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.
