26/8/2014: Betting on Corporate Tax Inversions? Ireland almost made the top of this strategy...

These haven't been slow-days-of-summer on the Irish corporate tax reputation front.

Few weeks ago, the story of Microsoft admission of holding a USD92bn large stash of cash in locations, including Ireland, has been put out to air: http://billmoyers.com/2014/08/23/microsoft-admits-keeping-92-billion-offshore-to-avoid-paying-29-billion-in-us-taxes/

And today, an interesting disclosure on foot of Ireland-free tax inversion deal by the Burger King popped up: a fund investing in tax inversion companies https://www.motifinvesting.com/motifs/tax-inversion-targets#/overview where Ireland is the second largest exposure after the UK...

These folks should list on Irish Stock Exchange... oh, poor Bermuda and Bahamas, obviously lacking in that skills-and-talent competitiveness we have so much of.

Time for another 'We Are Not a Tax-Haven' white paper from one of the Departments...

You can track my notes on the topic starting from here: http://trueeconomics.blogspot.ie/2014/08/382014-this-week-in-corporate-not-tax.html

3/8/2014: This Week in Corporate 'Not Tax Haven' News

Some links from recent press articles on Irish Corporate Tax regime:

• BloombergView on the U.S. politicians' logic concerning the issue of tax breaks: http://www.bloombergview.com/articles/2014-07-28/by-lew-s-logic-all-tax-breaks-are-unpatriotic With respect to Ireland, it no longer matters if there is any logic whatsoever to the U.S. Government and senior officials' statements on the matter. What does matter, however, is that we are now being increasingly / more frequently presented as an international tax arbitrage facilitators. That is the reputational cost of our decades-long policies. The real economic cost of our tax policies is that we no longer have any meaningful strategy or long-term outlook on manufacturing, productivity growth and/or investment. Instead, we have a strategy that relies, in part explicitly, but in full implicitly, on beggar-thy-neighbour tax arbitrage facilitation. 
• Vox provides its own musings on the matter in "Tax inversions: 9 questions about the hottest new trend in tax avoidance" article. It describes tax inversion with a direct reference to Ireland (and Switzerland) as: "So a company whose business is subject to relatively heavy taxation in one country (say, the United States) can buy a smaller company located in a country where its business is taxed at a lower rate (say, Ireland) and then declare the merged entity to be domiciled in the low-tax country for the purposes of taxation. Walgreens, for example, is in the process of buying a Swiss company called Alliance Boots and is considering re-labelling itself as a subsidiary of the Swiss company to pay lower Swiss tax rates." This is not a debate about Double-Irish scheme or other aggressive tax optimisation loopholes, but about the actual headline tax rate - the sacred Irish cow of 12.5%. And this is serious, real danger to Ireland, as we have no meaningful industrial / manufacturing / services etc growth pillars outside our reliance on tax-attracted FDI. The full article is here: http://www.vox.com/2014/7/28/5944263/corporate-tax-inversions-deserters-vs-economic-patriotism
• Reuters wades in with an excellent piece on the potential costs of Ireland losing the war on international tax regime. "Ireland has too much to lose to deter U.S. companies re-homing" (http://www.reuters.com/article/2014/07/30/us-usa-tax-ireland-analysis-idUSKBN0FZ1FA20140730?feedType=RSS&feedName=businessNews) also dives into the issue of our 12.5% rate. "It would be difficult to block inversions without jeopardizing the broader benefits," says the author. Which I agree with. We have lost the leadership momentum in the global debate on tax optimisation and now our headline rate is firmly in the crosshair. But our delirious tax advisory experts are still not getting the picture: ""It's a dangerous road to go down," said Kevin McLoughlin, who as head of tax at accounting firm Ernst & Young… I really struggle to see how they can legislate against companies choosing Ireland as a destination in a way that's confined only to these types of situations. I think it's extremely unlikely because I just don't know what they can do." Well, the problems of legislating outside of Ireland may be tough, but I'd love to see Kevin struggling to fill the potential void left in our economy if the legislators abroad do succeed in legislating on the matter. Somehow, I doubt EY will be that creative with coming up with economic development strategy ideas as they are with coming up with tax optimisation ideas.
• Robert Reich writes in Salon.com that “American” corporations are a farce (http://www.salon.com/2014/07/29/robert_reich_american_corporations_are_a_farce_partner/) and names a list of the Irish-based European operations of blue-chip corporates as the "American farce". Reich pushes the agenda of tax optimisation to R&D supports… which is… oh, surprise surprise, at the top of Irish Government agenda… Now, is there an area of tax arbitrage we haven't captured yet?..
• Last, but not least, remember the solemn, stern statements from Irish senior public figures arguing that Ireland does not promote itself as a tax arbitrage play, but rather focuses on 'human capital', 'regulatory environment' (aka - regulatory arbitrage) and 'headline rate of tax' (aka - inversions-enabling rate)? Well, they don't have to - instead of senior political and state leaders, we have a swarm of senior lawyers and accountants and corporate finance specialists and… to do the bidding, as reported by Reuters in "Irish, Dutch, UK law firms in tax inversion beauty contest in U.S." (http://www.reuters.com/article/2014/07/24/deals-taxinversions-lawfirms-idUSL2N0PK1L820140724).

