Ireland and corporate tax avoidance

maninasia

In America they have a legal duty to maximize shareholder return, I don't know how many other countries have such a system in place.

It's besides the point though, flies will land on **** if you let them .

The point is it possible that the current tax system will be changed against Ireland's wishes due to pressure from overseas. I don't see it happening yet although there has been plenty of grumbling. I do see Amazon to start having to include a sales tax pretty soon though.

More troubling would be other countries taking a leaf out of Ireland's book and offering the same or lower rates. That would negate the advantage also.

Google cannot reprimand or fire whistleblowers without breaking the law. they wouldn't be so stupid as to openly go down that route. Whistleblowers , if there are taxes recoverable, are also often entitled to a reward.

maninasia

This is more worrisome, it's coming from the Yanks not the Brits. The Yanks are getting more serious about it as they need the money these days.

http://www.rte.ie/news/business/2013/0521/451564-apple-tax-arrangements/

"Since the early 1990s, the government of Ireland has calculated Apple's taxable income in such a way as to produce and effective tax rate in the low single digits,'' the report said. Since 2003 this rate has been 2% or less - in one year, 2011, it was 0.05%.
The report said its findings "demonstrate Ireland has essentially functioned as a tax haven for Apple, providing it with income tax rates approaching zero".
It said Apple has cash holdings of $145 billion, of which $102 billion is offshore
The Senate committee has already published reports into the tax affairs of two other US high tech companies with significant Irish operations - Microsoft and Hewlett Packard.
Burdened with a government debt of $16 trillion, and a shrinking corporate tax base, the US government is moving to the forefront of a growing group of countries that want to see an overhaul of international tax laws that will cut down the opportunities for companies to avoid paying corporation taxes.
The issue of international corporation tax reform is likely to form a major part of the discussions at next month's G8 summit in Fermanagh.

edanto

maninasia wrote: »

The UK is in a bit of a bind because the City of London runs the biggest tax avoidance scam in the world.

http://www.vanityfair.com/society/2013/04/mysterious-residents-one-hyde-park-london

That's a fascinating article and any journalist worth their salt should be asking tough questions about the murky legal waters around the City of London, in the context of tax avoidance by MNCs.

Vanity Fair wrote:

It comes as a surprise to most people that the most important player in the global offshore system of tax havens is not Switzerland or the Cayman Islands, but Britain, sitting at the center of a web of British-linked tax havens, the last remnants of empire. An inner ring consists of the British Crown Dependencies—Jersey, Guernsey, and the Isle of Man. Farther afield are Britain’s 14 Overseas Territories, half of them tax havens, including such offshore giants as the Caymans, the British Virgin Islands (B.V.I.), and Bermuda. Still further out, numerous British Commonwealth countries and former colonies such as Hong Kong, with deep and old links to London, continue to feed vast financial flows—clean, questionable, and dirty—into the City. The half-in, half-out relationship provides the reassuring British legal bedrock while providing enough distance to let the U.K. say “There is nothing we can do” when scandal hits.

Data is scarce, but in the second quarter of 2009 the three Crown dependencies alone provided $332.5 billion in net financing to the City of London, much of it from tax-evading foreign money. Matters are so out of hand that in 2001 Britain’s own tax authorities sold off 600 buildings to a company, Mapeley Steps Ltd., registered in the tax haven of Bermuda to avoid tax.

Britain could close down this tax-haven secrecy overnight if it wanted, but the City of London won’t let it. “We have, to put it provocatively, a second British empire, which is at the very core of global financial markets today,” explains Ronen Palan, professor of international political economy at City University in London. “And Britain is very good at not advertising its position.”

.......
.....

