Showing posts with label corporate tax. Show all posts
Showing posts with label corporate tax. Show all posts
By Sam Willie

On October 14th, Ireland’s Minister for Finance announced plans to close the infamous and controversial “Double Irish” tax loophole, a tax avoidance scheme favored by foreign companies, and in particular US technology giants. Whether closure will affect Ireland’s status as an attractive tax jurisdiction for foreign companies looking to protect IP royalties is another matter.

Companies like Facebook, Google, and Microsoft have benefited from this tax scheme, transferring intellectual property royalty payments to firms in Ireland, and then on to Irish registered subsidiaries in other countries who abstain from taxing corporate income. The Economist has reported that the “Double Irish” could slash a company’s effective tax rate on IP profits to less than 2%. That rate could be lowered still when the “Double Irish” is used in conjunction with a “Dutch Sandwich,” where, as an intermediary step between transferring profits among Irish firms, the payments are routed through yet another tax haven, such as the Netherlands. Forbes reported that Facebook has sent $700 million in profits to the Cayman Islands through the scheme. Additionally, Google has used both the “Double Irish” and the “Dutch Sandwich” to save billions, and in a single year the scheme enabled Apple to avoid $9 billion in U.S. taxes.


By Derek Hunter

The phrase “tax inversion” probably could not sound drier. But this esoteric tax maneuver is garnering considerable press, and not just in the finance pages, but in the mainstream news as well.

A tax inversion is a transaction in which a U.S.-based multinational enterprise (MNE) re-domiciles abroad by merging with a foreign corporation. The goal is to swap the relatively high U.S. corporate tax rate (39%) with the lower tax rate of the foreign corporation’s jurisdiction, frequently Ireland (12.5%) or the United Kingdom (21%). Besides the billions of dollars saved (or lost, from Treasury’s perspective) in U.S. taxes, nothing else changes about the corporation.

So what’s all the fuss? First, it smacks of unfairness – big corporations, with the help of their well-paid lawyers, avoid taxes while the little guys make up the difference. It is also a great political issue: President Obama can call an inversion “unpatriotic,” while Republicans can use it as an example of why we need to lower tax rates to be more competitive.