Ed Moloney sees a serious inconsistency in Irish taxation laws. Ed Moloney blogs @ The Broken Elbow.
The piece reproduced below from the website run by Independent North Dublin TD, Clare Daly was written before the the giant drug maker Pfizer merged with the Irish-based pharma company Allergan, a deal designed to allow Pfizer to take advantage of Ireland’s generous tax arrangements for multi-national corporations.
Deals negotiated by the Irish government with multi-nationals like Pfizer allow corporations to base their headquarters in Ireland in exchange for minimal tax bills. In return the corporation will build a small headquarters and employ perhaps at most a couple of hundred people while the exchequer lets the corporation off with a tax bill that is a fraction of what they should pay, and would pay elsewhere.
The deal with Apple, for instance, allowed the giant computer corporation to pay a mere 2 per cent tax on $74 billion of revenue between 2010 and 2013. All of Apple’s foreign revenues, some 60% of its total business in 2013 were routed through Ireland and escaped the tax rates that would be levied at the point of production. But Apple is not alone; Google enjoys similar tax benefits and now so does Pfizer and a score of other large companies.
Despite protestations to the contrary from the Irish government, this is legalised theft, in which the people of numerous European and other countries are defrauded of revenues that could help to pay for roads, hospitals, schools and so on.
But it’s okay because some politicians and bureaucrats have made it okay.
Ireland is a tax haven for wealthy corporations in all but name.
Tom ‘Slab’ Murphy did the same as Apple, Google and Pfizer but on a tiny scale in comparison and without the approval of his government (although allegedly on foot of an assurance from “the architects of the peace process” that he would not be pursued.)
Why then are people in Ireland outraged by ‘Slab’s’ minor misdemeanor (minor, in comparison to Apple’s crimes) but quite content to allow Apple, Google and Pfizer to defraud millions of people of billions in tax revenues?
Surely, this is what should be exercising Ireland at the moment, not ‘Slab’s’ comparatively modest book-keeping excesses in the wilds of South Armagh.
Here is Clare Daly’s piece. Enjoy:
Is Ireland a Tax Haven for Corporations?
May 29, 2013
posted by dail | on Economy, International |
There has been a clear contradiction in the last week between international sources and the Irish government in relation to Ireland’s tax status. On the one hand we have the Taoiseach purporting that Ireland does not “do special tax-rate deals with companies”. Tanaiste, Eamon Gilmore, has been adamant that Ireland’s corporate tax structure remains transparent. He has also toed the Taoiseach’s line that Ireland does not negotiate favourable or particular rates with any corporation.
In contrast both sides of the Atlantic have taken issue with Ireland’s tax structures. Congressional hearings in the United States, investigating Apple’s offshore taxation policies, found that Apple had negotiated favourable tax conditions when setting up in Ireland in the early 80’s. More startling perhaps was the revelation that Apple had paid 2% on €74 Billion worth of revenue in the last three years. Clearly such figures would suggest discrepancy in the Government’s adamant assertion that Ireland’s corporate tax structures do not constitute ‘Tax Haven’ status.
Foreign sales, accounting for 60% of Apple’s profits, are routed through Irish subsidiaries and taxed nowhere. Apple’s Irish holding company which has no employees at the top of its foreign operations also serves as a group finance company. Apple Inc., the U.S. parent of the whole group, pays U.S. tax on the investment earnings of this company. In other words the holding company pays no tax to any government, and has not paid tax for five years.
Other multinational’s such as Google appear to have also taken advantage of the favourable Irish situation. This has been done through the setting up of multiple subsidiaries in Ireland, while still managing these subsidiaries from abroad. Such a situation blurs the legal clarity as to where these subsidiaries are registered and eligible for tax purposes. The outcome of which is that we now have U.S politician such as Democratic Senator Carl Levin saying that companies should not be able to “shift its value to a tax haven which is what Ireland is”.
In the United Kingdom there has been criticism of Google’s method of channeling profits and sales once more through Irish subsidiaries. This practice allows the company to avail of Ireland’s tax regime.
The injustice of all of this is highlighted by recently published research by All Ireland Research Observatory (AIBO), which has noted the stark contrast of tax burden in Ireland. The change in the relative proportion of different tax receipts between 2006 and 2012 shows that income tax has grown from 27.2% of all tax receipts in 2006 to 41.4% in 2012, VAT has dropped from 29.5% to 27.8%, excise duty remains relatively unchanged at 12.3% to 12.8%, while corporation tax has fallen to 11.5% from 14.7%, and capital gains tax has fallen to 1.1% from 6.8%.
Basically the burden of tax receipts has strongly shifted to individual income tax and the trend on corporation tax has been declining since 2002 despite the boom years and the fact that since 2002 the volume and value of exports has grown. In other words the rich have gotten richer while everyone else has shouldered the tax burden for the nation.
The introduction of the local property tax is yet another tax burden on individual families. While the tax burden remains as low as 11.5% for corporations, a full and open debate about raising the tax share for corporations in a real attempt to share the load in an equitable fashion is long overdue.