FORTUNE– The biggest technology company on Earth has a sizable portion of its operations here on the outskirts of Cork, a provincial town in southern Ireland, up a hill past a traffic circle marked with a large statue of Jesus Christ on the cross. In other words, this is about as far as one can get from Apple’s Silicon Valley base of Cupertino, more than five thousand miles away.
And yet Cork — population about 120,000 — is home to five of Apple’s global subsidiaries, including Apple Sales International, which manages the company’s gargantuan global distribution and sales of iPads, iPhones, computers, and its many other devices. (Also here are Apple Operations Europe, Apple Operations International, Apple Distribution International, and Apple Operations.) Yet there are no multi-lane highways across the street from its redbrick and glass building. Rather, a pair of horses munches on a rangy patch of grass, near to an empty soccer field, while a few miles away, dairy cows laze on the green fields of Blarney under a stormy sky — just as they did decades ago, when Steve Jobs flew into Cork in 1980 to open Apple’s overseas operation.
From the front, Apple HQ could well be mistaken for a high school, bland and modern, and just three stories high. And foot traffic is thin enough that when Fortune wandered up to the entrance on Tuesday morning, security guards quickly took notice. Was there anyone we could say hello to, we asked? No, the nearest public-relations staffer was in London.
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Despite that, the activities inside this modest building have provoked a firestorm in Washington, which has now rippled all the way back to Ireland. In U.S. Senate hearings last May, Apple (AAPL) struggled to explain how it had managed to avoid an estimated $44 billion or so in U.S. taxes, by taking advantage of Ireland’s 12.5% corporate tax rate, as well as mechanisms that effectively rendered it stateless for tax purposes. One loophole has allowed Apple and others to shunt billions in profits from Ireland through the Netherlands to the tax-free British Virgin Islands, by setting up a web of subsidiaries perfectly tailored to avoiding taxes, in the famously-named “Double Irish with a Dutch sandwich” accounting method. Apple insists it contributes about $1 in every $40 in corporate taxes the IRS collects. And while Sen. John McCain (himself a descendent of Irish immigrants from Ulster) admits Apple is a big taxpayer, he pointed out last May that it was also “among America’s largest tax avoiders.”
Those accounting acrobatics could be changing — if only by a little. Ireland’s Finance Minister Michael Noonan declared in mid-October that the country was finally canceling the Double Irish. Politicians in Dublin do seem keen to shake off the image of running a tax haven for tech giants, with Prime Minister Enda Kenny telling Fortune and other journalists in Dublin on Wednesday evening that he wanted to “be on the forefront of the response” in the global crackdown on tax avoidance.
But Ireland is now stuffed with tech giants. Drive out of Cork’s small airport, and among the first buildings you see are large operations for Amazon (AMZN) and IBM (IBM); Dell and the Massachusetts cloud-computing company EMC (EMC) each has a large building in Cork’s Mahon district. In Dublin, so many U.S. technology companies are squeezed into the city’s Silicon Docks that Ireland’s Industrial Development Agency, or IDA, recently launched an app showing photos of headquarters buildings for dozens of companies, including Facebook, Microsoft, and Google, which now has the tallest building in the country.
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Officials in Dublin, who have been playing host this week to the city’s huge Web Summit, like to stress the attractions other than taxes that have lured tech companies to Ireland, like being the Eurozone’s sole English-speaking country, and having the continent’s youngest population. The influx of U.S. companies into Ireland has been crucial for the country. “It’s the bedrock of our economy now,” says Barry O’Dowd, senior vice president for IDA’s emerging business division. “It has what has brought us out of the recession.”
But for multinationals, Ireland’s tax structure is a sweet deal. Among the benefits is a 25% cut on corporate tax bills if companies do R&D in Ireland. O’Dowd says many companies have benefited from those incentives, bringing their corporate tax rate down to “high single digits.” On Wednesday evening, nine smaller U.S. tech companies announced they were opening their European operations in Ireland, together hiring about 300 people.
While the Senate fumes about Apple’s small tax rates, Ireland — which is digging out from a deep recession — is not about to scrap all of its tax incentives any time soon. On Wednesday, Prime Minister Kenny told us journalists that “there is no question of letting Ireland’s tax rate be pressured,” for example, by raising its corporate tax rates.
In Cork on Tuesday, construction crews outside Apple HQ were putting the finishing touches to the company’s new building, a sprawling three-story structure which looks likely to double the company’s office space. The Double Irish might be on its way out. Apple, on the other hand, seems set to stay.
Editors note: a previous version of this story attributed to Barry O’Dowd the statement that Apple had benefitted from tax incentives to bring its tax rate down to “high single digits.” It should have read “many companies” benefitted from those incentives; the text has been updated to reflect that change.
