Ireland joins OECD tax agreement, ends status as tax haven for multinationals

AppleInsider

Ireland on Thursday announced that it will join an Organization for Economic Cooperation and Development agreement that brings an end to the country's low-tax policy for large multinationals, an incentive that attracted companies like Apple and Google to its shores.

By joining the OECD agreement, Ireland is ditching its longstanding 12.5% tax rate to comply with a minimum effective corporation rate of 15% for multinationals with global revenues that exceed 750 million euros (about $867 million) annually. The country's cabinet agreed to the deal ahead of a wider OECD announcement scheduled for Friday, reports The Guardian.

Ireland was among nine countries to staunchly refuse the OECD pact and in June pushed for compromise on the proposed global tax rate. At the time, the G7 agreed to make sweeping changes to international tax law, including closing off tax loopholes used by companies like Apple.

"I'm absolute convinced that our interests are better serviced within the agreement," Paschal Donohoe, Ireland's finance minister, said in a statement. He added that Ireland was partially successful in its plea for compromise, noting that Dublin was able to remove the phrase "at least" from a July draft that sought a tax of "at least 15%," the report said. The language suggested that additional rate hikes were in the works.

Dublin received assurances that the 15% rate would not be changed in the near future, Donahoe said in a lengthy statement explaining the turnabout.

"Overall I believe this agreement will bring long term stability and certainty to the international tax framework," he said. "We have been involved in these discussions for many years and this is the significant milestone in what has been an ongoing process to reform the international tax rules."

According to Ireland, the 15% tax rate will apply to 56 Irish multinationals employing about 100,000 employees and 1,500 foreign multinationals employing some 400,000 people. Companies making less than 750 million euros a year are subject to the old 12.5% tax rate, which has been in effect since 2003.

The Irish government is supposedly not worried about a potential mass exodus of multinationals that set up shop in the region to reap the benefits of a lower effective tax rate, sources told The Guardian. Corporations looking to pull out would likely have already done so, as tax policies that allowed for more lucrative strategies like the "Double Irish" loophole were squashed in 2015.

Apple was known to have perfected an evolution of the tax avoidance strategy -- dubbed the "Double Irish with a Dutch Sandwich" -- by funneling overseas revenue through properties in Ireland and the Netherlands, including its European headquarters in Cork. By some estimates, the company saved some $9 billion per year by employing the plan. The European Commission took issue with the low rates enjoyed by Apple, calling it illegal and ultimately charging the tech giant $14.4 billion in back taxes. That ruling is currently under appeal.

Barring unforeseen roadblocks, the OECD rules are scheduled to go into effect in 2023.

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rcfa

As if 12.5% weren’t enough. Remember, there were tax revolts over the “10th” (10%) that people had to yield to government/nobility in the past.

Also: big corporations split their business activities over a series of subsidiaries, each doing below the 750m threshold in business, thus being subject to the 12.5% tax rate. Problem solved.

darkvader

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

chadbag

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0.  People would get paid more and your economy would grow.   Corporations don't pay taxes.  Their customers do. 

22july2013

chadbag said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0.  People would get paid more and your economy would grow.   Corporations don't pay taxes.  Their customers do. 

And don't forget, not a single corporation owns itself, either in whole or in part. Every single share of every publicly or privately traded company is owned by human beings, who are already paying capital gains taxes on the shares that they own. I don't see any value in double taxation. Just tax the owners of the corporation as much as you want. If you tax corporations 40% on their profit and then the owners of the companies another 40% on their gains, that's a double tax on the same corporate income.

I'm not saying don't collect taxes. I'm saying that taxing the same profit twice is a cheap way to hide the true tax rate. If you tax both people and corporations by 40% then that works out to people keeping (100%-40%)*(100%-40%)=36% of their income which is a tax rate of 64%. That's pretty steep. But if that's what you want, then do it.

f_kent_d

Thing is, call it what you want but the matter here is the more money the government keeps the less money people have in their pocket to spend at the corporations that will be paying more in taxes just as they’re forced to pay a higher minimum wage to every employee. Lights, water, and rent aren’t free and prices go up when that margin is squashed. 

jimh2

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

You do understand that the higher the tax rates paid a company are the higher the items they sell will be priced. Companies do not just eat tax increases…they price them into the total cost of their products along with every other cost. They also pay a ton of other taxes (business license, real estate, personal property, payroll tax, state income tax, etc). 