But secrecy, for many, is at least as important: once a foreign investor has avoided British taxes, then offshore secrecy gives him the opportunity to avoid scrutiny from his own country’s tax—or criminal—authorities too. Others use offshore structures for “asset protection”—frequently, to avoid angry creditors. That seems to be the case with a company called Postlake Ltd.—registered on the Isle of Man—which owns a $5.6 million apartment on the fourth floor. Postlake is in turn registered as owned by Purcey Ltd., a B.V.I. entity, which is registered as held on behalf of an Isle of Man trust set up by the bankrupt Irish property developer Ray Grehan, who has been pursued by Ireland’s National Asset Management Agency to recover more than $350 million it says it is owed. Grehan had argued that the apartment is not really his but belongs to a family trust. Martin Kenney, a B.V.I. lawyer, says B.V.I. companies are frequently owned by foreign trusts from more outlandish jurisdictions, such as Nevis or the Cook Islands, deepening the secrecy. These structures are “debtor-friendly and creditor-unfriendly,” he says, so in cases of fraud it can be very hard to recover assets.

antoobrien

maninasia wrote: »

In America they have a legal duty to maximize shareholder return

If that is true then how do some many tech companies not pay a dividend?

Simple answer is that it is not true that it is a legal requirement, in fact the amount of regulatory requirements (SOX being a big one that many will have hear of) that have been put in place over the past 10 or so years looks geared to ensure not shareholder value but company viability.

The duty to maximise shareholder return is somewhere between a commercial obligation for US companies as this is how the companies raise funding and often how the employees get paid.

antoobrien

antoobrien wrote: »

If that is true then how do some many tech companies not pay a dividend?

Simple answer is that it is not true that it is a legal requirement, in fact the amount of regulatory requirements (SOX being a big one that many will have hear of) that have been put in place over the past 10 or so years looks geared to ensure not shareholder value but company viability.

The duty to maximise shareholder return is somewhere between a commercial obligation for US companies as this is how the companies raise funding and often how the employees get paid.

Shareholder return would be profits and share value - not just dividends. Dividends are really only a consequence of profits or value.

20Cent

There does seem to be a backlash against these tax avoidance measures. People in the UK must be wondering why their spare bedroom is being taxed while massive multinationals pay little or no taxation.
These freeloaders need to be boycotted until either the tax laws change or they start paying their fair share. Being tax compliant and socially responsible will become the new environmentally friendly.

Cookie_Monster

maninasia wrote: »

In America they have a legal duty to maximize shareholder return, I don't know how many other countries have such a system in place.

There are essentially two schools of thought: the UK / US model where nothing apart from shareholder return matters and the Japanese model where stakeholder return is more importtant (ie consideration for employees, owners, mgt, community, enviroment, gov etc is all equally important.

most of Europe float somewhere in the middle of these two but Ireland is firmly entrenched in the UK/US end of things.

The other thing to note is that a dividend is not necessarily good for shareholders, long term shareholder value increase is the key factor which mainly come from increasing the share value rather than simply paying out cash each year. Proper reinvestment and growth is more valuable long term.

antoobrien

20Cent wrote: »

There does seem to be a backlash against these tax avoidance measures. People in the UK must be wondering why their spare bedroom is being taxed while massive multinationals pay little or no taxation.
These freeloaders need to be boycotted until either the tax laws change or they start paying their fair share. Being tax compliant and socially responsible will become the new environmentally friendly.

That attitude is pretty galling considering the vast majority of those people seem to have no clue that taxes are paid not on revenue but on profit.

The simple fact of the matter is that these companies are tax complaint and most of them engage in community based schemes that will do more for social responsibility than any amount of tax funnelled into "social transfers"

20Cent

antoobrien wrote: »

That attitude is pretty galling considering the vast majority of those people seem to have no clue that taxes are paid not on revenue but on profit.

The simple fact of the matter is that these companies are tax complaint and most of them engage in community based schemes that will do more for social responsibility than any amount of tax funnelled into "social transfers"

Profit is manipulated. Starbucks make little or no profit on their shops in the UK. The coffee is bought from a subsidiary in Switzerland which changes the price to ensure this. Thats pretty galling for the people in the UK watching services etc being cut. It must also be galling to those who run their own coffee shops and pay the full taxes on them without the accounting monkey business. People need to take a companies tax arrangements into consideration when making a purchase, which they are beginning to do.

