Royalty raised its hostile cash bid to $12.50 per share on
Monday, from $11.25 previously, but made the new offer
conditional on Elan shareholders rejecting at a meeting due to
be held on June 17 the series of defensive transactions recently
announced by the Irish drug firm.

Royalty, which had said on Monday it reserved the right to
reduce the acceptance threshold from 90 percent, has described
Elan’s efforts to reinvent itself through a series of
acquisitions and debt deals as hasty and ill-conceived.

Elan fought back after its board met to discuss the revised
bid on Thursday and said the offer continued to grossly
undervalue the company and its future prospects, and urged
shareholders to take no action.

“This offer is no more than an opportunistic attempt to
acquire our company at a substantial discount at our
shareholders’ expense,” Elan chairman Bob Ingram said in a
statement.

“Put simply, for Royalty Pharma to win, you our shareholders
must lose.”

Elan rejected the previous bid, which it described as a
“nuisance,” and is determined to keep its independence by
plotting its own fresh course. It announced its second major
drug deal inside a week on Monday.

Elan sold its 50 percent interest in Tysabri, a multiple
sclerosis drug, to U.S. partner Biogen Idec in February
for $3.25 billion plus royalties of up to 25 percent, and used
the proceeds to reward investors through a share buyback and to
fund its spending spree.

It agreed to buy two private drug firms this week, quickly
following on from a separate $1 billion deal announced last week
to buy 21 percent of the royalties that U.S. company Theravance
receives from GlaxoSmithKline (GSK).

Royalty, which buys royalty rights on patented drugs, is
keen to add lucrative revenues from Tysabri to its stable of
streams that includes rheumatoid arthritis drugs Humira and
Remicade.

While Royalty said it is offering a 42 percent premium to
the $3.25 billion Elan sold its interest in Tysabri for, Elan
believes it is not properly valuing the drug and told
shareholders on Thursday that they risked losing out substantial
future income if they accepted Royalty’s offer.

Chief Executive Tim Cook faced criticism from a Senate
subcommittee in Washington on Tuesday over the iPad and iPhone
maker’s tax practices, which had been shrouded from full view
behind secretive tax-exempt Irish-based corporate entities.

Apple, one of Ireland’s top multinational
employers, denied avoiding billions of dollars in U.S. taxes and
said its arrangements helped fund research jobs in the United
States.

The committee revealed that Apple’s Irish companies, which
are not tax resident in any jurisdiction, allowed the group to
pay no tax on much of its overseas earnings in recent years.

Senator Carl Levin, chairman of the subcommittee, said Apple
had sought “the Holy Grail of tax avoidance”.

A former company executive and Irish officials told Reuters
the almost tax free status dates all the way back to Apple’s
arrival in County Cork 32 years ago.

Apple must have seemed attractive to Ireland and to Cork.
Amid a generally moribund Irish economy, Cork had been hard hit
by the closure of its shipyards and a Ford car plant and in 1986
nearly one on four were out of work in the city.

In the early days, Apple’s staff sat down to meals together.
Now the company employs 4,000 in Ireland and is the country’s
biggest multinational employer.

“There were tax concessions for us to go there,” said Del
Yocam, who was Vice President of manufacturing at Apple in the
early 1980s. “It was a big concession,”

In fact, the deal was about as good as a company can get.

“We had a tax holiday for the first 10 years in Ireland. We
paid no taxes to the Irish government,” one former finance
executive, who asked not to be named, said.

Apple wasn’t an exception, although it was among the last to
enjoy such favourable treatment. From 1956 to 1980, Ireland
attracted foreign companies by offering a zero rate of tax,
according to the Irish government’s website. Eligible companies
arriving in 1980 were given holidays until 1990.

“Any multinational attracted into Ireland that was focusing
on the export market paid zero percent corporation tax,” said
Barry O’Leary CEO of IDA Ireland, which is charged with
attracting investment into Ireland.

Apple said it pays all the tax due in every country where it
operates. It declined to comment on the tax treatment it
received in the 1980s.

As part of Ireland’s accession the European Economic
Community, precursor to the European Union, in 1973, it was
forced to stop offering tax holidays to exporters.

From 1981, companies arriving in Ireland had to pay tax,
albeit at a low 10 percent rate, providing they qualified for
manufacturing status.

ECONOMIC COUP

Apple’s investment was a major coup for Ireland. At the
time, the country was struggling with high and rising
unemployment, double-digit inflation and a brain drain of the
young and educated through emigration.

“We were the first technology company to establish a
manufacturing operation in Ireland,” recalled John Sculley,
Apple’s CEO from 1983 to 1993. He said government subsidies had
also played a role in deciding to set up a base in Ireland.

Ireland also offered low wage rates – a big attraction when
it came to hiring hundreds of people for the relatively low
skilled work of assembling electronic equipment.

Apple told the subcommittee it could not answer questions
about why it chose Ireland as a base since it had lost the
paperwork from the period.

The operation in Cork built the company’s Apple II computer
and would later build disc drives, ‘Mac’ computers and others.
These would be sold in Europe, the Middle East, Africa and Asia.

