Ireland expected to dissolve 'Double Irish' tax loophole benefitting Apple, others
After the European Union's antitrust watchdog pressured reform, Ireland's government is expected to announce changes to its tax residency policies, phasing out the popular multinational tax loophole employed by Apple to save billions of dollars.
Source: European Commission
According to two sources familiar with the matter, Ireland will "phase out" the well-known "Double Irish" tax arrangement large U.S. corporations like Apple and Google use to save billions of dollars on international profits, reports Reuters. The government is slated to make the announcement alongside a 2015 budget hearing on Tuesday.
The planned amendments involve tax residency for international corporations, which up to this point have taken advantage of complex international laws -- particularly intra-state EU arrangements -- to sidestep high tax rates.
In the case of the "Double Irish with a Dutch Sandwich" scheme, companies like Apple rely on current Irish law that views a company as a tax resident of the country from which it is managed, not incorporated. For Apple, the company used the intricate tax law and concessions made by the Irish government to declare its Cork headquarters as not being a tax resident of any country.
Applied to Apple's international operations, profits are directed to a subsidiary in Ireland. The 12.5 percent Irish tax rate is not applied ASI (Apple's business entity in Cork) because it is managed by Apple corporate in U.S. This also means the U.S. and other countries, like Australia, are also unable to levy taxes on Apple's Irish operations because ASI is out of their jurisdiction.
On the European side, Ireland has treaties with other EU countries that allows funds to pass across borders tax-free. Apple uses these arrangements to route international profits through the Netherlands (alternatively Singapore for Australian operations) back to ASI or another registered subsidiary as payments for assigned royalties. The final destination is a company registered in Ireland, but a tax resident of a tax haven like the Caribbean or Cayman Islands.
For its part, Ireland has at least made a showing of closing loopholes, with Finance Minister Michael Noonan vowing to make necessary amendments to the country's tax code after U.S. Senators John McCain and Carl Levin called for reform last year. Noonan made it illegal for corporations to not claim a tax domicile, but kept open a loophole that allowed these companies to effectively choose a resident country that best fits their needs.
With the supposed upcoming rule change, Ireland will automatically classify companies operating within its borders as tax residents "over time." The exact timeframe was not detailed, but the publication speculates companies already operating within Ireland will be granted a set period in which to rearrange accounting methods.
Joaquin Almunia, the European Commission's vice president and competition commissioner, stirred up action in late September with a letter saying his office suspects the Irish government's tax practices amount to illegal state aid. Almunia will end his term on Oct. 31, to be replaced by Denmark's former economy minister and known hardliner Margrethe Vestager.
Source: European CommissionAccording to two sources familiar with the matter, Ireland will "phase out" the well-known "Double Irish" tax arrangement large U.S. corporations like Apple and Google use to save billions of dollars on international profits, reports Reuters. The government is slated to make the announcement alongside a 2015 budget hearing on Tuesday.
The planned amendments involve tax residency for international corporations, which up to this point have taken advantage of complex international laws -- particularly intra-state EU arrangements -- to sidestep high tax rates.
In the case of the "Double Irish with a Dutch Sandwich" scheme, companies like Apple rely on current Irish law that views a company as a tax resident of the country from which it is managed, not incorporated. For Apple, the company used the intricate tax law and concessions made by the Irish government to declare its Cork headquarters as not being a tax resident of any country.
Applied to Apple's international operations, profits are directed to a subsidiary in Ireland. The 12.5 percent Irish tax rate is not applied ASI (Apple's business entity in Cork) because it is managed by Apple corporate in U.S. This also means the U.S. and other countries, like Australia, are also unable to levy taxes on Apple's Irish operations because ASI is out of their jurisdiction.
On the European side, Ireland has treaties with other EU countries that allows funds to pass across borders tax-free. Apple uses these arrangements to route international profits through the Netherlands (alternatively Singapore for Australian operations) back to ASI or another registered subsidiary as payments for assigned royalties. The final destination is a company registered in Ireland, but a tax resident of a tax haven like the Caribbean or Cayman Islands.
