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Ireland and corporate tax avoidance

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    #182
    antoobrien
    Registered Users Posts: 6,106 ✭✭✭antoobrien


    djpbarry wrote: »
    Supermacs drove the chipper in my home town out of business.

    The absolute bastards.

    And he started out as a teacher selling fast food to kids at lunch!


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    #183
    The Rooster
    Registered Users Posts: 4,465 ✭✭✭The Rooster


    Fratton Fred wrote: »
    didn't work like that in Dalkey. Starbucks only lasted six months.
    Well exactly. When you've got big royalties to pay to support the brand you are using its not always easy to make money. That's why they didnt last in Dalkey and they don't make much of a profit in UK.

    Advatages and disadvantages to being big as I said. But the key point is that Irish tax law doesn't hinder competition.


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    #184
    Potatoeman
    Registered Users Posts: 4,265 ✭✭✭Potatoeman


    Does it matter what these companies pay in any other country? They are not getting the money anyway. Why don`t they try and make them pay tax in their jurisdiction and keep their nose out of our national affairs.


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    #185
    carpejugulum
    Registered Users Posts: 523 ✭✭✭carpejugulum


    maninasia wrote: »
    this is a far bigger issue than the tax rate ,which at 12.5% would offer a tax reduction of perhaps 50% at most compared to other states.
    No, it wouldn't.
    effective-corporate-tax-rate.png


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    #186
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    Some more disturbing news in relation to corporsation tax today.

    I happen to have some friends working at one of the companies mentioned. One can't afford to get married, the others are in other sorts of financial difficulty. There is a serious problem with a system which facilitates this depth of tax arbitrage and in so doing necessitates such a disproportionate burden on below-average-income households.

    http://www.irishtimes.com/business/sectors/manufacturing/irish-boston-scientific-company-paid-effective-tax-rate-of-4-in-2011-1.1412331
    An Irish holding company of US medical products group Boston Scientific paid $60 million (€40 million) in corporation tax on profits of $1.4 billion in 2011; an effective tax rate of 4 per cent, according to research carried out by The Irish Times.
    A wide range of multinationals have Irish-incorporated subsidiaries that pay little or no tax on large sums going through their accounts because they are not resident here for tax purposes...

    ...An Irish holding company that heads a group of Boston Scientific operations around the globe, including in Ireland, notes that if Irish corporation tax of 12.5 per cent was levied on its profits, it would have to pay $177 million in Irish tax. However, the actual tax the group was legally obliged to pay was lower for a number of reasons, including “different tax rates on overseas earnings”, according to the accounts.
    ...Other multinationals
    Similar structures are in place at other Irish-incorporated multinational subsidiaries, including a subsidiary of US software company Novell, which paid no tax on profits of $315.6 million in the 16 months to March 2012.
    An Irish subsidiary of US software security company Symantec paid no tax on profits of $742 million in 2008, and $2.9 billion in 2007. An Irish subsidiary of French telecommuncation equipment firm Alcatel Lucent paid no tax on Irish profits of $313 million in 2008.


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    #187
    maninasia
    Registered Users Posts: 4,616 ✭✭✭maninasia


    antoobrien wrote: »
    Let's get this blatant lie out of the way for once and for all.

    Apple paid $8bn taxes on $156bn revenue for FY2012

    Using the US tax model (sales-cost of sales) that is 18% tax on worldwide gross profits.


    Yeah but the point is a large number of these companies goose 'cost of sales'. What they claim is 'cost of sales' is completely exaggerated. Or they artificially declare no profits in their subsidiaries , then wash it through ireland, meanwhile they pay the Virgin Islands nameplate company the 'licensing fee' for use of their IP and brand.

    If we tried to do this kind of carry-on we'd be banged up in jail. It's not illegal right now, but it is a very unfair system. Workers everywhere are carrying the can for these corporations and their shareholders in terms of disproportionately supporting the tax net.

    To find out that Ireland barely makes any tax revenue out of this scam is ironic indeed. Yes we get jobs, but we are still screwed on taxes.


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    #188
    maninasia
    Registered Users Posts: 4,616 ✭✭✭maninasia


    carpejugulum wrote: »
    No, it wouldn't.
    effective-corporate-tax-rate.png

    Well it is 50% less than a few very significant trading countries. It's also 15% less than a bunch of others.

    I've a feeling the effective tax rate varies enormously as to how big and international your company is, I doubt small companies get such an effective rate so easily. Tax men are not known for their generosity.

