10 ms·

Ireland to close corporate tax loophole used by Google and others

74 points by llamataboot 12y ago

tehwebguy 12y ago
> Starting Jan. 1, no companies will be allowed to set up a Double Irish scheme. Ireland also will phase it out through 2020 for companies that already have one, Noonan said. I wonder if there will be a mad dash to set up corps in Ireland over the next few months.
- mey 12y ago
  5 years of tax loop holes may make it worth it.
- anigbrowl 12y ago
  Acquisitions seem like a more likely approach.
droopyEyelids 12y ago
Sort of seems like they're pulling up the ladder to the benefit of established companies and the detriment of newcomers.
- Dylan16807 12y ago
  Phasing it out in 5 years seems pretty fast to me in governmental terms, how is this pulling up the ladder?
- nness 12y ago
  They are phasing out the existing schemes, and as mentioned, five years is a very fast turn around for a country to make some big changes to its taxation law.
mindcrime 12y ago
This makes me sad on so many levels. One, because it's sad that the US government has so much ability to force other sovereign entities to bend to its will, and two, because paying more taxes to the US government is never a good thing. I personally support anybody who finds new and creative ways to avoid sending tax dollars to the USG... after all, not everybody wants to fund the US's empire building overseas wars, torture camps, surveillance infrastructure, propaganda machine, and massive money-wasting bureaucracy. > As we've always said, it's for governments to decide the law and for companies to comply with it That is so fatalistic and depressing. Everybody should feel empowered to work to shape what "the law" is. Personally, I want society's notion of "the law" rolled back to just how Bastiat[1] defined it: "What, then, is law? It is the collective organization of the individual right to lawful defense. " I'm also reminded of what Bastiat said about lawful plunder and the perversion of the law: But, generally, the law is made by one man or one class of men. And since law cannot operate without the sanction and support of a dominating force, this force must be entrusted to those who make the laws. This fact, combined with the fatal tendency that exists in the heart of man to satisfy his wants with the least possible effort, explains the almost universal perversion of the law. Thus it is easy to understand how law, instead of checking injustice, becomes the invincible weapon of injustice. It is easy to understand why the law is used by the legislator to destroy in varying degrees among the rest of the people, their personal independence by slavery, their liberty by oppression, and their property by plunder. This is done for the benefit of the person who makes the law, and in proportion to the power that he holds. [1]: http://bastiat.org/en/the_law.html http://bastiat.org/en/the_law.html
- bogomipz 12y ago
  Do you realize that Google, Facebook, Oracle et al. are US companies? These companies all benefited from the stable business climate that the US government largely provides(stable judicial system, Delaware Companies, a stable financial system, State University systems that provide research grants that made Google possible in first place etc.) So why should these Corporations that benefitted from that not pay their fare share of taxes? I hate pay taxes too but I pay them and I understand that they pay for services I benefit from. You sound both naive and uninformed. Its a farce that American companies that make billions pay almost no tax on those profits while us little people shoulder the burden. Did you actually read the article?
  - briandh 12y ago
    The "fair share" rhetoric so frequently deployed in these contexts would be more convincing if US corporate tax policy was more in line with international norms and if less tax revenue funded policies ranging from wasteful to downright immoral.
    - Retric 12y ago
      'Normalizing' taxes with the rest of the world would be a massive taxes increase on huge numbers of companies. We might have a high nominal rate, but companies can often get vary low effective tax rates. Arguably, what we need is a corporate AMT and a lower top tax bracket. Otherwise some companies focus on paying zero taxes where others simply focus on being profitable.
      - briandh 12y ago
