxes in 2012.

The subcommittee said Apple used Ireland as a base for a webof offshore holding companies and negotiated a deal with theIrish government for a tax rate of less than 2 percent. The topU.S. corporate income tax rate is 35 percent.

At a May 21 Senate hearing, Apple Chief Executive Tim Cookmade no apology for saving billions of dollars in U.S. taxesthrough Irish subsidiaries. He told lawmakers his company backscorporate tax reform, though it may end up paying more.

With Washington paralyzed by political gridlock overspending and tax issues, no overhaul of the U.S. tax code hasgained momentum and analysts say it is unlikely soon. The codehas not been comprehensively cleaned up in 27 years.

Irish Finance Minister Michael Noonan said on Tuesday thathe planned to make it illegal for a company registered inIreland to have no tax domicile anywhere.

A spokesman for the Irish Department of Finance declined toexplain the change but denied it was due to U.S. pressure.

He added that companies could still nominate any countrythey liked as their tax residence, including zero taxjurisdictions such as Bermuda.

U.S. high-tech groups Google Inc and Microsoft Corp have cut their overseas tax rates to single digits byestablishing Dublin-registered units, which they have designatedas tax resident in Bermuda. Google and Microsoft say they followtax rules in every country where they operate. Apple has said ithas paid all the tax it should have.

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