By Padraic Halpin

DUBLIN (Reuters) - Ireland has rejected claims by two U.S. senators that Ireland is a tax haven and had handed Apple Inc a special tax deal, a charge the pair stood by on Friday.

Ireland's ambassador to the United States Michael Collins has written to the two senators, Carl Levin and John McCain, arguing Ireland's tax system is transparent, according to the text released by the finance ministry.

But Levin and former U.S. presidential candidate McCain said records obtained by their committee showed Apple paid a nominal rate far below Ireland's statutory rate of 12.5 percent.

"Testimony by key Apple executives, including CEO Tim Cook and Head of Tax Operations Phillip Bullock, corroborates that Apple had a special arrangement with the Irish government that, since 2003, resulted in an effective tax rate of 2 percent or less," the senators said in a statement.

"Most reasonable people would agree that negotiating special tax arrangements that allow companies to pay little or no income tax meets a common-sense definition of a tax haven."

Ireland has been forced to defend its low corporate tax rate after the Senate heard last week that the iPhone and iPad maker paid little or no tax on tens of billions of dollars in profits channeled through Irish subsidiaries and had effectively negotiated a special rate of less than 2 percent. {ID:nL2N0E20Y1]

NOT A HAVEN

"Ireland's tax system is set out in statute, so there is no possibility of an individual special tax rate being negotiated for companies," Collins wrote in the letter dated May 29 which was also sent to other members of Levin's Senate subcommittee.

"The memorandum to the Permanent Subcommittee refers to Ireland as a 'tax haven'. As you will be aware, the OECD has identified four key indicators of a tax haven. None of these criteria applies to Ireland."

Dublin has begun a diplomatic offensive to repair the damage done to its reputation from the allegations. Finance Minister Michael Noonan said last week Ireland would not be the "whipping boy" for the U.S. Senate.

Ireland has said that if Apple paid tax at such low rates, it was down to tax planning where it had found a gap to exploit between two different tax jurisdictions. Dublin has called for international efforts to curb such large scale tax avoidance.

Apple's Cook told a conference this week that the company did not have a special deal with the Irish government giving it a 2 percent flat tax rate.

Yet the Senate's investigation showed the iPhone maker had paid tax worth just 2 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.

(Editing by Stephen Nisbet and David Holmes)

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