hedware

chadbag said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0.  People would get paid more and your economy would grow.   Corporations don't pay taxes.  Their customers do. 

hedware

The real problem with multinational companies shifting their tax is that they don’t pay for any of their means of production and services in the countries in which they operate and earn profits. It is the poor taxpayer who pays for the utilities, legal services and much that these multinationals use while paying as little tax as they can connive by shifting earnings and therefore negating tax responsibilities. Apple has been a major shifter. Good on the EU for taking on Apple and other multinationals. 

mr lizard

Moving from 12.5% to 15% is hardly ending tax haven status. This headline is nonsense. 

Unless every loophole is closed then companies can still be clever and legally funnel money around to escape most taxation altogether. It’s that web of loopholes that makes somewhere a tax haven, not that the published rate of tax was 12.5% and not 15%. 

xbit

jimh2 said:

You do understand that the higher the tax rates paid a company are the higher the items they sell will be priced. Companies do not just eat tax increases…they price them into the total cost of their products along with every other cost. They also pay a ton of other taxes (business license, real estate, personal property, payroll tax, state income tax, etc). 

This move is clearly going after the tech giants and most tech giants don't play by traditional economic rules. You've got the likes of Amazon, Uber, etc. who don't price based on cost and seemingly have no real intention of making a profit. Taxing them higher isn't going to drive up prices.

foregoneconclusion

jimh2 said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

You do understand that the higher the tax rates paid a company are the higher the items they sell will be priced. Companies do not just eat tax increases…they price them into the total cost of their products along with every other cost. They also pay a ton of other taxes (business license, real estate, personal property, payroll tax, state income tax, etc). 

Oh yeah, I'm sure everyone remembers all those incredible price drops on goods/services after the U.S. gave corporations 2 trillion in tax cuts back in 2017...

gatorguy

foregoneconclusion said:

jimh2 said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

You do understand that the higher the tax rates paid a company are the higher the items they sell will be priced. Companies do not just eat tax increases…they price them into the total cost of their products along with every other cost. They also pay a ton of other taxes (business license, real estate, personal property, payroll tax, state income tax, etc). 

Oh yeah, I'm sure everyone remembers all those incredible price drops on goods/services after the U.S. gave corporations 2 trillion in tax cuts back in 2017...

+1

mknelson

chadbag said:
Actually, corporate tax rates should be 0.  People would get paid more and your economy would grow.   Corporations don't pay taxes.  Their customers do. 

That oversimplifies things.

See the Kansas tax cut disaster from last decade. They cut business taxes but didn't make up the revenue in other areas so cut back spending. Companies saw the cut backs in infrastructure and other spending so they laid off staff.

The economy shrank. Conservative newspapers then went on the attack against the Republican governor.

Taxing the company is a more direct source of revenue. Taxing shareholders only works when they have capital gains - that won't get much if share prices are stagnant or if the shareholders hold on to their shares.

larryjw

22july2013 said:

chadbag said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0.  People would get paid more and your economy would grow.   Corporations don't pay taxes.  Their customers do. 

And don't forget, not a single corporation owns itself, either in whole or in part. Every single share of every publicly or privately traded company is owned by human beings, who are already paying capital gains taxes on the shares that they own. I don't see any value in double taxation. Just tax the owners of the corporation as much as you want. If you tax corporations 40% on their profit and then the owners of the companies another 40% on their gains, that's a double tax on the same corporate income.

I'm not saying don't collect taxes. I'm saying that taxing the same profit twice is a cheap way to hide the true tax rate. If you tax both people and corporations by 40% then that works out to people keeping (100%-40%)*(100%-40%)=36% of their income which is a tax rate of 64%. That's pretty steep. But if that's what you want, then do it.

There are no capital gains taxes until the shares are sold -- which could be never. And with the step up in basis upon death, no capital gains taxes are ever paid. The fairness violation with the US tax code is those holding shares never pay income taxes at all because they have no "income". They live off of loans using their shares as collateral. They pay interest on their loans, then deduct the interest on their taxes, which are otherwise zero (meaning they could otherwise get money back from the Feds -- which is OUR tax money). In addition, the "owner/employee" controls the company, and the company "votes" that for the most part, what for you and I are normal living expenses and assets become corporation expenses and assets, and therefore are paid and owned by the corporation thus decreasing their "profits" subject to taxation. 