Tell me about these community schemes that do more than the police, fire services and hospitals then. Token charity public relations payments to pet causes not the same.

antoobrien

20Cent wrote: »

Tell me about these community schemes that do more than the police, fire services and hospitals then. Token charity public relations payments to pet causes not the same.

Community schemes like going into disadvantaged schools and working with children? Cleaning beaches? Helping to repaint nursing homes? You can call it token, but the real tokenism is the grab that money it should be ours attitude.

Here's something for you to consider, if we were to base the corporation tax on the profit on actual sales made in Ireland we would almost certainly reduce the amount of corporation tax paid here. How does that effect your cuts to Irish services?

Fratton Fred

antoobrien wrote: »

Community schemes like going into disadvantaged schools and working with children? Cleaning beaches? Helping to repaint nursing homes? You can call it token, but the real tokenism is the grab that money it should be ours attitude.

Here's something for you to consider, if we were to base the corporation tax on the profit on actual sales made in Ireland we would almost certainly reduce the amount of corporation tax paid here. How does that effect your cuts to Irish services?

Europe wide closing of these loop holes would mean U2 might again be an Irish company and we could all go back to loving Bono again.

20Cent

antoobrien wrote: »

Community schemes like going into disadvantaged schools and working with children? Cleaning beaches? Helping to repaint nursing homes? You can call it token, but the real tokenism is the grab that money it should be ours attitude.

Here's something for you to consider, if we were to base the corporation tax on the profit on actual sales made in Ireland we would almost certainly reduce the amount of corporation tax paid here. How does that effect your cuts to Irish services?

Imagine a plumber in Dublin set up an off the shelf company in Switzerland, all his jobs were paid to that company and he gave himself minimum wage in order to pay as little tax as possible, house car etc owned by the offshore co. That loophole would be shut down quick smart.

Yeah I call the services you describe as tokenism or more like public relations/marketing, bet they get tax relief on them as well. A crack down on tax havens would probably be bad for Ireland though agree, still doesn't mean we have to pimp our country out to them. A Europe wide solution to the issue seems required. Isn't that on the agenda for the G8?

antoobrien

Fratton Fred wrote: »

Europe wide closing of these loop holes would mean U2 might again be an Irish company and we could all go back to loving Bono again.

Meh, never liked him anyway, always thought there was something off about him. The tax stance just gave me a concrete reason. I guess if it ever does happen I'll just have to not like him for having a way overblown ego.

antoobrien

20Cent wrote: »

Imagine a plumber in Dublin set up an off the shelf company in Switzerland, all his jobs were paid to that company and he gave himself minimum wage in order to pay as little tax as possible, house car etc owned by the offshore co. That loophole would be shut down quick smart.

I give you bono.

antoobrien

20Cent wrote: »

Yeah I call the services you describe as tokenism or more like public relations/marketing, bet they get tax relief on them as well

This attitude shows an utter lack of understanding of just how seriously companies take Corporate Social Responsibility. They are far more common than one might believe, the problem is that the projects tackled rarely get any kind of media coverage so they get little or no visibility, unless provided in the form of sponsorship, despite the millions in time put into it by employees of these companies.

These PR/marketing schemes as you describe them get help where it's actually needed, rather than where a TD/senator/councillor/interest group lobbies for it and cost the taxpayer nothing.

20Cent

antoobrien wrote: »

This attitude shows an utter lack of understanding of just how seriously companies take Corporate Social Responsibility. They are far more common than one might believe, the problem is that the projects tackled rarely get any kind of media coverage so they get little or no visibility, unless provided in the form of sponsorship, despite the millions in time put into it by employees of these companies.

These PR/marketing schemes as you describe them get help where it's actually needed, rather than where a TD/senator/councillor/interest group lobbies for it and cost the taxpayer nothing.