But having a tax holiday in Ireland would not, in itself,
have allowed Apple to operate tax free in these markets.

Equipment assembly is not the kind of activity that
economists or tax authorities usually credit with generating a
large share of a technology company’s profits.

More value has been associated with generating the
intellectual property behind the technology – which Apple did in
the United States – and with the selling of goods, which was to
be done on the ground in France, Britain and India.

But none of these countries offered the tax advantages
Ireland did. The key to minimising Apple’s tax bill was
maximising the amount of profit that could be ascribed to
Apple’s Irish operations.

THE ARCHITECT

This task fell to Mike Rashkin, Apple’s first tax director,
two executives from the period said. One called him “the father
of it all”.

Rashkin arrived at Apple in 1980, from computer pioneer
Digital Equipment Corp (DEC) in Massachusetts, where he had
learnt about tax efficient corporate structuring in tech
companies.

Apple had already decided to establish its base in Ireland
when Rashkin moved to Silicon Valley, but he used his experience
at DEC to set up a tax structure that took advantage of Apple’s
base in the country, the executives said. Rashkin declined to
comment.

The Senate subcommittee’s report reveals how the arrangement
was structured. In 1980, Apple entered into a deal with its
Irish operation, whereby the latter would share the cost of
funding Apple’s research and development. In return, the Irish
unit would be able to enjoy rights to Apple intellectual
property for goods sold outside the Americas.

Apple secured the blessing of the U.S. tax authority, the
Internal Revenue Service, for the deal, one executive said. The
IRS gave Apple an advance pricing agreement, or APA, an
agreement which establishes how the IRS will treat a transaction
between affiliates for tax purposes, before it is entered into.

Many countries’ tax authorities offer APAs and companies say
they are necessary to facilitate international trade and
investment. Tax campaigners say tax authorities have been too
ready to accept the pricing proposed by companies which apply
for APAs.

The New York Times reported last year that Apple’s low taxes
were at least in part due to the confidential technology
transfer arrangement.

The terms of the deal and subsequent cost-sharing deals,
were favourable for Apple’s Irish unit. In effect, the Irish
unit paid much less to its U.S. parent, for the use of Apple
intellectual property, than it made from selling that property
on to affiliates.

“Apple’s cost sharing agreement (CSA) with its offshore
affiliates in Ireland is primarily a conduit for shifting
billions of dollars in income from the United States to a low
tax jurisdiction,” the subcommittee’s report said.

Meanwhile, Apple also constructed a system whereby the
affiliates which were actually selling the finished equipment
would earn minimal profits.

The techniques Apple used over the years included selling
goods to affiliates at prices which generated little profit at
the retail level, or by paying sales affiliates commissions
which are just about enough to cover their operating costs.

Rashkin’s work and Ireland’s accommodating approach had the
desired result for Apple.

“We’re very, very pleased,” Apple’s then-President A.C.
‘Mike’ Markulla said in 1981. “The Irish have really lived up to
their promises.”

Indeed, the accounts for Apple’s main Irish unit, then known
as Apple Computer Inc. Ltd, for 1989, the earliest year for
which detailed accounts were filed, show exactly how effective
the arrangement was.

The subsidiary paid $500,000 in income tax on profits of
$317 million, a rate of 0.2 percent.

END OF THE HOLIDAY

In 1990, Apple’s tax holiday came to an end, and in that
year, the Irish operation’s tax rate hit 4 percent, accounts
from the period show.

At the same time, Apple’s Irish manufacturing activities
came under question as the company looked to cut costs by
outsourcing. In 1992, the company announced plans to cut
hundreds of jobs after deciding to shift some work to Singapore,
which at this time was attracting increasing investment by
offering tax holidays.

“They nearly left Ireland altogether,” O’Leary said.

By this stage, the European Community had banned tax
holidays of the kind given to Apple, so the company and Dublin,
negotiated an arrangement which had a similar outcome but fell
within European rules.

The precise details of the arrangement were not disclosed
but Phillip Bullock, Apple’s head of tax operations indicated
that it was linked to minimizing taxable profit.

“Since the early 1990′s, the Government of Ireland has
calculated Apple’s taxable income in such a way as to produce an
effective rate in the low single digits,” he told the
subcommittee.

The deal didn’t stop Apple from shifting manufacturing work
to Asia but in the years that followed new jobs were created in
Cork, in sales and administrative support for the European
operation, the accounts of the Irish units show. Some
manufacturing remains in Ireland, the subcommittee said.

An Irish government spokesman declined to even confirm it
held discussions with Apple regarding tax, citing rules on
taxpayer confidentiality.

From 1996 Ireland phased in a 12.5 percent tax on all
corporate trading income, although foreign companies often pay
effective rates lower than this by shifting money into tax
havens such as Bermuda.

Apple’s Cook told the Senate panel on Tuesday that Apple
does not hold money on a Caribbean island or divert profits from
sales to U.S. customers to other jurisdictions to avoid us
taxes.

