Election is the calm in the storm of maintaining a competitive corporate tax regime

When Tim Cook and his two senior Apple colleagues were questioned by a US Senate sub-committee back in May 2013, the headlines generated in the world’s business press were unsettling.

Some lawmakers repeatedly characterised Ireland as a tax haven, saying behemoth Apple channelled billions of dollars of global revenues generated outside of the Americas through two or three Irish incorporated companies.

The charge sheet was that Apple paid little profit tax to the US tax man on over half its haul of global sales.

Mr Cook put up a credible performance. Apple said it was the 35% corporate tax rate levied in the US that was the source of the problem.

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He said the Irish companies were long established — set up decades before the iPhone had ever been dreamed of.

A much more recent agreement had transferred a chunk of Apple’s valuable intellectual property into Ireland, but the company had substantial numbers of people based here to justify the tax structures.

And revenues going through the Irish companies had already been taxed somewhere in the world, the senior Apple executives told the committee.

The committee was supposedly seeking to come up with ideas for tax reform in the US, but listening back to the testimony showed why reform of the US tax code is unlikely to happen any time soon.

It wasn’t only the divisions between US legislators that were laid bare.

There was no consensus whether the treasure left off shore by many US companies constituted a problem for the US.

Apple signalled it would officially bring on shore its many billions, if the US tax rate were to be substantially cut below 35% — one of the highest in the world.

Judging by the tone of the Senate committee, Apple is not short of friends in Washington.

The US hearing nonetheless thrust Ireland back into the international spotlight.

The US media headlines were not friendly.

Apple’s submission to the Senate hearing mentioned the country a dozen times, and referred to its key Irish subsidiaries or the Irish tax codes a further 20 times, or so.

Apple is also different. It is one of the most valuable companies in the world and an industry of reporters and commentators follow its every move.

Apple and its tax affairs naturally generate more headlines than any other big technology firm, and Ireland inevitably is thrust into the spotlight too.

Some international commentators — who ought to have known better — appeared to think that Dublin levied its 12.5% tax on all of the many billions passing through the books of the corporate giants based here.

The damaging claim that Ireland facilitated Apple to pay an effective 2% rate on its treasure persisted.

Subsequent Irish budgets closed some of the most egregious aspects of corporate tax procedures.

Without fanfare in the budget speech, in late 2013, Finance Minister Michael Noonan addressed the issue of “stateless” companies under Irish tax law.

It was a sign of Irish concerns about potential damage following the US Senate hearing.

Ireland had effectively been bracketed with Europe’s mountainous tax havens. Mr Noonan went on, in 2014, to announce the phasing out of the ‘double Irish’ tax arrangements.

The Government consistently denied the State had struck any sort of sweetheart tax deal with Apple many years earlier.

It announced incentives, including proposals for the ‘Knowledge Box’.

Ireland in 2013 was emerging from its three-year bailout. Recovery was still uncertain. Employment provided by the multinationals based here had gone a long way to cushion some of the worst effects of the slump.

Ireland was also engaged in the initiative driven by the world’s largest industrialised economies — and run by the Paris-based OECD — to reform the world’s tax system.

The Department of Finance had repeatedly said Ireland had little to fear from the initiative. And it has proved to be right.

Controversy isn’t new. In 2011, Enda Kenny, just a few months in power, clashed with then French president Nicolas Sarkozy, who wanted Dublin to raise the 12.5% tax rate in return for a more favourable bailout.

The “Gallic spat” showed the dangers facing Ireland.

Tax inversions by US pharma giants into Ireland featured in the US presidential election. In summer 2014, Brussels’ regulators opened formal state-aid investigations involving corporate tax deals struck in Ireland, Luxembourg and the Netherlands.

Again, it was the investigation into Ireland and its dealings with Apple that generated most headlines.

Last month, Mr Noonan said he expected the Commission to announce its decision after the Dáil election. Whatever the outcome, the next government will have to fight hard over tax. Other challenges are looming.

Brussels under EU economics and tax chief Pierre Moscovici has refined the long-standing common consolidated tax plan. Many believe the new initiative will be a non-starter.

Regardless, the lesson is clear: Maintaining the competitive tax regime will be never ending for all governments.