    However in Ireland all companies just need to pay 12.5%. The headline tax rate still matters a great deal. Obviously multinationals like it as adding in transfer pricing they can knock their taxes down to almost nothing!


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    #189
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    US Senators seem underwhelmed at the Irish Ambassador's insistence that there's nothing to see here....

    http://www.irishtimes.com/news/politics/us-senators-reject-irish-claim-over-tax-haven-status-1.1413947
    Two top Washington politicians have rejected the contention by the Irish Ambassador to the US that Ireland is not a “tax haven”.

    Ambassador Michael Collins wrote to a Senate subcommittee in Washington on Wednesday saying Ireland did not fit any of the four key indicators of a tax haven as identified by the OECD.

    Yesterday, the two senior members of the subcommittee, Democratic Senator Carl Levin and former presidential candidate Senator John McCain, responded by saying evidence it had heard recently about Ireland met a “common sense” definition of a tax haven.

    Yesterday, Mr Levin and Mr McCain, issued a response in which they said the records obtained by the subcommittee clearly showed that, for years, Apple paid the Irish tax authorities a nominal rate of corporation tax, far below the Irish 12.5 per cent rate.


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    #190
    Duggys Housemate
    Closed Accounts Posts: 3,298 ✭✭✭Duggys Housemate


    Both McCain and Levin - a total idiot - have made their minds up.


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    #191
    maninasia
    Registered Users Posts: 4,616 ✭✭✭maninasia


    Actually, and it pains me to say it, they are correct. We are a massive tax haven.

    Apple only paid 4% tax on profits as they used a special reciprocal tax agreement worked out between them and the Irish government in the 1980s.

    It allows them to claim that their overseas subsidiary is a non tax resident anywhere...a peculiar idea indeed.


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    #192
    Duggys Housemate
    Closed Accounts Posts: 3,298 ✭✭✭Duggys Housemate


    maninasia wrote: »
    Actually, and it pains me to say it, they are correct. We are a massive tax haven.

    Apple only paid 4% tax on profits as they used a special reciprocal tax agreement worked out between them and the Irish government in the 1980s.

    It allows them to claim that their overseas subsidiary is a non tax resident anywhere...a peculiar idea indeed.

    Utter rubbish. No such deal was agreed. Apple are exploiting a loophole in both US and Irish law not an agreement.


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    #193
    maninasia
    Registered Users Posts: 4,616 ✭✭✭maninasia


    Well it seems Cook has some explaining to do for his massive f$%k-up during testimony.

    http://www.independent.ie/business/irish/apple-chief-now-says-there-is-no-special-low-tax-deal-with-ireland-29307329.html


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    #194
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    Duggys Housemate wrote: »
    Utter rubbish. No such deal was agreed. Apple are exploiting a loophole in both US and Irish law not an agreement.
    Awareness of a loophole in tax law whereby firms can arrive and enjoy an internationally anomalous benefit, and failing to act to remedy it, is a de facto tax policy.

    No serious or classy crook would ever get his hands dirty by openly involving himself in transactions.

    Ireland is coming off with all the dignity of a sleazy Torremolinos bar owner in this affair. it's not even so much the reputational damage I mind, but the expectation that households and small firms should carry the can for major corporations, and that a foreign Government has to be the one to tell us about that.


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    #195
    ardmacha
    Registered Users Posts: 7,476 ✭✭✭ardmacha


    Apple pay tax in Ireland in proportion to their real activity in Ireland. They have a huge R&D activity in the US that ends up in the Bahamas or wherever. It is the business of the US to tax that activity that is taking place in the US.


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    #196
    mathepac
    Banned (with Prison Access) Posts: 4,991 ✭✭✭mathepac


    jmayo wrote: »
    Is anyone around here keeping an eye on UK's Public Accounts Committee (PAC) investigations into Google ? ...
    As was pointed out in some of last week-end's papers, most of the commentators including Mr Google, the UK PAC, the UK press :rolleyes: and our own poor saps know sweet FA about the topic they have chosen to comment on. If they all manage to get up to speed it might be possible to have a meaningful conversation.

    In the meantime ZZZzzzzz ...

    EIRE has a Corporate tax-rate of 12.5%, Macaroon / Cameroon / Cameron / whoever just proposed / announced a UK Corporate tax-rate of 10%. The US wants US corporations to pay tax in the US, change your tax laws then., and so on .... spare me. It has feck-all to do with the EU or Ireland.

    Everyone plays with the numbers. I once worked for a company who shipped product to the Netherlands at month-end / quarter-end to meet targets. Once the "export sales" numbers were posted it was all shipped back again ... and so on.