Ireland has been forced to defend its corporate tax rate after the Senate said on Monday that Apple paid little or no tax on tens of billions of dollars in profits channeled through Irish subsidiaries and that it had negotiated a special corporate tax rate of less than 2 percent. {ID:nL2N0E20Y1]

While a cabinet colleague acknowledged on Wednesday that there needed to be a clampdown on multinationals shifting profits around the world to avoid tax, Michael Noonan went on the attack, telling senators they had got their sums wrong.

In an angry exchange at a parliamentary committee meeting, the finance minister accused a fellow legislator of putting the jobs of people in the country at risk by repeating the Senate committee’s claims.

“I do not want to be the whipping boy for some misunderstanding in a hearing in the U.S. congress,” Noonan said in his first comments on the subject since the hearings.

“The central point the committee proceeded to speak of was an Irish special tax rate of two percent or less. The two-percent annual rates are got by dividing the tax charged by branches in Ireland by the entire profit of the companies concerned. This is clearly wrong and misleading.”

The U.S. investigation showed that the iPhone maker had paid tax worth just two percent of $74 billion in overseas income, largely helped by Irish tax law, which allows companies to be incorporated in the country without declaring taxes there.

The Senate subcommittee identified three Irish-registered Apple subsidiaries that have no tax residency in Ireland. One of these, a holding company that includes Apple’s retail stores throughout Europe, paid no tax at all in the last five years.

Repeating a message from ministers and officials that the Irish tax system is transparent and that no company has ever been given a special deal, Noonan said Apple’s arrangement was simply a matter of tax planning by a company who had found a gap to exploit between two different tax jurisdictions.

The subcommittee said as much, he added, when it noted that the Apple subsidiaries concerned, registered in the Irish county of Cork, were neither tax resident in Ireland nor in the United States – where foreign corporations need not declare taxes.

Responding to a questioner who said Apple’s tax rate bordered on magic, Noonan replied: “Maybe there was a magician, but the magician wasn’t living down in Cork. Because they are not tax resident in Ireland, they are not liable to Irish tax.”

PROVOKING U.S.

Other European governments, notably France, have previously criticized Ireland’s low rate of corporation tax – 12.5 percent – but the revelations from Washington focus on loopholes in the Irish tax code that Dublin is finding it harder to defend.

Richard Bruton, the minister in charge of attracting foreign companies like Apple to invest in Ireland, said companies need to be reined in: “They play the tax codes one against the other; that is tax planning, and I think we do need international cooperation through the OECD to deal with the aggressive nature of that,” he told state broadcaster RTE.

Irish Prime Minister Enda Kenny steered a careful path on Wednesday, saying on his way to a European Union meeting on tax avoidance that Dublin was helping lead a drive for a new international consensus on tax regimes for multinationals.

Unlike some other low business-tax economies, many with tiny populations, Ireland is heavily dependent on foreign companies such as Google, Pfizer and Intel for its export-led growth and for employment – foreign firms employ some 150,000 Irish people out of a workforce of under 2 million.

While Ireland has successfully repelled attacks on its corporate tax rate from European neighbors, U.S. pressure is more difficult to ignore.

By closing its own loopholes, Washington could threaten Ireland’s status as European hub for U.S. multinationals, and economists said it would be better for Ireland to act first.

“In the long run, the U.S. Congress, if they wanted to, could wipe out those 150,000 real jobs, and we don’t want to provoke people by over-egging it, by doing things that are clearly upsetting the U.S.,” said John FitzGerald of Irish think-tank the Economic and Social Research Institute.

Bruton said scapegoating individual countries was not the answer and noted fierce competition Ireland faces in trying to attract companies: “When I go into the boardrooms either in Asia or the U.S., I am followed into those boardrooms by Swiss, by Singaporeans, by Dutch, by Belgians who are offering specially put-together deals on the tax front,” he said.

“We make no apologies for having a regime that is designed to promote employment. It is a regime we have had for close to 50 years.”

(Additional reporting by Conor Humphries; Editing by Will Waterman and Alastair Macdonald)

Now the strategy that underpins Bruton’s role as jobs minister and the country’s hopes of recovering from the crisis that drove it to take an international bailout is under attack from the United States and the rest of Europe.

A U.S. Senate investigation found that computer major Apple used Irish tax loopholes to avoid billions of dollars in taxes, forcing Bruton to concede that large multinationals which shift profits to avoid tax need to be reined in.

Bruton’s call for an international clampdown on aggressive tax planning by large corporates is a rare negative shot at a sector that Ireland has courted for decades and underscores the high stakes for Dublin, which faces pressure to act alone.

Irish Prime Minister Enda Kenny steered a careful path on Wednesday, saying on his way to a European Union meeting on tax avoidance that Ireland was helping lead a drive for a new international consensus on tax regimes for multinationals.

The strategy is one of, ‘blame the game, not the player’.

International companies provide one in almost every 10 jobs in Ireland, where joblessness has been stuck at more than 14 percent for almost three years. With 4,000 workers, Apple is one of the top multinational employers.

Every four multinational jobs Ireland attracts adds three more indirectly in the local economy, according to the state Industrial Development Agency (IDA) which is tasked with attracting foreign firms.