The tax system is simply a scam -- pure and simple. 

edited October 2021

fastasleep

chadbag said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0.  People would get paid more and your economy would grow.   Corporations don't pay taxes.  Their customers do. 

Ah yes, the ever-beneficial Trickle-Down Economics™ which certainly hasn't been proven to be complete bullshit at all.

fastasleep

22july2013 said:

chadbag said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0.  People would get paid more and your economy would grow.   Corporations don't pay taxes.  Their customers do. 

And don't forget, not a single corporation owns itself, either in whole or in part. Every single share of every publicly or privately traded company is owned by human beings, who are already paying capital gains taxes on the shares that they own. I don't see any value in double taxation. Just tax the owners of the corporation as much as you want. If you tax corporations 40% on their profit and then the owners of the companies another 40% on their gains, that's a double tax on the same corporate income.

I'm not saying don't collect taxes. I'm saying that taxing the same profit twice is a cheap way to hide the true tax rate. If you tax both people and corporations by 40% then that works out to people keeping (100%-40%)*(100%-40%)=36% of their income which is a tax rate of 64%. That's pretty steep. But if that's what you want, then do it.

Another bingo tumbler idea grab bag post! That's not how any of this works, and pretty sure you just made up some random numbers here because capital gains taxes in the US are 0%, 15% or 20% for most assets held for more than a year, and no corporation has an effective tax rate of 40%.

macpro

gatorguy said:

foregoneconclusion said:

jimh2 said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

You do understand that the higher the tax rates paid a company are the higher the items they sell will be priced. Companies do not just eat tax increases…they price them into the total cost of their products along with every other cost. They also pay a ton of other taxes (business license, real estate, personal property, payroll tax, state income tax, etc). 

Oh yeah, I'm sure everyone remembers all those incredible price drops on goods/services after the U.S. gave corporations 2 trillion in tax cuts back in 2017...

+1

+1

stumptowner

chadbag said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0.  People would get paid more and your economy would grow.   Corporations don't pay taxes.  Their customers do. 

Unfortunately, you are only 80% correct.  "Corporations don't pay taxes.  Their customers do" is a nice bumper sticker, but it isn't reality.  Corporations pay taxes because they earn income, they make investments, they use public services (fire, transportation) and utilities and guess what, they also have "rights" that are almost similar to those of a person (a problem in itself) that are upheld by court systems that need to be paid.  The corporations who can do so more efficiently don't have as many expenses to pass on to customers as corporations who are less efficient.  So, if you want a corporate tax rate to really be 0, you need to change all of the other benefits and subsidies that corporations enjoy first.

crowley

chadbag said:

darkvader said:

15% corporate tax is still FAR too low.  Ideally corporate income tax rates should be at least as high as individual income tax rates, which for Ireland the top rate seems to be 40%.

And remember, corporations only pay income taxes on profits, expenses (like salaries) are deductible.  That's why cutting the corporate tax rate is HORRIBLE if you're trying to create jobs or increase salaries, low corporate tax rates encourage layoffs and low salaries to reduce expenses so more profit can be extracted.

If tax laws are written correctly, passing off profits to smaller subsidiaries will be impossible, for minimum taxation purposes it'll be the global 'holding company' that will determine the rate.

Actually, corporate tax rates should be 0.  People would get paid more and your economy would grow.   Corporations don't pay taxes.  Their customers do. 

And you don’t buy groceries, your employer does. 

Do you see how stupid this argument is?

13485

Hedware said:

The real problem with multinational companies shifting their tax is that they don’t pay for any of their means of production and services in the countries in which they operate and earn profits. It is the poor taxpayer who pays for the utilities, legal services and much that these multinationals use while paying as little tax as they can connive by shifting earnings and therefore negating tax responsibilities. Apple has been a major shifter. Good on the EU for taking on Apple and other multinationals. 

What are you talking about? In our limited involvement in countries outside the United States, we pay for the facility rent, we pay for the equipment,  we pay for the raw materials, we pay the salaries, we pay the utilities, we pay the taxes, and we definitely pay through the nose for the legal representation.