“They have all the IP for all our great tech companies and pharma companies,” Commerce Secretary Howard Lutnick said in an appearance on the All-In podcast in March. “Those things got to end.”
Companies such as Apple, Microsoft and Pfizer appear to have taken steps to stow intellectual property in Ireland, reducing their effective corporate income tax rates. For example, the European Commission found that in 2014, Apple’s effective corporate income tax rate was below 1% in Europe.
Apple and Pfizer did not respond to CNBC’s request for comment for this story. Microsoft declined to comment.
“If you are Apple and you are raking in the profits from your iPhone sales, you can make a lot of those profits just disappear from your taxable income,” said Alexander Arnon, a senior policy analyst at the University of Pennsylvania’s Wharton School budget model team.
The Irish government opened the country’s doors to multinational corporations following an economic crisis that unfurled through the 1980s. Unemployment in the country spiked and a wave of migration followed.
“That was clearly a driver of the tax strategy to make it even more attractive in the ’90s. It helped that Ireland became part of the EU,” said Kevin Kent, transatlantic practice chair at law firm Clark Hill.
Many multinationals took to strategies such as the “double Irish.” The strategy relied on the transfer of intellectual property between subsidiaries based in different countries with relatively low taxes.
“It was a sort of an escape valve from high-tax countries,” said Adam Michel, director of tax policy at the Cato Institute. “We were actually pushing companies outside of the United States, both their headquarters and their investment.”
The efforts paid off in Ireland. Growth in gross domestic product per capita surpassed rates observed across the developed world.
Watch the video above to learn more about why U.S. multinationals have flocked to Ireland
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