Dublin’s ‘Silicon Docks’ – where Google and Facebook are headquartered – is home to the country’s largest theatre, newest five-star hotel and surrounded by modern apartment blocks.

LOOPHOLES

Previous spats with other European governments over Ireland’s tax regime have centered on the country’s low 12.5 percent rate of corporation tax, a rate Dublin has successfully argued is key to emerging from financial crisis.

But the focus on loopholes and concessions is more difficult to defend, particularly with European countries, who bailed out Dublin, angered by Ireland’s role in helping multinationals to avoid paying tax on sales in their countries.

With a host of countries, including Singapore and Israel, vying with Ireland to attract big employers, the government is hoping international bodies like the Organisation for Economic Cooperation and Development will deal with profit shifting.

Multinational companies contributed three-quarters of the 4 billion euros of corporation tax collected last year and account for over 80 percent of the country’s exports, the IDA says.

“If Ireland just decided to stop something tomorrow, there are many, many other jurisdictions that compete with us,” said IDA chief executive Barry O’Leary.

Knowing U.S. firms’ tax planning methods were set to come under scrutiny on Capitol Hill, O’Leary and a colleague spent the earlier part of this year visiting dozens of chief finance officers and tax chiefs at multinationals to reassure them.

O’Leary is relaxed about the potential damage to Ireland’s reputation from revelations Apple, under CEO Tim Cook, used three Irish-based subsidiaries to help it pay just two percent tax on overseas income, a fraction of Ireland’s already low 12.5 percent rate of corporate tax.

“You could take one school of thought that listening to Tim Cook yesterday, he spoke in very positive terms about the operating environment in Ireland,” O’Leary said.

But behind the scenes, official Ireland is worried.

“Potentially the damage is huge. Ireland is getting mentioned too many times,” said a senior Irish banker, who has worked in the country for 30 years.

“We’re being seen as a tax haven. We’re not. Ireland is not just a brass plate economy, we’re a low-tax economy. You actually have to set up and work here but we’re not being differentiated from countries like Bermuda where there’s no infrastructure and no jobs.”

HAPPY DAYS?

Richard Murphy, director of Tax Research UK, says Ireland is not a typical secretive low-tax or no-tax state, but is a conduit tax haven.

“The intention is to attract money through Ireland. The vast majority of what happens in Ireland is not actually to locate an activity in Ireland, it is to relocate profits to Ireland from which they immediately leave.”

“The 12.5 percent is almost irrelevant.”

In southern Ireland, a few kilometers south of Cork’s Blarney Castle, where legend has it kissing a block of stone endows people with the gift of speaking eloquently, Apple is expanding its offices.

Builders working on the site are not bothered by the tax controversy, reflecting a view widely held here that if Dublin didn’t offer concessions to multinationals someone else would and the small island of 4.5 million people would lose out.

“It’s the congressmen in the states who are complaining, not anyone around here,” said one construction worker, who declined to give his name. “For us it’s happy days”.

But from the office blocks of Dublin to the streets of Cork, there is a degree of irritation that the multinationals pushed things to their limits and in doing so, potentially risked Ireland’s core selling point, the 12.5 percent rate.

“It’s the one perk that we have … Without it we’re done for,” said Orla Murphy, a housewife in Cork. “When its 12.5 percent, that’s one thing. But they couldn’t even stick to the great terms we had. That’s what makes me cross.”

(Additional reporting and writing by Carmel Crimmins; editing by Philippa Fletcher)

The Irish government, which has seen the luring of U.S. multinationals with low taxes as a key part of its economic policy since the 1960s, said its system was transparent and other countries were responsible if the tax rate paid by Apple was too low.

“They are issues that arise from the taxation systems in other jurisdictions, and that is an issue that has to be addressed first of all in those jurisdictions,” deputy prime minister Eamon Gilmore told national broadcaster RTE on Tuesday.

In a 40-page memorandum released ahead of an appearance by Apple Chief Executive Tim Cook before Congress on Tuesday, a Senate subcommittee identified three subsidiaries that have no tax residency either in Ireland, where they are incorporated, or in the United States, where those companies are managed.

The main subsidiary, a holding company that includes Apple’s retail stores throughout Europe, has not paid any corporate income tax in the last five years, the report said.

Apple’s arrangement has allowed it to pay just 1.9 percent tax on its $37 billion in overseas profits in 2012, despite the fact that the average tax rate in the countries of the Organisation for Economic Co-operation and Development (OECD), its main markets, was 24 percent in 2012.

The report said “Ireland has essentially functioned as a tax haven for Apple”.

Gilmore said Ireland was pursuing the issue of international tax avoidance “very strongly” at the European Union and the OECD, which is spearheading initiatives.

The issue will be discussed at a meeting of European Union officials on Tuesday, he said.

The Senate report said a subsidiary with a mailing address in Cork, Ireland’s second-largest city, received $29.9 billion in dividends from lower-tiered offshore affiliates from 2009 to 2012, comprising 30 percent of Apple’s global net profits.