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    #197
    Worztron
    Registered Users Posts: 8,676 ✭✭✭Worztron


    Apple Sales International: Profits = €17 billion; Taxes = €8 million; equals a rate of 0.05%

    Google Ireland Limited: Profits = €9 billion; Taxes = €22.2 million; equals a rate of 0.25%

    Facebook Ireland: Profits = €1 billion; Tax = €3.2 million; equals a rate of 0.3%

    Mitch Hedberg: "Rice is great if you're really hungry and want to eat two thousand of something."



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    #198
    maninasia
    Registered Users Posts: 4,616 ✭✭✭maninasia


    I don't know about the actual figures pertaining to the final rate of tax, but it is clear we are a big peg in the global tax avoidance structure, and our days in this game are numbered.
    They are numbered either by a leavening of the tax playing field in Europe (competition among nations) or by tightening up due to pressure from large countries such as US and Germany and even UK (which itself is also a major player in tax avoidance).


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    #199
    srsly78
    Registered Users Posts: 7,157 ✭✭✭srsly78


    Worztron wrote: »
    Apple Sales International: Profits = €17 billion; Taxes = €8 million; equals a rate of 0.05%

    Google Ireland Limited: Profits = €9 billion; Taxes = €22.2 million; equals a rate of 0.25%

    Facebook Ireland: Profits = €1 billion; Tax = €3.2 million; equals a rate of 0.3%

    Learn to read the accounts properly.

    (www.duedil.com - free reg, you can get any companies accounts from here)


    Google Ireland Limited 2011:

    Turnover 12,457,352,000 EUR
    Cost Of Sales 3,382,094,000 EUR
    Gross Profit 9,075,258,000 EUR
    Operating Profit 20,852,000 EUR
    Pre-Tax Profit 24,369,000 EUR
    Post-Tax Profit 2,153,000 EUR

    As you can see, "profit" can refer to lots of different stuff. That 9 billion gross profit is not what is taxable. You have made the same mistake with the other companies too.

    The discrepancy is caused by transfer pricing rules, as allowed by the USA via tax treaties with various countries.


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    #200
    Duggys Housemate
    Closed Accounts Posts: 3,298 ✭✭✭Duggys Housemate


    Cody Pomeray wrote: »
    Awareness of a loophole in tax law whereby firms can arrive and enjoy an internationally anomalous benefit, and failing to act to remedy it, is a de facto tax policy.

    No serious or classy crook would ever get his hands dirty by openly involving himself in transactions.

    Ireland is coming off with all the dignity of a sleazy Torremolinos bar owner in this affair. it's not even so much the reputational damage I mind, but the expectation that households and small firms should carry the can for major corporations, and that a foreign Government has to be the one to tell us about that.

    The tax law exploited by Apple is a problem of the laws of two countries. The US doesn't tax the companies registered in the US , we don't tax companies not registered for tax here.

    Look. Ireland will get a bad press because that is how dominant powers work. The UK is being exploited by Starbucks use of tranfer pricing , Ireland is exploiting Google ( who do the same to Ireland via the British dependency of Bermuda). Nobody talks of transfer pricing to Britain.


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    #201
    mathepac
    Banned (with Prison Access) Posts: 4,991 ✭✭✭mathepac


    srsly78 wrote: »
    Learn to read the accounts properly. ...
    The discrepancy is caused by transfer pricing rules, as allowed by the USA via tax treaties with various countries.
    Correct. To plug the so-called loopholes, the tax laws in two countries must change.
    Duggys Housemate wrote: »
    The tax law exploited by Apple is a problem of the laws of two countries. The US doesn't tax the companies registered in the US , we don't tax companies not registered for tax here. ...
    I agree with the first sentence. I think what you mean is that the US doesn't tax companies registered in Ireland; we don't tax companies operated / run from the US. This is a reciprocal agreement.


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    #202
    maninasia
    Registered Users Posts: 4,616 ✭✭✭maninasia


    srsly78 wrote: »
    Learn to read the accounts properly.

    (www.duedil.com - free reg, you can get any companies accounts from here)


    Google Ireland Limited 2011:

    Turnover 12,457,352,000 EUR
    Cost Of Sales 3,382,094,000 EUR
    Gross Profit 9,075,258,000 EUR
    Operating Profit 20,852,000 EUR
    Pre-Tax Profit 24,369,000 EUR
    Post-Tax Profit 2,153,000 EUR

    As you can see, "profit" can refer to lots of different stuff. That 9 billion gross profit is not what is taxable. You have made the same mistake with the other companies too.