These companies enjoy all the facilities of their host countries, security, public transport, education etc etc yet avoid contributing to them. I'm just not as impressed by these token pr stunts as yourself.

antoobrien

20Cent wrote: »

These companies enjoy all the facilities of their host countries, security, public transport, education etc etc yet avoid contributing to them. I'm just not as impressed by these token pr stunts as yourself.

To call their local actions "token PR stunts" is to show a total lack of understanding of what it is these companies do for communities.

How about asking somebody from Ballinasloe about the effect of AT Cross pulling out (90s)?

Dell in Limerick(2000s)?

The proposed job losses at Johnson & Johnson in Cashel?

Fruit of the Loom from their factories in Donegal (90s)?

Abbot cutting 180 jobs in Sligo(2012)?

Jacobs in Tallaght (owned by Danone - 2000s)?

Celestica in Swords (2000s)?

Add the income tax of the 250k odd people employed & the jobs they support then you start to see the value of these companies. They owe is nothing but they still support the local communities through sponsorships & initiatives like CSR.

20Cent

antoobrien wrote: »

To call their local actions "token PR stunts" is to show a total lack of understanding of what it is these companies do for communities.

How about asking somebody from Ballinasloe about the effect of AT Cross pulling out (90s)?

Dell in Limerick(2000s)?

The proposed job losses at Johnson & Johnson in Cashel?

Fruit of the Loom from their factories in Donegal (90s)?

Abbot cutting 180 jobs in Sligo(2012)?

Jacobs in Tallaght (owned by Danone - 2000s)?

Celestica in Swords (2000s)?

Add the income tax of the 250k odd people employed & the jobs they support then you start to see the value of these companies. They owe is nothing but they still support the local communities through sponsorships & initiatives like CSR.

Threads about corporate tax avoidance that list of companies didn't fold or leave because the tax was too high.

Any examples of these wonderful initiatives these tax avoiders are doing in Ireland? Some google employees getting sponsored for the marathon doesn't count.

Britain and the US are getting pretty tired of the loopholes being used via Ireland could be costing us more than the benefit gained from hosting them. There are enquiries ongoing in the UK and the US at the moment looking at this issue.

When these companies fail to pay their fair share the burden is put onto the citizens increases. Also for the sake of a free market having one company paying little or no tax distorts the market and competition.

Duggys Housemate

This investigation by the UK is a sham. You don't get corporation tax on sales in your country. You get corporation tax on profits where the company selling is based. Many of these companies have been here since they were tiny startups - Apple has been here since 1980, before the Mac, 27 years before the iPhone. It was a high corporation tax then. If Apple owes the UK tax on sales, then BMW in Germany owes taxes on sales in the UK, not profits to Berlin. ( which is bollocks). Amazing the number of Irish people who are prepared to disregard Irish sovereignty.

Thats a rubbish claim. Legally and morally, or any other way.

The investigation in the US has more moral merit, but no legal merit. The Americans are claiming that all moneys earned abroad by American headquartered companies should be repatriated after taxes are paid and immediately. At least there is some merit, as most of the Intellectual Property is created there. However whats sauce for the Goose is sauce for the Gander. American companies based in America but owned abroadshould repatriate their profits abroad, and not re-invest there.

Ireland should close the Bermuda loophole ( we are actually losing money). Companies won't flee ( to where? We would still be low at 12.5 % - and the workforce is stikcy) But tarts it.

In reposnse to the UK we should investigate the City.

Duggys Housemate

20Cent wrote: »

These companies enjoy all the facilities of their host countries, security, public transport, education etc etc yet avoid contributing to them. I'm just not as impressed by these token pr stunts as yourself.

Indeed they do so they should pay 12.5% here and tell the UK to jump in a pond.

antoobrien

20Cent wrote: »

Threads about corporate tax avoidance that list of companies didn't fold or leave because the tax was too high.

Nice set of blinkers.