It said it exploited a difference between Irish and U.S. tax residency rules.

“NO SPECIAL RATES”

Apple said in a comment posted online on Monday it did not use “tax gimmicks”. It said the existence of its subsidiary Apple Operations International in Ireland did not reduce Apple’s U.S. tax liability, and the company would pay more than $7 billion in U.S. taxes in fiscal 2013.

A number of U.S. multinationals including web search leader Google, online retailer Amazon.com and coffee chain Starbucks have come under criticism for arranging their affairs in a way that leaves them liable to low rates of tax on billions of dollars of overseas sales.

Apple’s auditor, Ernst & Young, which also audits Google and Amazon.com, declined immediate comment.

According to the congressional report, Apple’s Tax Operations Head Phillip Bullock told the subcommittee that the company had obtained a special low tax rate through negotiations with the Irish government below the already low standard rate of 12.5 percent. Apple said this had been 2 percent or less for the last 10 years.

Ireland’s Prime Minister Enda Kenny denied there was any special rate agreement.

“Ireland does not, I will repeat, does not do special tax rate deals with companies; we don’t have any special extra-low corporate tax rate for multinational companies.”

A spokesman for Ireland’s finance department said Ireland’s tax system was statute based, so there was “no possibility of individual special tax rate deals for companies”.

A spokeswoman for the Office of the Revenue Commissioners said she could not comment on individual cases as that would breach taxpayer confidentiality, but she also denied that the tax authority agreed special low tax rates with multinationals.

“All companies in Ireland pay the standard 12.5 percent rate on their trading profits arising in Ireland, and they pay a corporation tax rate of 25 percent on their Irish non-trading income,” she said.

Unemployed Cork local Tom Falvey, 55, who got 10 weeks’ work attaching cladding to the exterior of Apple’s three-storey headquarters in the early 1990s, said Ireland’s jobless would pay the price for any rise in taxes.

“The companies will just say ‘take a jump’ and move somewhere else more obliging. Our unemployment is high enough as it is,” he said, as he walked his dog past the sprawling complex 5 kilometres (3 miles) from the city center.

A dozen or so casually dressed Apple workers, most in their 20s and 30s, who were smoking cigarettes outside the 1990s office building, said they could not talk to the press.

Alongside, builders are working on a sleek new glass and concrete extension. Michael Ambrose, a 58-year-old former construction worker walking by, said the government was powerless to get more tax out of Apple.

“We’re a small country and feel we can’t say no. We know they’ll just go off to one of these Asian countries … They’re a law unto themselves.”

FISCAL ATTRACTION

Apple said last year it would add 500 more people to its Cork workforce of 2,800.

Ireland’s pro-business tax structures have attracted U.S. multinationals including Google, Microsoft and Facebook, big employers who have helped offset an unemployment rate stuck above 14 percent, but its low corporate tax rate of 12.5 percent has drawn criticism elsewhere in Europe.

The government regularly touts its success in attracting international investment as one of its main achievements, and multinationals, which account for almost 10 percent of Ireland’s workforce, have taken the sting out of austerity measures prescribed under an EU/IMF bailout by creating jobs.

U.S. firms invested $30 billion in Ireland last year, more than in China and the rest of emerging Asia combined, according to the American Chamber of Commerce.

In the 1960s Ireland turned around its economy by attracting foreign businesses with tax holidays. After joining what later became the European Union, it was no longer able to do this and instead shifted to a system of low tax rates – currently 12.5 percent – and a light touch approach to tax administration that allows companies to reduce their effective rate much lower.

A raft of mainly U.S. companies have taken advantage of Ireland’s tax regime to minimise their tax bills.

Microsoft’s Irish base, along with another operation in low-tax Singapore, helped the company pay tax of just 9.4 percent on $21 billion of non-U.S. earnings last year. Google channels most of its overseas profits through Ireland, a practice that allowed it to pay tax at a rate of just 2.6 percent on $6 billion of foreign profits in 2012.

Patrick Coveney, the chief executive of Greencore, one of Ireland largest companies, told RTE radio that it was politicians across the world who were responsible for these tax treaties and tax structures.

“I find it frankly a little frustrating that it is them who are piling in and criticising international traded businesses who are merely availing of the tax environment that they have put in place,” said Coveney, a former president of the Dublin Chamber of Commerce.

Irish opposition party Sinn Fein, which has 14 seats in Ireland’s parliament, said the companies should be invited before a parliamentary committee when it holds hearings shortly to discuss corporation tax.

“This Government continues to protest that our tax system is transparent. It is transparently flawed. Our tax code has been written for the benefit of large companies and the wealthiest in society. This is what I want to get to the bottom of in the Committee hearings,” said the party’s finance spokesman Pearse Doherty.

(Additional reporting by Tom Bergin; Editing by Will Waterman)

The Irish government, which has seen the luring of U.S.
multinationals with low taxes as a key part of its economic
policy since the 1960s, said its system was transparent and
other countries were responsible if the tax rate paid by Apple
was too low.