    The discrepancy is caused by transfer pricing rules, as allowed by the USA via tax treaties with various countries.

    Right, transfer pricing is the multi billion dollar tax avoidance scheme which allows 'gross profits' to magically convert to minimal 'operating profits', while shifting the proceeds to their subsidiary in a tax haven. Ireland's 12.5% rate is just applied to the crust that's left which then becomes crumbs.

    Of course transfer pricing wouldn't work without strange loopholes like Ireland allowing companies operating here to be tax non-resident everywhere else in the world!

    In this case countries could tighten up and try to leverage tax on 'gross profits', but then 'cost of sales' will be their next playtoy.

    There is a tax system called 'minimum applicable taxation' which may eventually have to come into effect. It's extremely unfair that employees and small contractors need to pay their taxes while multinational giants game the system.


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    #203
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    Duggys Housemate wrote: »
    Look. Ireland will get a bad press because that is how dominant powers work. The UK is being exploited by Starbucks use of tranfer pricing , Ireland is exploiting Google ( who do the same to Ireland via the British dependency of Bermuda). Nobody talks of transfer pricing to Britain.
    Maybe don't start a paragraph with "look" if the rest of that paragraph is reliant on emotions and no facts.

    So lets stick to facts. US tax laws as they relate to federal tax obligations of overseas subsidiaries, their sub companies, and the ineractions between them are extensive. Some might use the word 'severe'. The US tax code provides only for very narrow movement within its strictures. It is difficult to imagine how much further the US tax authorities could go in calling in under their jurisdiction those activities and corporate persons which are 'rightfully' American, but who avail of such strange and wonderful mechanisms (such as Irish transfer pricing rules) as to render them impenetrable to all but brute force, it seems.

    However, usually nobody has to resort to brute force; the international economies of the advanced world are usually fully co-operative with one another in working together to combat unfair or improper structures which seek to undermine corporations' tax obligations.

    Under the Finance Act 2010, Irish tax law openly gave the two fingers to the arms length principle in international best practice as regards transfer pricing rules between subsidiaries or otherwise related firms. Deloitte themselves looked at these legal provisions and gave the equivalent of a shrug and a smile in their follow up report.
    We are legal renegades in this regard, acting totally out of character both for ourselves and for the standards expected in the international community with whom we like to align ourselves.

    To describe this as an international problem is a form of national myopia. Worse again, to cry 'bully' when we openly resort to such underhanded tactics gives a sad glimpse of this State's inability to assume a grown-up country's responsibility.


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    #204
    edanto
    Registered Users Posts: 2,809 ✭✭✭edanto


    Cody Pomeray wrote: »

    Under the Finance Act 2010, Irish tax law openly gave the two fingers to the arms length principle in international best practice as regards transfer pricing rules between subsidiaries or otherwise related firms. Deloitte themselves looked at these legal provisions and gave the equivalent of a shrug and a smile in their follow up report.
    We are legal renegades in this regard, acting totally out of character both for ourselves and for the standards expected in the international community with whom we like to align ourselves.

    That's fascinating. I don't know the area well, but would like to read more, something like an analysis of that legislation explaining which bits of the law have the effect you described and how other jurisdictions are different.

    Would you know of any articles like that please?


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    #205
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    The integrity of the 'arms length' rule and counterparty documentation requirements are the issues which make the Irish transfer pricing rules easy to overcome and an aberration in international tax law; I don't know of any law firm who would explicitly state this, but you can read between the lines in reports like this from Arthur Cox, which gives a fairly good breakdown of the Finance Act 2010.

    http://www.arthurcox.com/uploadedFiles/Publications/Publication_List/Arthur%20Cox%20-%20The%20New%20Irish%20Transfer%20Pricing%20Regime,%20April%202010.pdf

    The Finance Act was an amazing creature. Although it claimed to 'tighten' Irish transfer pricing rules, as Arthur Cox point out, the rules were very much "light touch". But even more absurdly, the Act actually further relaxed irish provisions on dividends and royalties. In international tax law, our provisions on transfer pricing remain, therefore, exceptional.


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    #206
    gaius c
    Registered Users Posts: 3,528 ✭✭✭gaius c


    Duggys Housemate wrote: »
    Both McCain and Levin - a total idiot - have made their minds up.

    Maybe they are idiots but they are influential and small fry like us will get squashed as a result.


