Saturday, February 8, 2014

8/2/2014: Yahoo's Tax Base (err… Optimisation) is Moving to Ireland

Some slowdown in the tax haven news for Ireland recently and now a return back:

Yahoo! Inc will shift its European tax base to Ireland from Switzerland, due to mounting pressures on Swiss tax codes.

Aptly, French authorities, already rather irate about Irish tax loophole known as Double-Irish are fuming:

And of course our own leaders are denying… citing our tight to have a low tax rate... as if someone is challenging the rate. Nothing like 'deflect and deny' strategy at work.

You can track some of the top stories on Irish tax regime in the news starting from here:
or by searching this blog for 'tax haven'.

As an aside: 

There is an interesting dichotomy being played out across Irish policy and state institutions and the MNCs when it comes to the Double Irish loophole in the tax code.

The dichotomy is based on the argument that since Double Irish is not illegal, there is nothing wrong with it.

Let's quickly consider this argument: MNCs and the Irish State promote good corporate 'citizenship' via extensive deployment of and support for Corporate Social Responsibility programmes. So far so good.

Via Double Irish, the same MNCs with the blessing of the Irish State are at the same time reducing tax payments in the countries where the MNCs use public infrastructure, institutions and benefit from returns to social capital that are paid for, in large, by taxes. When this is done by locating actual value-added activities in a country, like Ireland, with low tax rate, there is a reduction in demand for the above resources in other countries (e.g. MNCs employees use these services and returns in Ireland instead of, say, France). But when it is done via loopholes and transfer pricing, the employees of MNCs are staying in the locations where the value-added is created (e.g. France), while their tax base is partially migrating to an arbitrary and unrelated to value-added activities jurisdiction (e.g. Ireland).

Thus, the function of these loopholes is to transfer resources from the activity-linked jurisdiction to Ireland. It is a zero sum game (no new value is created) and it is a beggar thy neighbour system (one jurisdiction gains at the expense of the other). In simple terms, whether it is legal or not, it is wrong.

So how come the executives of the companies and the State officials who so loudly extol the virtues of corporate citizenship so quickly forget the said virtues and run for the cover of legal codes when it comes to tax regime? Is ti because the price of doing things right is different from the price of doing things legally?

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