20Cent wrote: »

Any examples of these wonderful initiatives these tax avoiders are doing in Ireland? Some google employees getting sponsored for the marathon doesn't count.

Google Corporate social responsibility, there are a lot of companies that have pages on it.

who_me

I read on NYTimes that Apple has negotiated a 2% corporate tax rate here (!!!), and some income is untaxed. It's kind of staggering how they're claiming the income is stateless and thus subject to no tax.

I know the importance of bringing in foreign investment, but Ireland to me is like the stereotype of an abused girlfriend who takes any kind of abuse, she's just terrified of being left alone. Other small nations prosper without resorting to becoming tax havens, why is Ireland such a special case?

What an utterly lop-sided tax system we have here. Is it any wonder people are so resistant to things like the property tax, when the richest corporations in the world get a free-ride here. I guess the truth is fairly self-evident: the government will screw the tax-payer simply because they can, because the tax-payer won't uproot themselves and leave, whereas the corporations can and will.

Duggys Housemate

who_me wrote: »

I read on NYTimes that Apple has negotiated a 2% corporate tax rate here (!!!), and some income is untaxed. It's kind of staggering how they're claiming the income is stateless and thus subject to no tax.

I know the importance of bringing in foreign investment, but Ireland to me is like the stereotype of an abused girlfriend who takes any kind of abuse, she's just terrified of being left alone. Other small nations prosper without resorting to becoming tax havens, why is Ireland such a special case?

What an utterly lop-sided tax system we have here. Is it any wonder people are so resistant to things like the property tax, when the richest corporations in the world get a free-ride here. I guess the truth is fairly self-evident: the government will screw the tax-payer simply because they can, because the tax-payer won't uproot themselves and leave, whereas the corporations can and will.

The Dept. of Finance said that was incorrect. There are no negotiations with separate companies here. They pay 12.5% on what they declare.

And where do you think these companies owe taxes?

1) Here?
2) The UK where they have the audacity to sell stuff?
3) The US?

If you believe 3) then you can't believe 1).

( 2 is just rubbish).

Fratton Fred

Duggys Housemate wrote: »

This investigation by the UK is a sham. You don't get corporation tax on sales in your country. You get corporation tax on profits where the company selling is based. Many of these companies have been here since they were tiny startups - Apple has been here since 1980, before the Mac, 27 years before the iPhone. It was a high corporation tax then. If Apple owes the UK tax on sales, then BMW in Germany owes taxes on sales in the UK, not profits to Berlin. ( which is bollocks). Amazing the number of Irish people who are prepared to disregard Irish sovereignty.

Thats a rubbish claim. Legally and morally, or any other way.

When a BMW dealer sells a car, where do they pay tax to?

Duggys Housemate

Fratton Fred wrote: »

When a BMW dealer sells a car, where do they pay tax to?

Simple Fred.

The BMW dealer pays tax on the difference between the retail and the manufacturing price of the car ( his revenue) summed over the year, minus his expenses over the year, which is his profits. But he is in the UK.

The dealer is not a BMW employee. BMW is not in the UK.

In another analogy. Carphone warehouse import a Samsung S4 at £200 and sell at £300. Samsung books the profit on the £200 (their sale to channel) whatever that is and declares it in Korea. Carphone Warehouse declare in the UK the £100 revenue ( etc.) and that minus expense is profit.

In another example an American retailer sells Cadburys imported from the UK. He pays taxes on the difference between the wholesale and retail cost of the bar, minus expenses, and Cadburys books the profit - if any - on the wholesale price of the bar. It declares it's profits in the UK.

I knew this when I was 12.

seamus

This is all pretty much just sabre-rattling, particularly from the UK ahead of any discussion on a possible withdrawal from the EU.

It's an example of where the conflict between free markets and patriotism comes to a head. People need to free to buy and sell products, but politicians like to think that a company has a national identity and thus "American" companies should pay tax in america and companies who sell stuff into the UK should pay tax on what they sell in the UK. It's the erroneous belief that there's some kind of moral obligation on a company or an individual to pay more tax than they are legally due to.