Time to cut some FDI ribbons, Ministers…

Note: you can track previous links and discussions relating to Irish corporate tax policies and debates by using 'search' option for 'corporate tax' on this blog or by following blog-links from here: http://trueeconomics.blogspot.ie/2014/07/2672014-this-week-in-corporate-not-tax.html

26/12/2013: Italy's Illegal Measure Takes a Shot at Corporate Tax Optimisation

Just when I thought we are safe from the 'Tax Haven Ireland' stories at least until the end of holidays, the latest instalment in the saga arrived… this time from Italy.

With this in mind, let's update the string of links covering the topic. You can follow earlier links from here: http://trueeconomics.blogspot.ie/2013/12/8122013-is-ireland-also-german-federal.html (see the bottom of the post).

I wrote before about Italy's plans to curb tax optimisation by web-based MNCs. Here's the latest announcement on the topic: http://www.bloomberg.com/news/2013-12-23/italy-approves-google-tax-on-internet-companies.html

So Italy now passed the 'Google Tax'. It aims to collect USD1.35 billion or EUR1 billion in tax revenues. The tax is utterly illegal under the EU rules.

The 1957 Treaty (of Rome) establishing a European Economic Community (EEC) Part 1, Art.3(c): “the abolition, as between Member States, of obstacles to freedom of movement for persons, services and capital”.
The Treaty (of Lisbon) on the Functioning of the European Union (TFEU): Art. 26 (2) “the internal market shall comprise an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured…"

The point, however, is that the Italian parliament measure is putting added pressure on  the OECD, the EU and the national governments to deal with the problem of aggressive tax optimisation practices of some MNCs.

8/12/2013: Is Ireland also a German (Federal) Not-a-Tax-Haven?

Irish tax system continues to percolate through international news. Here are two recent articles:

1. ZDNet coverage of Tech sector corporate tax payments in Ireland: http://www.zdnet.com/representation-without-taxation-tech-giants-and-their-loopy-business-of-innovative-tax-avoidance-7000023539/
2. Irish Times story on Germany official use of Irish tax system for balancing the budget: www.irishtimes.com/business/economy/german-ministers-used-irish-shell-firms-to-balance-budget-1.1613637

Which of course begs a suggestion: may be Ireland is not a corporate tax haven... afterall, Germany is not a corporation...

You can track series of articles featuring Irish tax regime in international media starting from this link: http://trueeconomics.blogspot.ie/2013/10/28102013-back-in-news-double-irish.html

16/11/2013: Apple under fire in Italy... thanks to its Irish tax practices

More unpleasant tax news flows for Ireland: Italians continue their campaign against low tax payments by predominantly US MNCs. As I remarked before (here: http://trueeconomics.blogspot.ie/2013/11/14112013-with-banks-or-without-things.html) this is a misguided campaign based on fiscal desperation, but it does not bode well for us here in Ireland to see the country name being firmly linked with what our 'partners' in Europe are not exactly happy...
http://news.sky.com/story/1168449/apple-faces-italy-tax-fraud-inquiry

You can track series of links on the subject of Ireland's corporate tax systems starting from here: http://trueeconomics.blogspot.ie/2013/10/28102013-back-in-news-double-irish.html

28/10/2013: Back in the News: Double-Irish (non)Tax Haven

Starting the week on the right footing... Ireland's tax regime back in the news:

• Bloomberg inforgraphic showing clearly the disconnect between our fabulously 'active' corporate profitability and our anaemically limp jobs creation amongst Ireland-based US MNCs: http://www.bloomberg.com/infographics/2013-10-28/u-s-profits-in-ireland-pile-up.html
• More Bloomberg reporting: an extensive profiling of the lead tax specialist behind Ireland's infamous double-Irish: http://www.bloomberg.com/news/2013-10-28/man-making-ireland-tax-avoidance-hub-globally-proves-local-hero.html

And note: this is not tax haven, although it is, according to the specialist behind it, going away... cause it is not a tax haven, of course...

