NO MORE DOUBLE IRISH, thunders Dublin. Erm, from 2020 that is The Irish Finance Minister announced the end of the "Double Irish" tax break in his budget speech on Tuesday. Tech giants such as Facebook, Google, Apple and LinkedIn have taken advantage of Ireland’s lenient tax set-up for decades. But due to external pressure from Brussels and elsewhere, the emerald isle will outlaw the …
as they can always turn to Luxembourg for a little bit of light royalty transfer tax "management" if the double Irish isn't replaced in 6 years time.
Going to be a lot of happy accounting firms working out the next bit of tax planning wizardry.
If only the UK government would come up with some competitive tax rates they could bring in so much more money than the current mantra of higher taxes which bring in less.
I imagine all these companies have contingency plans in place to reorganize things as necessary to work around such things. Probably already have the necessary filings in place and small offices opened in the necessary locations for years. Paying a few people to push papers around and look busy as a backup plan to insure you keep saving the bulk of $700 million or $2.5 billion Facebook and Google save, or whatever $large billion Apple and Microsoft save each year is well worth it.
They might scramble to find a backup to their backup now that they have a target date for bringing their backup plan online. Good luck to Ireland with whatever the "patent box" is, I suspect they're going to lose out on this regardless but it sounds like they were left with no choice.
It's never 20% though. There are better rates if you're big enough or have enough friends in the right Party.
If I formed an IT company tomorrow here in Ireland, my profits would be taxed at 12.5% (ignoring the reliefs for new businesses), and I wouldn't have had to lobby anyone to get that rate. Compare with France or Germany where that new business would pay a greater percentage on its profits than an EDF or BASF would.
The EU probe into Apple is not about the Double Irish, but about whether Ireland gave Apple an even lower corporate tax rate: the kind of "sweetheart" tax deal (a form of direct state aid) that large German and French concerns have lobbied for, and got, from their respective governments for years.
I'm glad to see the loophole close. It has given the country a bad name, but now it'll be interesting to see if the US Government in particular addresses the loopholes in its tax laws that allow other forms of revenue stripping to be performed.
I wonder how much of Uncle Alex's promises for Scotland would have come undone now the EU and the rest of the world are frowning on these corporate tax deals that formed the cornerstone of the prosperity plans.
I guess we won't find out until UKIP gain a majority in Westminster and throw Scotland out...
Is a race to the bottom. Already to day, there is this feeling that companies will eventually pay no tax at all. And, that is splendid of course was it not that "we the people" will have to pay it instead. Taxation within the EU should be the same. There are many more intelligent means to compete. And EU what about getting rid of the tax heavens. You have talked about it for years now.
I disagree in part. I believe the EU should set a minimum rate to prevent the intra-block race to the bottom and let countries decide how they wish to levy their taxes. There will always be a trade-off between tax rate, barriers to entry/bureaucratic costs, employment costs, employment pools, access to ancilliary services, etc etc that can then be shopped around for but countries need not fear another block member charging 0.5% corporation tax. Outside the EU it's up for grabs, perhaps there should be a G20 minimum of 10-15% or something. Having one rate for the whole of Europe does not take into account the other factors in each economy and thus provides ever greater inflexibility and likely the demise of the majority of members, as if it isn't bad enough already with 50+% youth unemployment in Spain.
"Competing on taxes Is a race to the bottom."
That was utter nonsense the first time a union uttered it, and it will remain nonsense until we finally rid ourselves of that communist curse.
If competing on taxes is a bad thing, then just whack the rate up to 99% and see what happens. I'll clue you in: very bad things happen, but the reverse is true if you lower the rate.
A promise of changes in 2020 sounds more like something said to stop other governments from taking their own actions.
How else can little Ireland maintain its internal tax windfall by stopping major countries like the US, UK, France, Germany, Japan, Canada, etc. from properly taxing these massive companies?
There is nothing stopping the US taxing these US corporations any way they like - the so-called "Double Irish" only exists because US tax law ignores transfers between foreign subsidiaries registered in the same country. (That's why you don't seen any UK companies moving their head-quarters to Dublin)
There's very little evidence that US multi-nationals are choosing Ireland simply because of the "Double-Irish" - they wouldn't bother employing thousands of workers, and constantly expanding those workforces there if all they wanted was to exploit a tax loophole, that they could do with a "brass-plate" office with a dozen employees (or none). They are taking advantage of the loophole in US tax law when they're here anyway, but it's a loop-hole in US tax law, not a loophole in Irish tax law.
If the major industrialized nations would simply make a stand and base their tax policies on where companies do the majority of their business, rather than letting them pick the lowest tax rate.
If they did that there would be no way out for these tax dodgers. I mean, what are they going to do, is Starbucks going to shift their operations to Ireland, Luxemburg and St. Kites?
Is Amazon going to limit sales to the USA, UK and Canada to less than it sells in Ireland?
Expecting Ireland to fix this is a waste of time. Even IF Ireland wanted to fix it some other nation would come along and do the same thing.
And the UK is guilt free in this. Many tax havens are UK territories and protectorates.
Likewise the USA permits New York to act like a tax haven in some sorts of arrangements.
Ireland is merely the worst of a bad lot.
The thing is, the wealthy don't want this fixed. They want the problem to continue, they want to continue to not pay their fair share towards education, transportation and national defense. So they lobby to prevent effective action, and they lobby successfully.
