Tax campaigners welcomed the change. “The Double Irish has come to symbolize all the elaborate tax avoidance schemes that multinationals and their advisers have engaged in,” said Sorley McCaughey, Head of Advocacy and Policy at Christian Aid Ireland. “Many of these schemes have resulted in the poorest countries in the world losing billions every year in revenue.”
The impact on companies’ profits will be reduced by a new scheme announced by Noonan under which profits linked to the exploitation of patents will attract lower tax rates. Britain already has such a scheme, under which profits linked even tangentially to a patent can face a tax rate of 10 percent.
The Netherlands’ “innovation box” scheme applies a tax rate of just 5 percent, although the eligible profits are more restricted than under the British regime, tax advisers say.
Kevin McLoughlin, tax adviser with consultants EY said the new patent tax regime “will allow Ireland to continue to compete effectively for international investment”.
Corporate filings show that technology companies have channeled tens of billions of dollars in profits which attract little or no taxation elsewhere, through Ireland under the current rules.
Yet the huge amount of money currently escaping taxation means that if Ireland introduced even a 5 percent tax rate on loosely-defined patent income, it could still collectively cost the companies billions of dollars each year. [eap_ad_1] Also, many OECD and G20 countries oppose such inducements and the EU is also examining whether they breach bloc competition rules, raising the possibility that the impact on companies could be higher.
Ireland is not the only country that has allowed companies to channel profits into tax exempt firms. Amazon operates a structure whereby all its European sales are channeled through a Luxembourg company, which in turn channels profits into a tax-exempt partnership, also registered in the Grand Duchy.
However, this arrangement is being investigated by the European Commission, which suspects Luxembourg may have broken EU rules by giving the online retailer excessively generous treatment in return for creating jobs.
The company has denied it received a sweetheart deal.
The EU drive includes investigations into Apple’s arrangements in Ireland and tax rulings that the Netherlands gave to coffee chain Starbucks. (Reuters)
[eap_ad_4]