You can track series of articles featuring Irish tax regime in international media starting from this link:

http://trueeconomics.blogspot.ie/2013/10/24102013-irish-tax-regime-hits-news.html

13/9/2013: Another month, another 'look into' Irish tax rules

The regular readers of this blog are aware that I try to track the more important news items concerning Ireland's corporate tax policies. The links to these stories can be successively follows from here: http://trueeconomics.blogspot.ie/2013/08/1982013-tax-haven-ireland-in-2009-news.html

Two more items from today are worth listing in addition to the above:

1. An article from the Irish Independent (http://www.independent.ie/business/irish/state-to-lift-lid-on-us-firms-secret-tax-rulings-29575810.html). Couple of selective quotes: "Details of how multinational companies' tiny tax bills are calculated are to be revealed by the State for the first time." And per usual disclosure that the Stockholm Syndrome patients must have: "Irish authorities have always insisted that there are no special tax deals for companies. Under Irish law, all businesses are supposed to be subject to the same laws and tax rates." Alas, as article notes: "This is the first time information about how Ireland taxes big corporations has ever been shared outside of the Revenue Commissioners and the companies themselves... Tax rulings are so confidential that even the Department of Finance is never given details by Revenue of individual cases." Ok, nothing to see there, folks, it's just so we like secrets, we've just decided to have our own Area 51... cause we like it that way, not cause there's any smoking guns or something...
2. And so we don't really have to worry about out tax policies, as the Government says we shouldn't, here's a article from the Irish Times (http://www.irishtimes.com/business/economy/eu-finance-ministers-put-state-s-tax-regime-in-spotlight-1.1525893). More selective quotes: "Ireland is likely to face tough questions about its corporate tax regime when EU finance ministers gather today in Vilnius for a two-day meeting, following confirmation that the European Commission has begun a preliminary inquiry into the country’s tax practices." Repeat with me... there is nothing in these codes to worry about. "... Ireland, Luxembourg and the Netherlands will be under pressure to defend their tax structures amid claims that all three countries may have offered tax deals to specific companies in breach of state aid rules." Clearly all G7 nations, plus all EU nations are just being taken for a ride by someone, somewhere, who got it into their heads that there is something questionable going on with Irish tax system. In case you have doubts: "Dublin moved quickly yesterday to deny suggestions that Ireland had engaged in anti-competitive behaviour, with Taoiseach Enda Kenny insisting that the State was committed to a “transparent” system. Tánaiste Eamon Gilmore said that Ireland’s tax regime was open and “statute-based”. He said his understanding was that the inquiry was part of an “information-gathering exercise which is done from time to time”." Yes, that's right folks: 'from time to time' 'routine stuff'... Would Mr Gilmore - with his wisdom and perfect knowledge of the matters suggest to us when was the last time the 'routine' thingy 'gathering' such information was done? Or when was the last time G7 and G20 discussed Ireland's tax rule before 2011-2013? Just for the record, please, Mr Gilmore?

19/8/2013: 'Tax Haven' Ireland in the (2009) news again

I've been tracking articles relevant to the debate on the tax haven status of Ireland in relation to corporation tax for some time now.

Here's the last link which sets the chain of previous links on the topic:
http://trueeconomics.blogspot.it/2013/06/1062013-corporate-tax-haven-ireland.html

And since the above, I had couple of posts relevant to the subject:
http://trueeconomics.blogspot.it/2013/06/1662013-minister-in-northern-ireland-is.html
and
http://trueeconomics.blogspot.it/2013/07/2272013-g20-spells-out-squeeze-on-tax.html

Here are couple of most recent ones:

The Guardian covers 2009 case of Vodafone in two stories:
http://www.theguardian.com/business/2013/aug/18/vodafone-tax-deal-irish-office
http://www.theguardian.com/business/2013/aug/18/tax-vodafone-dublin
while the Tax Justice Network responds to the OECD Action Plan on corporate tax avoidance, explicitly identifying Ireland as a 'tax haven'
http://blogs.euobserver.com/shaxson/2013/07/19/press-release-response-to-oecd-action-plan-on-corporate-tax-avoidance/
and lastly the editorial in the EUObserver that also labels Ireland a 'tax haven':
http://blogs.euobserver.com/shaxson/2013/05/02/the-capture-of-tax-haven-ireland-the-bankers-hedge-funds-got-virtually-everything-they-wanted/

Note 1: The Guardian article references EUR67 million rebate on EUR1.04 billion in Vodafone dividends booked into Luxembourg. The dividends were paid on underlying revenues that were booked into Irish GDP and, thus, into our GNI (netting out transfers of royalties etc).These, in turn, required a payment of 0.59% of GNI-impacting activities to the EU Budget. While is is hard to exactly assess how much Irish Exchequer unnecessarily paid into the EU budget due to Vodafone activities, the amount is probably in excess of EUR 5 million and this compounds the transfers of EUR67 million referenced by the Guardian.