"If the major industrialized nations would simply make a stand and base their tax policies on where companies do the majority of their business, rather than letting them pick the lowest tax rate."
Unfortunately, that can't work.
Taxation is based on profit, not turnover. You'd find the onshore company would magically stop making any profit, and another company in another jurisdiction would start making more profit.
"If they did that there would be no way out for these tax dodgers"
Wrong. Very very wrong. Epic fail in fact. Anyone in the tax arbitrage industry would simply laugh at such a suggestion.
"Is Amazon going to limit sales to the USA, UK and Canada to less than it sells in Ireland?"
No, but it will stop making a taxable profit in Ireland leaving Ireland with a greater percentage of a vastly reduced pie. Another pie will be baked somewhere more favourable, but Ireland won't get a sniff, never mind a slice.
"Many tax havens are UK territories and protectorates."
True, but the best ones aren't.
"Likewise the USA permits New York to act like a tax haven in some sorts of arrangements."
You're confusing NY with Delaware.
"Ireland is merely the worst of a bad lot."
Taking your implied definition of worse, all I can say is... nope, it's not. Not by a very long chalk.
"The thing is, the wealthy don't want this fixed. They want the problem to continue, they want to continue to not pay their fair share towards education, transportation and national defense. "
The top 1% of earners in the UK pay 30% of all taxes. Please explain a) How that isn't fair, b) Just how much of the burden you think they should shoulder, and c) What is your plan b when they up sticks and relocate somewhere less hostile?
I'm just a person posting on the internet, as are you, but I used to work in tax arbitrage, where as it is obvious you haven't, because it is equally obvious that despite having some strong feelings on the subject, you don't actually understand it at all. Sorry if that sounds harsh... you're far from alone in that regard.
"The top 1% of earners in the UK pay 30% of all taxes. Please explain a) How that isn't fair, b) Just how much of the burden you think they should shoulder, and c) What is your plan b when they up sticks and relocate somewhere less hostile?"
Kerry Packer in the day blew $36M in a casino in one night but yet he paid less tax than me????
The ultra rich have such tax scams going such as the double Irish sandwich that they pay less tax than the average earner.
As for moving, they already do but the business they own remain and they should be taxed properly.
In 2008, about 8 per cent of the UK's total personal income went to the top 1 per cent of earners. However, half that share, 4 per cent, went to the very top 0.1 per cent of earners.
Source: http://en.wikipedia.org/wiki/Income_in_the_United_Kingdom#High_income
People tend to confuse "income" with "wealth" in these arguments, which is probably why you're as surprised at the low share as I was. Many very wealthy people keep their income safely outside of the UK, and thus safe from tax, but by residing in the UK and thus out of the jurisdiction their earnings live in, they do a kind of personal 'Double London'...
"worst of a bad lot" No, not by a long way. You need to go to sunnier climes to see the very worst.
The Netherlands (not just the Antilles) and especially Luxemboug also allow similar schemes, but they come under less criticism. Even the UK acts as a conduit for various tax dodges in the former Soviet Union.
Ireland DOES want to fix this issue, because it's damaging the country's reputation, and it's causing ill-informed people to label the country a "tax haven", when it's nothing of the sort. It's also very dangerous for any small nation to base its economic fortunes on a scheme that infuriates wealthier, more powerful nations: For example, the US could impose punitive fines on companies it deems to be exploiting the Double Irish and similar mechanisms. If that were to happen it would be a major disincentive for those companies to remain in Ireland.
The attraction of Ireland for US companies isn't the availability of some revenue stripping wheeze, it's a combination of lots of other factors, particularly: a stable and predictable corporate tax system that's oriented towards international trade, an educated workforce that speaks fluent English, close cultural similarities with the US/Canada, an efficient banking and finance system that's governed by stable rule of law, as well as Euro-zone membership and a guaranteed membership of the EU in the forseeable future. That latter one is a big deal for foreign investors, who want an English-speaking hub for their operations in the big European markets - the UK government's posturing on leaving the EU isn't winning them any points when it comes to foreign investment - but the UK thinks its economy is big enough to not need such investment.
I reckon it'll be impossible to tax them, so just have no corporation tax at all and charge max VAT with companies operating outside the EU, medium VAT with companies trading in the EU and low VAT for companies in the Country, thus making it more profitable to sell to your main client by operating in the same as country. Of course it might kill all the Indian call centres. Rules for operating in the country are 33% of all employees including contracted and temps. This should increase the number of jobs in the country for semi skilled, but won't affect the massive companies as much. But for small local companies it should provide a decent advantage and reduce amounts importing foreign goods(which is good and bad).
Course i'm sure they'll be moaners, especially drug traffickers complaining why everything has got expensive. Whereas people with jobs should have much less income tax and so be able to handle the VAT differences. Governments should also hate it as they won't understand how much it will reduce trade but it'll get locals on board and blow up trying to guess what the outcome will be.
re "The thing is, the wealthy don't want this fixed. They want the problem to continue, they want to continue to not pay their fair share towards education, transportation and national defense"
Yes,
Just look at Boris and Cameron regularly visiting tax dodgy Amazon. Low wages slavery is what they prefer to proper taxes which guarantee all our futures.
India is a low tax regime too and that is the way we are heading !
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