“They are issues that arise from the taxation systems in
other jurisdictions, and that is an issue that has to be
addressed first of all in those jurisdictions,” deputy prime
minister Eamon Gilmore told national broadcaster RTE on Tuesday.

In a 40-page memorandum released ahead of an appearance by
Apple Chief Executive Tim Cook before Congress on Tuesday, a
Senate subcommittee identified three subsidiaries that have no
tax residency either in Ireland, where they are incorporated, or
in the United States, where those companies are managed.

The main subsidiary, a holding company that includes Apple’s
retail stores throughout Europe, has not paid any corporate
income tax in the last five years, the report said.

Apple’s arrangement has allowed it to pay just 1.9 percent
tax on its $37 billion in overseas profits in 2012, despite the
fact that the average tax rate in the countries of the
Organisation for Economic Co-operation and Development (OECD),
its main markets, was 24 percent in 2012.

The report said “Ireland has essentially functioned as a tax
haven for Apple”.

Gilmore said Ireland was pursuing the issue of international
tax avoidance “very strongly” at the European Union and the
OECD, which is spearheading initiatives.

The issue will be discussed at a meeting of European Union
officials on Tuesday, he said.

The Senate report said a subsidiary with a mailing address
in Cork, Ireland’s second-largest city, received $29.9 billion
in dividends from lower-tiered offshore affiliates from 2009 to
2012, comprising 30 percent of Apple’s global net profits.

It said it exploited a difference between Irish and U.S. tax
residency rules.

“NO SPECIAL RATES”

Apple said in a comment posted online on Monday it did not
use “tax gimmicks”. It said the existence of its subsidiary
Apple Operations International in Ireland did not reduce Apple’s
U.S. tax liability, and the company would pay more than $7
billion in U.S. taxes in fiscal 2013.

A number of U.S. multinationals including web search leader
Google, online retailer Amazon.com and coffee
chain Starbucks have come under criticism for arranging
their affairs in a way that leaves them liable to low rates of
tax on billions of dollars of overseas sales.

Apple’s auditor, Ernst & Young, which also audits Google and
Amazon.com, declined immediate comment.

According to the congressional report, Ireland had also
agreed a special 2 percent rate for Apple’s Irish taxable
profits instead of the normal 12.5 percent.

Ireland’s European Affairs minister Lucinda Creighton,
denied this.

“There is no such deal. There is no deal for any company to
pay 2 percent corporate tax in Ireland – that is erroneous,”
said Creighton, a barrister by profession.

A spokesman for Ireland’s finance department said Ireland’s
tax system was statute based, so there was “no possibility of
individual special tax rate deals for companies”.

A spokeswoman for the Office of the Revenue Commissioners
said she could not comment on individual cases as that would
breach taxpayer confidentiality, but she also denied that the
tax authority agreed special low tax rates with multinationals.

“All companies in Ireland pay the standard 12.5 percent rate
on their trading profits arising in Ireland, and they pay a
corporation tax rate of 25 percent on their Irish non-trading
income,” she said.

Unemployed Cork local Tom Falvey, 55, who got 10 weeks’ work
attaching cladding to the exterior of Apple’s three-storey
headquarters in the early 1990s, said Ireland’s jobless would
pay the price for any rise in taxes.

“The companies will just say ‘take a jump’ and move
somewhere else more obliging. Our unemployment is high enough as
it is,” he said, as he walked his dog past the sprawling complex
5 kilometres (3 miles) from the city centre.

FISCAL ATTRACTION

Apple said last year it would add 500 more people to its
Cork workforce of 2,800.

Ireland’s pro-business tax structures have attracted U.S.
multinationals including Google, Microsoft and Facebook
, big employers who have helped offset an unemployment
rate stuck above 14 percent, but its low corporate tax rate of
12.5 percent has drawn criticism elsewhere in Europe.

The government regularly touts its success in attracting
international investment as one of its main achievements, and
multinationals, which account for almost 10 percent of Ireland’s
workforce, have taken the sting out of austerity measures
prescribed under an EU/IMF bailout by creating jobs.

U.S. firms invested $30 billion in Ireland last year, more
than in China and the rest of emerging Asia combined, according
to the American Chamber of Commerce.

In the 1960s Ireland turned around its economy by attracting
foreign businesses with tax holidays. After joining what later
became the European Union, it was no longer able to do this and
instead shifted to a system of low tax rates – currently 12.5
percent – and a light touch approach to tax administration that
allows companies to reduce their effective rate much lower.

A raft of mainly U.S. companies have taken advantage of
Ireland’s tax regime to minimise their tax bills.

Microsoft’s Irish base, along with another operation in
low-tax Singapore, helped the company pay tax of just 9.4
percent on $21 billion of non-U.S. earnings last year. Google
channels most of its overseas profits through Ireland, a
practice that allowed it to pay tax at a rate of just 2.6
percent on $6 billion of foreign profits in 2012.

Patrick Coveney, the chief executive of Greencore,
one of Ireland largest companies, told RTE radio that it was
politicians across the world who were responsible for these tax
treaties and tax structures.