Note 2: I am not as much interested in the legal definitions of a tax haven (there are none and, thus, technically-speaking no country can be definitively labeled a tax haven) or in specific groups' definitions of the tax haven (the OECD definition is so convoluted, it virtually makes it impossible for any country with any global political clout - including that acquired via membership in the EU - to be labeled one, while the Tax Justice Network definition is broad enough to potentially include a large number of countries). I am concerned with the spirit of the concept - rent-seeking via tax arbitrage, and with the potential fallout from this in terms of distortions to economic development models and risks arising from same.

Note 3: A 'thank you' is due to a number of people who reminded me - in the context of the Guardian articles linked above - that Ireland charges a 25% corporate income tax on non-trading income. TY to @jameseyryan @Gerpf @JeremyTaxman @seamuscoffey

24/7/2013: Few Links to Thought-Provoking Articles in Economics

Few reading links on economics of inequality and income growth trends links to human capital: "Is Inequality Inhibiting Growth?" by Professor Raghuram Rajan

"Starting in the early 1970’s, advanced economies found it increasingly difficult to grow. Countries like the US and the United Kingdom eventually responded by deregulating their economies.

"Greater competition and the adoption of new technologies increased the demand for, and incomes of, highly skilled, talented, and educated workers doing non-routine jobs like consulting. More routine, once well-paying, jobs done by the unskilled or the moderately educated were automated or outsourced. So income inequality emerged, not primarily because of policies favoring the rich, but because the liberalized economy favored those equipped to take advantage of it.

"The short-sighted political response to the anxieties of those falling behind was to ease their access to credit. Faced with little regulatory restraint, banks overdosed on risky loans."

Another interesting link on income inequality data 

War for Talent is covered here: "It’s the Market: The Broad-Based Rise in the Return to Top Talent" Steven N. Kaplan and Joshua Rauh

And a very provocative, and thought-provoking paper "Defending the One Percent" by N. Gregory Mankiw.

On G20 Tax Proposals: "OECD bureacrats in new diversionary plan to harm business and hike taxes" by  Daniel J. Mitchell covers the OECD proposals for dealing with tax anomalies presented to G20. 

I wrote about these here: http://trueeconomics.blogspot.ie/2013/07/2272013-g20-spells-out-squeeze-on-tax.html and http://trueeconomics.blogspot.ie/2013/07/272013-sunday-times-june-23-2013-g8-and.html

and http://trueeconomics.blogspot.ie/2013/02/1822013-oecd-on-corpo-tax-havens-for-g20.html

10/6/2013: Corporate Tax Haven Ireland Weekly Links Page

We score the 'unique' one in the world of tax arbitrage / err... tax havens... our own proper name. And FT just 'graphed' it:
http://www.ft.com/intl/cms/s/0/e0c8317c-ceaf-11e2-8e16-00144feab7de.html#axzz2VqnobwHj

For more links to worldwide reporting of Ireland as corporate tax haven, follow the second link in this post:
http://trueeconomics.blogspot.ie/2013/05/2652013-corporate-tax-haven-ireland.html or
http://trueeconomics.blogspot.ie/2013/05/1452013-corporate-tax-haven-ireland.html

26/5/2013: Corporate Tax Haven Ireland Weekly Links Page

"Taxes are not up to Google," Schmidt reiterated. "If the international tax regime changes we will follow. But virtually all American companies have structures like this; this is how the international tax regime works. The fact of the matter is if we pay more tax in one area, we pay less somewhere else."

Thus spoke Eric Schmidt of Google (http://www.wired.co.uk/news/archive/2013-05/22/eric-schmidt-tax) and guess what: he is right. Google is not breaking the law. It is the law that allows for countries, like Ireland, to follow beggar thy neighbour economic policies and strategies.

The issue is not the low tax rate, but the fact that various loopholes allow companies operating - allegedly in Ireland - to channel revenues from other countries into Ireland. This is not about exports from Ireland, and it is not about low tax regime in Ireland. When an MNC books revenue earned somewhere else to Dublin, MNC is not break a law. Instead, Ireland is facilitating transfer of funds that relate to value added activity elsewhere to its own economy. This, in the nutshell, summarises the entire nature of Irish economic development strategy: take value added from somewhere else and appropriate it as Irish.