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    #207
    gaius c
    Registered Users Posts: 3,528 ✭✭✭gaius c


    maninasia wrote: »
    I don't know about the actual figures pertaining to the final rate of tax, but it is clear we are a big peg in the global tax avoidance structure, and our days in this game are numbered.
    They are numbered either by a leavening of the tax playing field in Europe (competition among nations) or by tightening up due to pressure from large countries such as US and Germany and even UK (which itself is also a major player in tax avoidance).

    Don't think so. Some of the political blustering is because Apple don't contribute enough to campaign warchests. Other companies that contribute are not getting hit to the same level.

    Once Apple play ball and grease some palms, they'll be off the hook and life will go on.


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    #208
    antoobrien
    Registered Users Posts: 6,106 ✭✭✭antoobrien


    maninasia wrote: »
    Of course transfer pricing wouldn't work without strange loopholes like Ireland allowing companies operating here to be tax non-resident everywhere else in the world!

    Transfer pricing has nothing to do with that being tax resident/non tax resident in a country, it is to do with transfers to legal entities in different jurisdictions for the apportioning of taxation. The google and apple cases have been badly distorted by the senate committee because of the existence of "non-resident" companies, however it is the tax resident companies that that pay the transfer prices to entities in other countries that have loopholes that allow cheap repatriation of funds (which Ireland doesn't).

    The real problem, is not the Irish rates or even rules, but loopholes like the the Dutch rules allowing funds to wash into their overseas holdings (same as the british ones) with little/no taxation paid, with the side effect that they have to apply the same rules to places like Berumda, which have little/no tax paid.

    Companies in the US must get agreement from the SEC for their transfer pricing schemes, so it's not like the Apple or Google schemes are secret in the first place.


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    #209
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    antoobrien wrote: »
    Companies in the US must get agreement from the SEC for their transfer pricing schemes, so it's not like the Apple or Google schemes are secret in the first place.
    What legal basis would the IRS have for coming after a subsidiary firm which is incorporated in Ireland, owned by a parent firm incorporated in Ireland, and managed and controlled outside of the US? Seriously.

    That's just daft. We would be the first to be screaming blue murder if the US tax authorities began appropriating the profits from such structures, and rightly so.

    Our transfer pricing rules are exceptional and out of keeping with our colleagues in the OECD. We need to stop blaming others for this, or at least have the balls to admit what we are facilitating.


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    #210
    antoobrien
    Registered Users Posts: 6,106 ✭✭✭antoobrien


    Cody Pomeray wrote: »
    What legal basis would the IRS have for coming after a subsidiary firm which is incorporated in Ireland, owned by a parent firm incorporated in Ireland, and managed and controlled outside of the US? Seriously.

    That's just daft. We would be the first to be screaming blue murder if the US tax authorities began appropriating the profits from such structures, and rightly so.

    Our transfer pricing rules are exceptional and out of keeping with our colleagues in the OECD. We need to stop blaming others for this, or at least have the balls to admit what we are facilitating.

    Oh for the love of....

    You do realise that the IRS levies taxes on worldwide earnings of us individuals (corporations are treated as individuals) right? This means that among other things every dual citizen has to file a tax return with the IRS as well as revenue. One of the the reason that TFAs exist is so that the likes of Apple & Google don't pay 12.5% on their operating profit here, then pay 30+% on the worldwide gross profit (which is what most US states use for calculating CT).

    One of the Apple companies registered here pays taxes in the US because of the structure of the overseas tax laws in the US (the profits generated are counted as investment income, which is subject to US taxation, whereas sales activities outside of the US are not). This fact is at best helping to cause at worst intentionally being used to confuse the issue.


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    #211
    Cody Pomeray
    Closed Accounts Posts: 3,648 ✭✭✭Cody Pomeray


    antoobrien wrote: »
    Oh for the love of....

    You do realise that the IRS levies taxes on worldwide earnings of us individuals (corporations are treated as individuals) right?
    I mentioned it in my previous post. I don't think you understand what I've just said.

    Nobody is questioning federal tax obligations. I am questioning the extent to which the IRS can credibly bring foreign corporations and their subsidiary firms under US tax jurisdiction i.e. there is a limit to the scope of a country's anti-deferral and TP rules which is usually met by the co-operation of other tax jurisdictions in the advanced world.

    So bearing that in mind, answer my question.

    what legal basis would the IRS have for coming after a subsidiary firm which is incorporated in Ireland, owned by a parent firm incorporated in Ireland, and managed and controlled outside of the US?


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