        It's not just the nominal rate. The average effective corporate tax rate is also quite a bit higher for the US than other developed countries; according to a report by PricewaterhouseCoopers and the World Bank, 27.9% versus an OECD average of 15.9%. [1 citing 2] The right wing think-tank AEI reported a smaller disparity of about 9% a few years earlier. [3] For what it's worth, these rates are fairly variable over the years. So "huge numbers" seems like quite a stretch. Moreover, I used the broader term "policies" rather than "rates" for a reason. The US's worldwide taxation scheme, for instance, is in itself problematic. [1] http://barbwire.com/2014/10/15/analysis-are-us-corporate-taxes-really-the-highest-in-the-world/ http://barbwire.com/2014/10/15/analysis-are-us-corporate-tax... [2] http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Special-Reports/Paying-Taxes-2014.pdf http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/... [3] http://www.aei.org/article/economics/fiscal-policy/taxes/report-card-on-effective-corporate-tax-rates/ http://www.aei.org/article/economics/fiscal-policy/taxes/rep...
funkyy 12y ago
I wonder what UK, Germany etc promised to Ireland in exchange. The tax debate was strong since more than a decade and it was even stronger during the default of Ireland. All talks before have failed - I cant imagine what EU had to promise to them to change their minds...
- alphadevx 12y ago
  Ireland never defaulted.
  - Qzmp 12y ago
    Not only did Ireland not default but it was strongarmed by the ecb into repaying loans foreign banks had made to irish banks. The reason for this was to prevent 'contagion' ie to save the european banking system. Ireland was later given some assurances about being looked after for doing this which have so far not been backed up
- barrkel 12y ago
  http://www.irishtimes.com/news/ireland/irish-news/no-one-way-street-on-irish-debt-as-far-as-germany-is-concerned-1.1959616 http://www.irishtimes.com/news/ireland/irish-news/no-one-way...
Afforess 12y ago
This is unfortunate. Corporate taxation is double taxation in the first place, and silly. Corporate profits are already taxed (in the form of dividends/capital gains to shareholders, and income tax to employees), there is no reason to tax them twice. Further, Corporate taxes make up a pittance of the total revenue by the federal US government. America wastes too much time worrying over the relatively tiny amount of corporate tax dodging when it spends trillions elsewhere. America would be much better off without corporate taxes. http://en.wikipedia.org/wiki/Dividend_tax#Arguments_against http://en.wikipedia.org/wiki/Dividend_tax#Arguments_against
- timedoctor 12y ago
  Double taxation of corporate taxes exists in the US but it's not the case in every country. For example in Australia you get a personal tax credit for any corporate taxes that you pay. This is the reason why a lot of people choose an LLC in the US.
  - kanwisher 12y ago
    S corps don't have double taxation either. Small companies where you would get tax credit shouldn't really pay much in corporate taxes since all the money goes to the owners at end of each year.
- blackguardx 12y ago
  Why tax people's labor instead?
- dlp211 12y ago
  http://gocomics.typepad.com/.a/6a00d8341c5f3053ef017ee5819764970d-pi http://gocomics.typepad.com/.a/6a00d8341c5f3053ef017ee581976...
- saalweachter 12y ago
  Piddling? 9% of the 2010 tax revenues is about 1.5% of the 2010 GDP. US capital gains taxes that year were about 0.3% of GDP, with a top tax rate of about 15%[1]. To make up the lost revenue from eliminating corporate taxes, you would need to raise the long term capital gains tax rate six-fold, to 90%. [1] http://www.forbes.com/sites/realspin/2013/09/09/to-raise-the-capital-gains-tax-rate-is-to-not-raise-capital-gains-taxes/ http://www.forbes.com/sites/realspin/2013/09/09/to-raise-the...
zurn 12y ago
I wonder if the refusal of other EU states to help with the banking crisis had something to do with Ireland's tax haven antics. Ireland got a worse deal than the other EU crisis countries.
- alphadevx 12y ago
  The ECB bailed out the Irish to save the European banking system, and ultimately the Euro, that was exposed to Irish bad debt via loans made to Irish banks by other European banks. The bailout was in the form of loans at a punitive interest rate, even the IMF (also part of the bailout program), seemed kind in comparison. Ultimately the ECB eased up when it become clear that Ireland was doing a sterling job of turning itself around, making heavy cuts and reforms in the process, but the growing impression I have of the EU is that the rules are for the little countries, when you look for example at the debt problems and flouting of the European Fiscal Compact by Italy and France presently. The lack of solidarity throughout this financial crisis has been telling, and will leave lasting resentments (just ask your Greek, Irish, or Portuguese friends).
  - zurn 12y ago