And in the spirit of usual weekly posts (see thread start on Irish Corporate Tax Haven here: http://trueeconomics.blogspot.ie/2013/05/1452013-corporate-tax-haven-ireland.html ): in this week, it is virtually impossible to list all Tax Haven Ireland links from around the world in a post, but here are some:

• http://www.irishexaminer.com/business/eu-eyes-tax-residency-law-change-232325.html
• several listed here: http://trueeconomics.blogspot.ie/2013/05/26052013-ireland-hard-at-work-on-troika.html
• An important link from March 2013: http://www.finfacts.ie/irishfinancenews/article_1025752.shtml
• Noonan's feeble defence of the regime he claims doesn't exist: http://www.irishtimes.com/news/politics/oireachtas/us-senate-committee-quoted-incorrect-tax-rates-for-apple-activities-here-d%C3%A1il-told-1.1404834
• And here is an 'official' admission that we might change that which, allegedly, does not need to be changed because it is not an 'Irish' problem: http://www.reuters.com/article/2013/05/26/us-ireland-tax-reform-idUSBRE94P04820130526?feedType=RSS&feedName=businessNews
• Of course, the problem does not exist: http://www.rte.ie/news/2013/0522/451805-tax-ireland-apple/
• But things are smelling of some smoke: http://www.euronews.com/2013/05/22/ireland-branded-tax-haven-ahead-of-eu-summit-on-tax-evasion/
• and the smoke ain't white: http://venturebeat.com/2013/05/22/ireland-were-no-tax-haven-but-yes-apple-did-pay-2-tax/
• Vincent Browne wades in with some good links: http://www.irishtimes.com/business/economy/government-zealously-protects-the-wealthy-in-ireland-s-wild-west-tax-haven-1.1401752
• Recall Budget 2013 'Strategy' on Corporate Tax (betcha you didn't know we had this strand of thinking flowing through...) http://budget.gov.ie/budgets/2013/Documents/Budget%202013%20-%20Presentation%20on%20Corporation%20Tax%20and%20FDI.pdf
• IDA Tax 'Guide" from 2012: http://www.idaireland.com/news-media/publications/library-publications/ida-ireland-publications/IDA_Tax_2012.pdf you have to love Figure 3:

• Accountants' view: http://www.annebrady.ie/page6/page35/page91/page91.html Note that 'statutory transparency and uniformity' principle really is not what is being used as core discriptor of Irish regime...
• An interesting 2012 document from IAM on the value of tax regime to Ireland's capacity to attract FDI - as in tax being a singularly most important factor http://www.iamireland.ie/dashboard//upload/134522238057FDI_and_Tax_16th_August_2012.doc
• Jim Stewart's paper on Irish Corporation Tax regime: http://www.tcd.ie/iiis/documents/discussion/pdfs/iiisdp375.pdf This concluded that "The corporate tax rate in Ireland is often described at the ‘cornerstone’ of industrial policy. This paper argues that excessive reliance on tax reliefs and on the attraction/retention of foreign direct investment has led to the development of certain tax haven type features for the Irish economy. Tax haven type features are in turn at variance with the development of sustainable firms."
• CS Monitor article on Google and Apple cases: http://www.csmonitor.com/World/Europe/2013/0521/Google-Apple-draw-transatlantic-ire-over-double-Irish-tax-haven
• Counterbalance from one of the few knowledgeable people on the subject: http://www.independent.ie/business/irish/peter-vale-five-reasons-why-ireland-is-not-a-tax-haven-29287879.html

I shall stop there, for now...

26/05/2013: Ireland Hard at Work on Troika & Tax Haven Fronts

Several recent points raised in relation to the work being done by Minister Noonan are worth a quick consideration.

Point 1: Ireland, allegedly, is the best-performing 'Troika programme' in the 'periphery' (forget the semiotics of a country being a programme and 1/3 of the EZ being a 'periphery'). We are fulfilling all programme requirements and are even ahead of schedule on some (namely - issuance of bonds we don't have to issue). If so, then can Minister Noonan explain:

• Why have we needed all the material alterations to the programme, obtained in conjunction with 2011-2012 Greek 'rescues' (term extensions and rate reductions on loans), the restructuring of the promo notes, etc. If we are satisfying the programme requirements, then why do we constantly attempt (and succeed) in changing the programme?
• If, as a part of well-functioning programme, Ireland has already recapitalized its banks and if the measures - approved by the EU and the Troika - to rebuild Irish banking sector are working, then why does Minister Noonan constantly 'working' on finding ever more convoluted ways to shove more funds into them? As in using CoCos as here: http://www.irishexaminer.com/business/noonan-examining-ways-to-capitalise-banks-232186.html or tapping ESM as here: http://www.foxbusiness.com/news/2013/05/21/ireland-still-hoping-to-refinance-bank-debts-through-esm/