For its part, Ireland has at least made a showing of closing loopholes, with Finance Minister Michael Noonan vowing to make necessary amendments to the country's tax code after U.S. Senators John McCain and Carl Levin called for reform last year. Noonan made it illegal for corporations to not claim a tax domicile, but kept open a loophole that allowed these companies to effectively choose a resident country that best fits their needs.
With the supposed upcoming rule change, Ireland will automatically classify companies operating within its borders as tax residents "over time." The exact timeframe was not detailed, but the publication speculates companies already operating within Ireland will be granted a set period in which to rearrange accounting methods.
Joaquin Almunia, the European Commission's vice president and competition commissioner, stirred up action in late September with a letter saying his office suspects the Irish government's tax practices amount to illegal state aid. Almunia will end his term on Oct. 31, to be replaced by Denmark's former economy minister and known hardliner Margrethe Vestager.
Comments
May the luck of the Irish be with you Ireland. I see an exodus of large corps
Since no one owns the moon, how can they be taxed?
Yep. I hope it was worth it for their sakes.
There is no reason why Apple can own some land on the moon.
Now that's lunacy.
The part that gets me is that no less than 3 "leaders of the free world" have paid this guy $250,000 to own land on the moon.
I would prefer zero international and national corporate taxes since all they do is increase the proce of products for the consumer anyway. The consumer (aka the public) doesnt really get anything out of corporate taxes except a reduction in purchasing power of their money.
If people really wanted to slow global warming or the evils of consumption, you would need a consumption tax at the point of sale. So those that buy more crap like yachts or mac pro's or whatever will pay in taxes.
Honestly I would love to buy products from Europe but they make it SO expensive that eventually say F-it since everything from europe is overpriced due to local taxation. Then on top of that the import duties and shipping costs to the usa are painful.
Europe's economy is EXACTLY what you would expect from the policies that they have. Poverty for newcomers and younger generations and economic stagnation are a veritable given just like here in America. High IQ people win in almost any economy by the way... But are the exception. The worlds rules, laws, and money are made by smart people FOR smart people. That's the true "class warfare" that nobody really wants to admit.
was about time that Ireland would finally crack down on these unscrupulous corporations.
If you have 401K or IRA or any retirement portfolio, guess who's money the EU is dipping its grubby hands into?
-- Edit to add "EU"
Blame the EU. Their economy is going down the drain and so they need to leech off Apple.
They are going down the tubes because they bought into Thatcherism and austerity at a time of financial collapse -- the Republican ideal to liquidate productivity in favor of passive investors who make money but nothing else. Their economies are running on smoke, having taken out Greece, Spain at least.
While not totally disagreeing I'd suggest invoking 'Thatcherism' is a stretch. That was a long time ago and the political landscape was utterly different.
May the luck of the Irish be with you Ireland. I see an exodus of large corps
Only if the situation is unfavorable after the changes. If it's still better than elsewhere then companies will stay.
We don't yet know what will happen.
I would prefer zero international and national corporate taxes since all they do is increase the price of products for the consumer anyway.
It's always fun to see people advocate for no corporate taxes. Yet they expect that when an employee dials 911, the police or fire department will still show up. They expect the utilities to work. They expect the roads their employees use to get to work to be paved and plowed. And of course they expect their company to be able to lobby politicians and contribute to campaigns. They want companies to have all the rights of a citizen but not pay the taxes that any citizen would be required to in order to obtain all that society provides to a citizen.
What. The. Absolute. ****??
I do not think he was arguing in favor of no taxes at all. I think he was questioning whether collecting taxes from corporations is the most effective way to do so, or would it be more effective to eliminate corporate taxes and replace them by consumption oriented taxes. Economists find that to be an interesting debate, in part because it could eliminate (corporate) tax considerations from corporations' decisions about where to locate their operations.
You're missing his point. The fact is, regardless of what you think, corporations do not pay taxes; you and I do. Almost all of it is passed though to us. Corporations are no more than a vehicle for tax collection.
The government is bamboozling people into believing that there is some corprate entity that is separate from its tax-paying customers. That's pure fiction. You can choose to believe it if you wish.
This is a well written opinion about corporate tax:
http://www.nytimes.com/2014/08/26/upshot/cutting-the-corporate-tax-would-grow-other-problems.html?abt=0002&abg=1