Ireland 's Tax Policies : Ireland
Ireland is a popular country to incorporate a foreign subsidiary due to its incredibly low corporate income tax rate and tax policies. The corporation tax rate in Ireland is 12.5%, (Thomson, 2016) which is incredibly low causing it to become a tax haven. Tax havens are created by tax competition. Tax competition is defined as “the use, by entities that participate in it, of such activities within the tax policy that will allow maintaining or increasing the attractiveness of a particular territory as a convenient business location.” (Dzialo, 2015) Countries then will compete with each other by lowering their tax rates to make investments in their country more attractive, thus creating tax havens. Ireland’s tax residency is based on a management and control test.
Discrepancies in Tax Policies The discrepancies between Ireland and the United States tax policies have been the major issue allowing Apple to legally avoid taxes. Apple’s subsidiary Apple Operations International (AOI) was incorporated in Ireland resulting in the United States not recognizing the company, therefore not having to pay income taxes to United States. According to Holtzblatt, Geekie, and Tschakert, AOI only has three directors and one employee. (2016) Since none of the managers live in Ireland, they are not controlled or managed there, therefore they do not have tax residency in Ireland. CEO of Apple, Tim Cook, said, “Apple pays all its required taxes, both in [the United