Point 2: Ireland, allegedly, is not reliant in its adjustment on beggaring its neighbours via asymmetric tax regime, when it comes to corporate tax rates. Per Minister Noonan (see: http://www.irishtimes.com/news/politics/oireachtas/us-senate-committee-quoted-incorrect-tax-rates-for-apple-activities-here-d%C3%A1il-told-1.1404834): "The ability of multinational companies to lower their global taxes using international structures reflected the global context in which all countries operated." 

But then, "Mr Noonan said ... “some multinational corporations, with the assistance of legal practitioners and tax advisors, have exploited the differences in these systems to their own advantage”." So, wait a second here: it is down to 'some' MNCs - with help of legal & tax advisors - to 'exploit' tax system to their advantage. "The Minister said tax management was an international business. “Very clever accountants and very clever lawyers are involved in it and they basically try to get into an unspecified space between the tax laws of two jurisdictions." 

Ok, we get the point - bad advisors and bad companies are exploiting good Irish regime or global regime. Were it not for this 'exploitation, one can assume things would have been different, right? Wrong: “Operating in that space, they find ways of avoiding the tax that otherwise would not have been payable.”

Come again? Apparently, some multinationals just love hiring expensive advisors to avoid tax that would not have been payable even absent these advisors. You see, per Minister Noonan, Ireland's reputational problems of being branded a tax haven stem from utter stupidity of some MNCs that are so dim, they hire useless but very clever advisors to devise complicated and clever schemes to avoid that which doesn't exist. 

Seems like Minister Noonan has been exposed to too much logic lessons as of late.

14/5/2013: Corporate Tax Haven Ireland Weekly Links Page

Corporate Tax Haven Ireland in the news... again:
http://www.bloomberg.com/news/2013-05-13/europe-eases-corporate-tax-dodge-as-worker-burdens-rise.html

Update: Twitter in the news: http://www.telegraph.co.uk/technology/twitter/10056570/Twitter-CEO-resigns-as-UK-boss-after-accounting-fiasco.html
Note Irish connection.

Keep track of 'Tax Haven' view of Irish economic policies by following the links, starting here:
http://trueeconomics.blogspot.ie/2013/05/352013-not-week-goes-by-without-tax.html

Update 17/5/2013:
Three more stories, both relating to Google operations in Ireland:
http://www.independent.co.uk/news/business/comment/ben-chu-lets-not-get-bamboozled-by-google-in-the-global-tax-avoidance-debate-8620046.html
and
http://www.guardian.co.uk/technology/2013/may/16/google-told-by-mp-you-do-do-evil
and
http://www.independent.ie/business/irish/no-apology-for-low-tax-regime-as-google-debate-drags-on-richard-burton-29274843.html

I find it bizarre that Minister Bruton feels anyone on earth is asking for Ireland's apology. I think the point of this debate about the role of tax havens, like Ireland, is that policymakers around the world are seeking to close the loopholes through which companies engage in aggressive tax optimisation. Minister Bruton should focus on how Ireland can deal with this threat, as well as on how Ireland can develop a business platform (low tax is an important part of this platform) that actually operates on adding value here and not on beggaring our trading partners.

Minister Bruton's point about the need to create jobs in Ireland is nonsensical in the above debate. If we create jobs here on foot of value added in the Irish economy, then there is no problem with our MNCs activities globally, because low tax regime applies only to value added created here. Our trading partners have a problem with Ireland acting as a conduit for tax minimization whereby there is zero value added created in Ireland, but instead value added created elsewhere is booked via Ireland into tax havens. These forms of tax arbitrage do not create any jobs here in Ireland and generate no tax revenue here.

3/5/2013: Not a week goes by without a Tax Haven Ireland story?

More from the 'Tax Haven Island' newsflow, with a second story this week: "US firms paid an average tax rate of 8% profits in Ireland"
http://www.rte.ie/news/business/2013/0503/390280-us-corporations-tax/

I wonder if Michelle Obama's rumoured trip to Ireland will include a visit to such sunny tax haven locations as Barrow St, Dublin 2, or IFSC...