“I find it frankly a little frustrating that it is them who
are piling in and criticising international traded businesses
who are merely availing of the tax environment that they have
put in place,” said Coveney, a former president of the Dublin
Chamber of Commerce.

Yet within a month, O’Connell had inspired Munster to a Heineken Cup win over Harlequins and made such a compelling case for inclusion that bookmakers made him odds-on favourite to captain the touring side for the second time in a row.

While the captaincy went to Wales’ Sam Warburton, the big second row’s selection was never in doubt from the moment the full time whistle sounded at The Stoop and O’Connell, hand raised in the air, was mobbed by his team mates.

“Three months ago, I didn’t think I’d be here so it’s all a bonus for me,” O’Connell told reporters at the Lions’ Irish training camp on Monday.

“People ask me would I have been disappointed if I hadn’t been selected, I wouldn’t have been really. I got back from a very serious injury as quick as I could and played as well as I could. When you give everything you have, if you come up short that’s just the way it is.”

Dogged by injury since he led the Lions in South Africa in 2009, the 33-year-old underwent surgery on his back for the second time on New Year’s Eve and all but ruled himself out of Lions selection 10 days later.

The Harlequins’ game, with O’Connell dominant in the lineout and immense in the loose, changed all that, yet conscious that he last started for Ireland over a year ago, the 1.98-metre tall lock was unsure if he was even in Warren Gatland’s thoughts.

“Up until my name was read out, I wasn’t sure. It was hard to know having not played any international rugby since last March and very little rugby since the previous May, it was very difficult to know if they were even going to consider me.

“I just tried to avoid the speculation. Someone would play a good game one week, they’d have pencilled themselves in for the tour. They’d play badly the following week, they’d have written themselves off and they’d play well the next week and they’d have pencilled themselves in for captain.”

Four years on from his last time in the red of the Lions, O’Connell says he is far more relaxed, not least because the captaincy duties rest with Warburton, whom the 85-times capped Irishman roomed with last week.

The former captain described the current tour’s lieutenant as wise beyond his years, recalling that at 25, a year older than Warburton is now, he was a lot more naive when he toured with the Lions for the first time in New Zealand in 2005.

He said he has not offered the Welsh skipper any particular advice, but does recommend that some Lions traditions continue.

“Hopefully we’ll get a few nights out, I know we’ve gone very professional but I think there’s a point where professionalism has a certain amount of limited gains,” he said.

“You do need to be a little bit old school at times and get a night out or two. I’m not sure has Warren pencilled that in, I’ll let Sam have that chat with him.”

(Reporting by Padraic Halpin, editing by Justin Palmer)

Yet within a month, O’Connell had inspired Munster to a Heineken Cup win over Harlequins and made such a compelling case for inclusion that bookmakers made him odds-on favourite to captain the touring side for the second time in a row.

While the captaincy went to Wales’ Sam Warburton, the big second row’s selection was never in doubt from the moment the full time whistle sounded at The Stoop and O’Connell, hand raised in the air, was mobbed by his team mates.

“Three months ago, I didn’t think I’d be here so it’s all a bonus for me,” O’Connell told reporters at the Lions’ Irish training camp on Monday.

“People ask me would I have been disappointed if I hadn’t been selected, I wouldn’t have been really. I got back from a very serious injury as quick as I could and played as well as I could. When you give everything you have, if you come up short that’s just the way it is.”

Dogged by injury since he led the Lions in South Africa in 2009, the 33-year-old underwent surgery on his back for the second time on New Year’s Eve and all but ruled himself out of Lions selection 10 days later.

The Harlequins’ game, with O’Connell dominant in the lineout and immense in the loose, changed all that, yet conscious that he last started for Ireland over a year ago, the 1.98-metre tall lock was unsure if he was even in Warren Gatland’s thoughts.

“Up until my name was read out, I wasn’t sure. It was hard to know having not played any international rugby since last March and very little rugby since the previous May, it was very difficult to know if they were even going to consider me.

“I just tried to avoid the speculation. Someone would play a good game one week, they’d have pencilled themselves in for the tour. They’d play badly the following week, they’d have written themselves off and they’d play well the next week and they’d have pencilled themselves in for captain.”

Four years on from his last time in the red of the Lions, O’Connell says he is far more relaxed, not least because the captaincy duties rest with Warburton, whom the 85-times capped Irishman roomed with last week.

The former captain described the current tour’s lieutenant as wise beyond his years, recalling that at 25, a year older than Warburton is now, he was a lot more naive when he toured with the Lions for the first time in New Zealand in 2005.

He said he has not offered the Welsh skipper any particular advice, but does recommend that some Lions traditions continue.

“Hopefully we’ll get a few nights out, I know we’ve gone very professional but I think there’s a point where professionalism has a certain amount of limited gains,” he said.

“You do need to be a little bit old school at times and get a night out or two. I’m not sure has Warren pencilled that in, I’ll let Sam have that chat with him.” (Reporting by Padraic Halpin, editing by Justin Palmer)

Royalty Pharma, which buys royalty streams of patented
drugs, said Elan’s efforts to reinvent itself through a series
of acquisitions and debt deals were hasty and ill-conceived.