    Well, Ireland took a bad deal from the ECB, nationalizing the bank imposion and imposing punishing austerity measures (executed with sterling enthusiasm as you say) instead of doing something like Iceland. It's more Ireland bailing out the ECB, courtesy of hapless and/or corrupt political leadership. Even the traditionally right-wing IMF turned around a while ago and has been consistently calling out Europe's austerity enthusiasm as damaging. See eg. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/an-amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/ http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/a... Some in the austerity movement have since been parading Ireland as an example of the success of their receipe for some reason. But: http://www.nytimes.com/2014/01/11/opinion/irelands-rebound-is-european-blarney.html http://www.nytimes.com/2014/01/11/opinion/irelands-rebound-i...
    - alphadevx 12y ago
      I agree with you on the treatment of Ireland, and the subsequent criticism of the country over corporate tax issues, often implying that the country was implicit in this, was rubbing salt in the wounds. Those tax structures were in place long before the crisis. I'm torn on whether Iceland's approach was better however (for them), time will tell.
circlefavshape 12y ago
Just FYI - as far as I understand it, the "double Irish" works because in the US you are tax-resident if you incorporate in the US, while in Ireland you are tax-resident if you do business in Ireland So if you incorporate in Ireland but do your business in the US you are tax-resident nowhere, and naturally corporations exploit this
garrettheaver 12y ago
As someone who works in the tech sector in Ireland I personally think now is the right time to be closing this particular loophole. It has run its useful course. It has become a mechanism for huge profits to be shuffled around virtually untaxed by organisations with a scale large enough to employ teams simply to exploit it. It's not a realistic proposition for SMEs to manage the level of international complexity it involves, particularly when you include the Dutch sandwich. It's an unfair and unbalanced advantage to large multinationals. I disagree with others that companies should not have to pay corporation tax. I don't believe it is double taxation. Corporation tax is not charged on employee income, thats an operational expense and the tax on income is paid by the employee relative to their own tax status. Also, tax on dividends is effectively a personal income tax. Dividend tax is not liable on dividends paid to other Irish resident companies, amongst many other sensible exemptions. Corporation tax is charged on the trading profit of a corporate entity, not its revenue. Also, it's worth pointing out that if a company has paid corporation tax in previous years in Ireland and then reports a loss they may be entitled to a refund. A side note on FDI implications. Yes the "double Irish" has played a role but it's by no means the only reason large multinationals locate here. The new "Knowledge Box" structure in conjunction with our relatively low corporate tax rate of 12.5%, the tax credits for Research and Development related activities, our membership of the EU and Eurozone, the ability of companies to deal directly with the highest levels of government, the fact we natively speak English, the fact we're culturally similar to the US and UK, the fact we have a timezone which overlaps for at least part of the day with almost everywhere in the US and that we have a statistically young and educated workforce all contribute to attracting tech companies here. Thats before we even consider the efforts of the IDA (and Enterprise Ireland at a domestic level) who IMHO are superb national assets. I think that if we can restructure our tax rules so that "Ireland Inc" gains even a fraction more revenue from the multinationals operating here whilst retaining our international competitiveness, then it's unquestionably the smart thing to do.
anonbanker 12y ago
This is all just further fallout from Ireland's stance on the Lisbon treaty, which led Intel, HP, and Microsoft to close up shop within a month of each other. I'm very glad the loophole is being closed, but I don't think Ireland's tech sector will ever recover.
- barrkel 12y ago
  This is news to me. Do you have references? Intel, MS and HP are all still present. HP has downsized in Ireland in the past, Galway in particular, but that's a chain reaction from it being Digital, then Compaq. But they still have a presence there too. Dell left Ireland, but I don't recall any connection being made with the Lisbon treaty vote at the time, and don't see much evidence in searches. I think it was more down to newly-joined Poland being cheaper.