To track my posts on Irish Corporate Tax Haven, follow this link : http://trueeconomics.blogspot.ie/2013/05/252013-news-from-irish-tax-haven.html

Hat tip to:

Updated 08/05/2013: Two new links on the same subject:

http://www.ft.com/intl/cms/s/0/c638f73a-978f-11e2-97e0-00144feabdc0.html#axzz2SjL5Iq3z

and

http://treasureislands.org/the-capture-of-tax-haven-ireland-the-bankers-hedge-funds-got-virtually-everything-they-wanted/

Hat tip to: 

2/5/2013: News from the Irish Tax Haven Central... Barrow St, D2

Given our Manufacturing PMI released today, things have to be looking sour when it comes to Irish GDP and GNP for Q1-Q2 2013. But, as always, never mind. In reality, Irish manufacturing is no longer the core driver of the economy. Instead, making stuff in Ireland (even if it was done for tax purposes with la-la-land accounting for value added) is now surpassed by billing revenues into Ireland by the services exporters, like Google.

Of course, the latter activity is also driven by tax arbitrage. And it is booming. So much so, that we now have a weekly international media instalment labeling Ireland a tax haven for services exporting MNCs.

Here's the latest one http://mobilebeta.reuters.com/special-report-how-google-uk-clouds-its-tax

And should you want to trace more stories on the same subject of Ireland as tax haven, here is the link to start with (keep tracing posted links): http://trueeconomics.blogspot.ie/2013/04/2742013-news-from-irish-corporate-tax.html

27/4/2013: News from Irish Corporate Tax Haven Front

Latest instalment on Irish corporate tax haven: http://www.irishtimes.com/news/politics/oireachtas/irish-corporate-tax-rate-on-agenda-in-berlin-1.1374576

For those who want to read more, here are earlier links on same topic:
http://trueeconomics.blogspot.ie/2013/03/1832013-irish-corporate-tax-haven-in.html
Follow link at the end to more posts.

18/3/2013: Irish Corporate Tax Haven in the News, Again...

As you know, I have been gradually building up a record of articles in international and Irish media detailing the tax haven nature of our (Irish) tax laws and practices when it comes to corporation tax.

Here is the link to a new article by the WSJ on the topic:
http://online.wsj.com/article/SB10001424127887324034804578348131432634740.html

And here is a link to the most recent compilation of information & articles on the topic from my blog:
http://trueeconomics.blogspot.ie/2013/02/1822013-oecd-on-corpo-tax-havens-for-g20.html

18/2/2013: OECD on Corpo Tax Havens for G20

Just as G20 was starting to make noises about corporate tax havens at their meeting in Moscow (here) the OECD produced a convenient paper on the topic of tax avoidance. The paper is rather 'neutered' when it comes to language, but nonetheless offers couple fascinating insights, especially when it comes to Ireland. The report is titled "Addressing Base Erosion and Profit Shifting"

Per OECD: looking "specifically at the effects of income-shifting practices of United States based MNEs [Clausing, 2011],  …finds large discrepancies between the physical operations of affiliates abroad and the locations in which they report their profits for tax purposes: the top ten locations for affiliate employment (in order: the United Kingdom, Canada, Mexico, China, Germany, France, Brazil, India, Japan, Australia) barely match with the top ten locations for gross profits reporting (in order: the Netherlands, Luxembourg, Ireland, Canada, Bermuda, Switzerland, Singapore, Germany, Norway and Australia)."

And then:

"A report of the United States Congressional Research Service (Gravelle, 2010) concludes that there is ample and clear evidence that profits appear in countries inconsistent with an economic motivation. The report analysed the profits of United States controlled foreign corporations as a percentage of the GDP of the countries in which they are located. It finds that for the G-7 countries the ratio ranges from 0.2% to 2.6% (in the case of Canada). The ratio is equal to 4.6% for the Netherlands, 7.6% for Ireland, 9.8% for Cyprus, 18.2% for Luxembourg. Finally, the study notes that the ratio increases dramatically for no-tax jurisdictions with for example, 35.3% for Jersey, 43.3% for Bahamas, 61.1% for Liberia, 354.6% for British Virgin Islands, 546.7% for the Cayman Islands and 645.7% for Bermuda."

Now, of course, Ireland is a conduit via which profits of MNCs are off shored to zero tax jurisdictions, so one wonders, how much of Cayman's and BVI or Bahamas' 'profits' are really coming via Ireland.

The whole report addresses the issue of 'base erosion' in tax systems - the topic also close to heart to Ireland, as CCCTB proposals at the EU level are attempting to deal exactly with that problem and represent a massive threat to Ireland's tax optimisation industry.