If a company is not doing anything illegal, but you're not happy about it, then the problem is with the law, not with the company.

I say it's sabre-rattling because very little will come of this. If the US decide that companies need to pay US tax on profits, then the huge corporations will completely up sticks and move. If Apple's profits are to be taxed at US rates, then they will need to make their products more expensive, and they will be murdered in all other markets as competitors move in with cheaper products.
Instead, they will make far better profits by completely removing themselves from the US and exporting their products to the US. Companies don't have citizenship, so if Google aren't US-based, the US can't do anything about their profits.

The US and the UK know this though.

Fratton Fred

Duggys Housemate wrote: »

Simple Fred.

The BMW dealer pays tax on the difference between the retail and the manufacturing price of the car ( his revenue) summed over the year, minus his expenses over the year, which is his profits. But he is in the UK.

The dealer is not a BMW employee. BMW is not in the UK.

In another analogy. Carphone warehouse import a Samsung S4 at £200 and sell at £300. Samsung books the profit on the £200 (their sale to channel) whatever that is and declares it in Korea. Carphone Warehouse declare in the UK the £100 revenue ( etc.) and that minus expense is profit.

In another example an American retailer sells Cadburys imported from the UK. He pays taxes on the difference between the wholesale and retail cost of the bar, minus expenses, and Cadburys books the profit - if any - on the wholesale price of the bar. It declares it's profits in the UK.

I knew this when I was 12.

Thanks for being patronising.

And Google UK buy services from Google Ireland, mark them up and sell them to companies in the UK, no? The advertising is on behalf of UK companies, targeting UK markets and managed by Google in the UK, except according to Google, it isn't.

The argument is where does the sale take place. If, as Google claim, it takes place in Ireland, what are their sales people in the UK doing? Oh, despite being called sales people, they are only marketing?

antoobrien

Fratton Fred wrote: »

And Google UK buy services from Google Ireland, mark them up and sell them to companies in the UK, no? The advertising is on behalf of UK companies, targeting UK markets and managed by Google in the UK, except according to Google, it isn't.

No google in Ireland provide services across Europe from Ireland, the same way as paddypower provide services across Europe from the Isle of Man. Those services are not sold to the UK or French etc entities, they are sold to the customers in those countries.

Many software companies have "manufacturing" facilities here so that when they ship software (i.e. disks) it is shipped from the Irish (often EMEA) entity, rather that he local one. There's a reason why amazon, MS etc have big data centres here.

TheVman

I have been living in France for nearly ten years and I have to admit (eventhough i love EIRE) that this tax avoidance, social dumping nonsense is going to turn Ireland into a despised country, both its people and as a country to the detriment to tourism etc etc
It has been basically ****ing the rest of Europe on this issue for years and all that for a few thousand jobs in manafacturing and assembly...
This will not be allowed to continue and it should not be allowed...
This corporate tax issue is going to have disastrous effects on Ireland sonner or later.

I recommend reading : http://www.independent.ie/opinion/analysis/no-wonder-the-neighbours-are-upset-over-our-cosy-tax-policies-29276553.html

Duggys Housemate

TheVman wrote: »

I have been living in France for nearly ten years and I have to admit (eventhough i love EIRE) that this tax avoidance, social dumping nonsense is going to turn Ireland into a despised country, both its people and as a country to the detriment to tourism etc etc
It has been basically ****ing the rest of Europe on this issue for years and all that for a few thousand jobs in manafacturing and assembly...
This will not be allowed to continue and it should not be allowed...
This corporate tax issue is going to have disastrous effects on Ireland sonner or later.

I recommend reading : http://www.independent.ie/opinion/analysis/no-wonder-the-neighbours-are-upset-over-our-cosy-tax-policies-29276553.html

More nonsense. Ireland is a country with a lower tax take than some others, it is NOT A TAX HAVEN.