74 points by llamataboot 12y ago

> Starting Jan. 1, no companies will be allowed to set up a Double Irish scheme. Ireland also will phase it out through 2020 for companies that already have one, Noonan said. I wonder if there will be a mad dash to set up corps in Ireland over the next few months.

mey 12y ago
5 years of tax loop holes may make it worth it.
anigbrowl 12y ago
Acquisitions seem like a more likely approach.

droopyEyelids 12y ago

Sort of seems like they're pulling up the ladder to the benefit of established companies and the detriment of newcomers.

Dylan16807 12y ago
Phasing it out in 5 years seems pretty fast to me in governmental terms, how is this pulling up the ladder?
nness 12y ago
They are phasing out the existing schemes, and as mentioned, five years is a very fast turn around for a country to make some big changes to its taxation law.

mindcrime 12y ago

This makes me sad on so many levels. One, because it's sad that the US government has so much ability to force other sovereign entities to bend to its will, and two, because paying more taxes to the US government is never a good thing. I personally support anybody who finds new and creative ways to avoid sending tax dollars to the USG... after all, not everybody wants to fund the US's empire building overseas wars, torture camps, surveillance infrastructure, propaganda machine, and massive money-wasting bureaucracy. > As we've always said, it's for governments to decide the law and for companies to comply with it That is so fatalistic and depressing. Everybody should feel empowered to work to shape what "the law" is. Personally, I want society's notion of "the law" rolled back to just how Bastiat[1] defined it: "What, then, is law? It is the collective organization of the individual right to lawful defense. " I'm also reminded of what Bastiat said about lawful plunder and the perversion of the law: But, generally, the law is made by one man or one class of men. And since law cannot operate without the sanction and support of a dominating force, this force must be entrusted to those who make the laws. This fact, combined with the fatal tendency that exists in the heart of man to satisfy his wants with the least possible effort, explains the almost universal perversion of the law. Thus it is easy to understand how law, instead of checking injustice, becomes the invincible weapon of injustice. It is easy to understand why the law is used by the legislator to destroy in varying degrees among the rest of the people, their personal independence by slavery, their liberty by oppression, and their property by plunder. This is done for the benefit of the person who makes the law, and in proportion to the power that he holds. [1]: http://bastiat.org/en/the_law.html http://bastiat.org/en/the_law.html

bogomipz 12y ago
Do you realize that Google, Facebook, Oracle et al. are US companies? These companies all benefited from the stable business climate that the US government largely provides(stable judicial system, Delaware Companies, a stable financial system, State University systems that provide research grants that made Google possible in first place etc.) So why should these Corporations that benefitted from that not pay their fare share of taxes? I hate pay taxes too but I pay them and I understand that they pay for services I benefit from. You sound both naive and uninformed. Its a farce that American companies that make billions pay almost no tax on those profits while us little people shoulder the burden. Did you actually read the article?
- briandh 12y ago
  The "fair share" rhetoric so frequently deployed in these contexts would be more convincing if US corporate tax policy was more in line with international norms and if less tax revenue funded policies ranging from wasteful to downright immoral.
  - Retric 12y ago
    'Normalizing' taxes with the rest of the world would be a massive taxes increase on huge numbers of companies. We might have a high nominal rate, but companies can often get vary low effective tax rates. Arguably, what we need is a corporate AMT and a lower top tax bracket. Otherwise some companies focus on paying zero taxes where others simply focus on being profitable.
    - briandh 12y ago
      It's not just the nominal rate. The average effective corporate tax rate is also quite a bit higher for the US than other developed countries; according to a report by PricewaterhouseCoopers and the World Bank, 27.9% versus an OECD average of 15.9%. [1 citing 2] The right wing think-tank AEI reported a smaller disparity of about 9% a few years earlier. [3] For what it's worth, these rates are fairly variable over the years. So "huge numbers" seems like quite a stretch. Moreover, I used the broader term "policies" rather than "rates" for a reason. The US's worldwide taxation scheme, for instance, is in itself problematic. [1] http://barbwire.com/2014/10/15/analysis-are-us-corporate-taxes-really-the-highest-in-the-world/ http://barbwire.com/2014/10/15/analysis-are-us-corporate-tax... [2] http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/Documents/Special-Reports/Paying-Taxes-2014.pdf http://www.doingbusiness.org/~/media/GIAWB/Doing%20Business/... [3] http://www.aei.org/article/economics/fiscal-policy/taxes/report-card-on-effective-corporate-tax-rates/ http://www.aei.org/article/economics/fiscal-policy/taxes/rep...