Based on the data in the report, here are some revealing charts:

It is first worth noting that in absolute terms, corporate tax revenues overall are not that spectacular in the case of Ireland, contributing at an OECD average levels to the Exchequer. And these revenues have been falling, not rising, in importance despite a severe decline in GDP during the crisis:

Three interesting aspects per above are:

1. It is pretty clear that Irish Exchequer has opted to transfer lower corporate tax burden onto the shoulders of individual Irish taxpayers, and that this process has started well before the onset of the crisis, but became dramatically pronounced in 2007-2009.
2. It is also pretty clear that overall corporation tax is not an important source of Exchequer funding in recent years despite the Government numerous claims that the Corporation Tax receipts are robust and vital to the Exchequer.
3. Domestic boom period was associated with a massive (relative) uplift in tax revenues from the corporation tax, while the MNCs/exports boom during the crisis did nothing of the sorts, showing clearly that the effect of MNCs activities on Irish economy (as instrumented by the Exchequer) is weak.

However, the trend toward deterioration in revenues importance to the Exchequer during the crisis (driving down the 2000-2011 average) stands in contrast with rising importance of the corporation tax in the decade of the 1990s:

It is illustrative to highlight the change in relative importance of the corporation tax revenues over the last decade:

Ireland stands out as the the country with the third largest decline in corporation tax importance in 2011 compared to 2000-2005 average. In contrast, in Switzerland, the corporation tax contribution in 2011 stood at a premium on 2000-2005 average.

Here are some links on the topic of the Irish corporate tax haven from the blog:

http://trueeconomics.blogspot.ie/2012/11/19112012-links-on-irish-corporate-tax.html

http://trueeconomics.blogspot.ie/2012/10/13102012-irish-corporate-tax-haven-in.html

http://trueeconomics.blogspot.ie/2012/10/30102012-feeble-defense-for-tax.html

http://trueeconomics.blogspot.ie/2012/11/19112012-two-points-on-irish-corporate.html

http://trueeconomics.blogspot.ie/2012/10/13102012-irish-corporate-tax-haven-in.html

Enjoy.

1/2/2013: The Innocence of Double-Irish

Irish corporate tax policies issues have now penetrated (agt last) into the RTE newsflow - link here.  Of course, the most priceless reaction is, surprise, surprise, via our Minister Noonan:

"In the Dáil in recent weeks, Finance Minister Michael Noonan said: “The problem with the so-called ‘Double Irish’ from Ireland’s point of view is that it has that name. People think that something we do here gives rise to it. That is not the case.” Mr Noonan blamed tax codes elsewhere, including the way the US government treats certain tax arrangements."

Yep, folks, that's right, Irish law allowing dodgy entities set up off-shore to be tax exempt is, apparently, not Irish problem. Serves those Americans right, then...

I'd love to see him repeat this comes St Patricks Day in Washington. Should be the joke of the dinner.

Yes, US tax codes are to be blamed. And so are the UK, German, French, etc Governments' inability to tackle what is rampant tax optimisation. But in the end, Double-Irish is Double-Irish. Not a Double-Japanese or a Tripple-Mongolian.

Note: here are some lists of recent literature on Irish corporate tax heaven.

19/11/2012: Two points on Irish Corporate Tax

Two thoughts, related (on foot of the current discussions of the Irish Corporate Tax Haven in the EU, US and in Ireland):

1) US/EU/Ireland strategy dilemma: 

(X) : US is unhappy about MNCs underpaying tax in the US via international tax arbitrage

(Y) : US' strategic ally - the EU - is unhappy about US MNCs underpaying tax in the EU via international tax arbitrage

(Z) : Ireland is a trading & investment ally with the US and a member of the EU

(W): Ireland is a major center for tax arbitrage by the MNCs

So now: Z  =  X  +  Y  -  W  +  V(?)

Where V(?) is the unknown 'good will' that US and EU must feel toward Ireland to sustain the above equation.

2) And the above implies this: In the current environment: 

-- incentives for the US to increase (X) are higher than normal (driven by the fiscal cliff and the need to onshore jobs); 

-- while incentives for the EU are to increase (Y) are also much higher than normal (driven by EU own fiscal deleveraging and aggravated by the fact that EU member states are funding 'bailout' for Ireland), 

-- yet at the same time, incentives for Ireland to keep increasing (W) are also extremely heightened (due to the Irish crisis 'solution' model of 'exporting out of the recession and fiscal deleveraging'). 

All of which means that V(?) is rapidly diminishing, squeezed by contradicting (X)+(Y) and (W) rapidly pulling the national interests further and further apart.

I'd say (as an old boxer) - we are heading for the corner... Good luck to anyone thinking we can sustain current corporate tax regime in this world...