Royalty’s new bid for Elan values the company at around $6.4
billion and comes in the face of Elan’s insistence that it is
worth more. Royalty previously offered $11.25 a share

Elan rejected the initial bid, described as a “nuisance,”
and stressed that it is determined to keep its independence.

The Dublin-based company said in a statement that its board
would assess the new Royalty Pharma offer but “strongly advised”
shareholders to take no action on the bid at this time.

Earlier Monday Elan announced its second major drug deal in
less than a week.

Royalty said its new, all-cash offer was conditional on Elan
shareholders voting against the acquisitions at a special
shareholder meeting set for June 17.

Royalty said Elan “dramatically overpaid” last week when it
agreed to pay $1 billion for buy 21 percent of the royalties
that U.S. company Theravance receives from
GlaxoSmithKline.

Royalty said its takeover offer “represents 100 percent
liquidity for Elan stockholders today, which Royalty Pharma
believes is a far superior alternative to Elan’s high-risk
strategy of hastily arranged and value-destructive
acquisitions.”

It added, “If the Theravance transaction and the other
transactions announced today serve as a template, Royalty Pharma
believes Elan stockholders should be very concerned about future
value destruction and undue risk-taking by Elan.”

Royalty also contends that Elan’s board has “compromised its
ability to freely advise Elan shareholders” because according to
the Theravance deal, the board is not allowed to recommend
Royalty Pharma’s offer at any price without breaching that
agreement.

“Royalty Pharma believes it is highly irresponsible and
‘off-market’ to agree to such provisions,” the firm said in a
statement announcing its sweetened offer.

Elan sold its 50 percent interest in Tysabri, a multiple
sclerosis drug, to U.S. partner Biogen Idec in February
for $3.25 billion plus royalties of up to 25 percent, and used
the proceeds to reward investors through a share buyback and to
plot its spending spree.

Royalty also said on Monday that it reserved the right to
reduce the acceptance threshold for its increased offer to 50
percent plus one Elan share from 90 percent previously.

Elan shares in New York, up more than 10 percent
since Royalty’s first approach in February, were up 3 percent to
$12.04 in afternoon trading.

In a string of deals over the past few days, Elan has
basically transformed itself into a specialty pharma roll-up of
companies from around the world, said Michael Yee, an analyst
with RBC Capital Markets.

Now it is up to shareholders to decide if they want to take
the risk of letting management try to execute this strategy, he
said.

“The company has limited experience in acquiring,
consolidating and executing on products in the last five years,”
Yee said. “That is why it could be risky.”

Newly crowned European player of the year Wilkinson, who turned down the chance to tour with the Lions to focus on his club side Toulon, was flawless yet again in the French team’s 16-15 win over Clermont Auvergne on Saturday.

Gatland, who contacted the former England number 10 to offer him a place in the squad last month, said he had not spoken to him since and that position had not changed no matter how many ways reporters found to ask him the question.

“How do I say no a different way,” an agitated Gatland told a news conference after being asked repeatedly if Wilkinson could yet find himself on a plane Down Under next month.

“He’s a good player, yeah but we’ve had that conversation about Jonny… I don’t think anything’s changed since the conversation we had the last time. If we picked up an injury on tour, then maybe there’s a conversation (to be had).”

Just over two weeks after Gatland picked his squad for the three-test series, Australia coach Robbie Deans named Israel Folau and two other uncapped players in his preliminary squad of 25 on Sunday, but had no place for flyhalf Quade Cooper.

Deans will add six more players to the group on June 11 meaning Cooper, the former first-choice flyhalf, with whom the coach fell out with last year, could yet find himself in the squad, something Gatland fully expects to happen.

“I thought it was predictable,” the Kiwi said of a squad shorn of the likes of Kurtley Beale, Tatafu Polota Nau, George Smith and David Pocock through illness or injury.

“There’s going to be six players added so I think they’re just assessing his (Cooper’s) form and I presume he’s going to be added later on. I don’t pick the Australian squad, I don’t take a lot from what’s going on with the politics down there.”

The Lions are spending their last week before departure in the five-star Carton House hotel on the outskirts of Dublin, the vast grounds where the Irish rugby team regularly train and Real Madrid called home on a recent pre-season tour.

Gatland said his squad, without a number of players still on duty with Leinster, Ulster, Northampton and Leicester until this weekend’s cup finals, had gelled quickly between a training camp in Cardiff last week and the secluded surroundings of Carton this week.

He was also lucky enough to list Stewart Hogg’s hay-fever among his list of major ailments with Brian O’Driscoll expected to recover from a back injury to play for Leinster in Saturday’s RaboDirect Pro 12 final before joining the squad.

The only main injury concern is fellow Leinsterman Sean O’Brien. The all-action flanker bruised a bone in his knee in Friday’s Amlin Challenge Cup victory but should be available to Gatland and his team in a couple of weeks.

“We’ve been quite lucky at the moment, we haven’t picked up too many injuries and fingers crossed for the two finals this week that guys can turn up on Sunday and fly out on Monday,” he said.

(Editing by Pritha Sarkar)