funkyy 12y ago

I wonder what UK, Germany etc promised to Ireland in exchange. The tax debate was strong since more than a decade and it was even stronger during the default of Ireland. All talks before have failed - I cant imagine what EU had to promise to them to change their minds...

alphadevx 12y ago
Ireland never defaulted.
- Qzmp 12y ago
  Not only did Ireland not default but it was strongarmed by the ecb into repaying loans foreign banks had made to irish banks. The reason for this was to prevent 'contagion' ie to save the european banking system. Ireland was later given some assurances about being looked after for doing this which have so far not been backed up
barrkel 12y ago
http://www.irishtimes.com/news/ireland/irish-news/no-one-way-street-on-irish-debt-as-far-as-germany-is-concerned-1.1959616 http://www.irishtimes.com/news/ireland/irish-news/no-one-way...

Afforess 12y ago

This is unfortunate. Corporate taxation is double taxation in the first place, and silly. Corporate profits are already taxed (in the form of dividends/capital gains to shareholders, and income tax to employees), there is no reason to tax them twice. Further, Corporate taxes make up a pittance of the total revenue by the federal US government. America wastes too much time worrying over the relatively tiny amount of corporate tax dodging when it spends trillions elsewhere. America would be much better off without corporate taxes. http://en.wikipedia.org/wiki/Dividend_tax#Arguments_against http://en.wikipedia.org/wiki/Dividend_tax#Arguments_against

timedoctor 12y ago
Double taxation of corporate taxes exists in the US but it's not the case in every country. For example in Australia you get a personal tax credit for any corporate taxes that you pay. This is the reason why a lot of people choose an LLC in the US.
- kanwisher 12y ago
  S corps don't have double taxation either. Small companies where you would get tax credit shouldn't really pay much in corporate taxes since all the money goes to the owners at end of each year.
blackguardx 12y ago
Why tax people's labor instead?
dlp211 12y ago
http://gocomics.typepad.com/.a/6a00d8341c5f3053ef017ee5819764970d-pi http://gocomics.typepad.com/.a/6a00d8341c5f3053ef017ee581976...
saalweachter 12y ago
Piddling? 9% of the 2010 tax revenues is about 1.5% of the 2010 GDP. US capital gains taxes that year were about 0.3% of GDP, with a top tax rate of about 15%[1]. To make up the lost revenue from eliminating corporate taxes, you would need to raise the long term capital gains tax rate six-fold, to 90%. [1] http://www.forbes.com/sites/realspin/2013/09/09/to-raise-the-capital-gains-tax-rate-is-to-not-raise-capital-gains-taxes/ http://www.forbes.com/sites/realspin/2013/09/09/to-raise-the...

zurn 12y ago

I wonder if the refusal of other EU states to help with the banking crisis had something to do with Ireland's tax haven antics. Ireland got a worse deal than the other EU crisis countries.

alphadevx 12y ago
The ECB bailed out the Irish to save the European banking system, and ultimately the Euro, that was exposed to Irish bad debt via loans made to Irish banks by other European banks. The bailout was in the form of loans at a punitive interest rate, even the IMF (also part of the bailout program), seemed kind in comparison. Ultimately the ECB eased up when it become clear that Ireland was doing a sterling job of turning itself around, making heavy cuts and reforms in the process, but the growing impression I have of the EU is that the rules are for the little countries, when you look for example at the debt problems and flouting of the European Fiscal Compact by Italy and France presently. The lack of solidarity throughout this financial crisis has been telling, and will leave lasting resentments (just ask your Greek, Irish, or Portuguese friends).
- zurn 12y ago
  Well, Ireland took a bad deal from the ECB, nationalizing the bank imposion and imposing punishing austerity measures (executed with sterling enthusiasm as you say) instead of doing something like Iceland. It's more Ireland bailing out the ECB, courtesy of hapless and/or corrupt political leadership. Even the traditionally right-wing IMF turned around a while ago and has been consistently calling out Europe's austerity enthusiasm as damaging. See eg. http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/an-amazing-mea-culpa-from-the-imfs-chief-economist-on-austerity/ http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/03/a... Some in the austerity movement have since been parading Ireland as an example of the success of their receipe for some reason. But: http://www.nytimes.com/2014/01/11/opinion/irelands-rebound-is-european-blarney.html http://www.nytimes.com/2014/01/11/opinion/irelands-rebound-i...
  - alphadevx 12y ago
    I agree with you on the treatment of Ireland, and the subsequent criticism of the country over corporate tax issues, often implying that the country was implicit in this, was rubbing salt in the wounds. Those tax structures were in place long before the crisis. I'm torn on whether Iceland's approach was better however (for them), time will tell.

circlefavshape 12y ago

Just FYI - as far as I understand it, the "double Irish" works because in the US you are tax-resident if you incorporate in the US, while in Ireland you are tax-resident if you do business in Ireland So if you incorporate in Ireland but do your business in the US you are tax-resident nowhere, and naturally corporations exploit this

garrettheaver 12y ago

As someone who works in the tech sector in Ireland I personally think now is the right time to be closing this particular loophole. It has run its useful course. It has become a mechanism for huge profits to be shuffled around virtually untaxed by organisations with a scale large enough to employ teams simply to exploit it. It's not a realistic proposition for SMEs to manage the level of international complexity it involves, particularly when you include the Dutch sandwich. It's an unfair and unbalanced advantage to large multinationals. I disagree with others that companies should not have to pay corporation tax. I don't believe it is double taxation. Corporation tax is not charged on employee income, thats an operational expense and the tax on income is paid by the employee relative to their own tax status. Also, tax on dividends is effectively a personal income tax. Dividend tax is not liable on dividends paid to other Irish resident companies, amongst many other sensible exemptions. Corporation tax is charged on the trading profit of a corporate entity, not its revenue. Also, it's worth pointing out that if a company has paid corporation tax in previous years in Ireland and then reports a loss they may be entitled to a refund. A side note on FDI implications. Yes the "double Irish" has played a role but it's by no means the only reason large multinationals locate here. The new "Knowledge Box" structure in conjunction with our relatively low corporate tax rate of 12.5%, the tax credits for Research and Development related activities, our membership of the EU and Eurozone, the ability of companies to deal directly with the highest levels of government, the fact we natively speak English, the fact we're culturally similar to the US and UK, the fact we have a timezone which overlaps for at least part of the day with almost everywhere in the US and that we have a statistically young and educated workforce all contribute to attracting tech companies here. Thats before we even consider the efforts of the IDA (and Enterprise Ireland at a domestic level) who IMHO are superb national assets. I think that if we can restructure our tax rules so that "Ireland Inc" gains even a fraction more revenue from the multinationals operating here whilst retaining our international competitiveness, then it's unquestionably the smart thing to do.

anonbanker 12y ago

This is all just further fallout from Ireland's stance on the Lisbon treaty, which led Intel, HP, and Microsoft to close up shop within a month of each other. I'm very glad the loophole is being closed, but I don't think Ireland's tech sector will ever recover.

barrkel 12y ago
This is news to me. Do you have references? Intel, MS and HP are all still present. HP has downsized in Ireland in the past, Galway in particular, but that's a chain reaction from it being Digital, then Compaq. But they still have a presence there too. Dell left Ireland, but I don't recall any connection being made with the Lisbon treaty vote at the time, and don't see much evidence in searches. I think it was more down to newly-joined Poland being cheaper.