Just a week after the explosive revelations by a US Senate panel about the use by Apple, one of the world's biggest public companies, of what the software giant views as three stateless Irish companies, to avoid taxes on billions of dollars worth of revenues, the director of Corporate Enforcement in Ireland, reported on his office's company law compliance activities, which have been dominated by the former Anglo Irish Bank, for the past four years.
Ian Drennan, director of Corporate Enforcement, said on Wednesday:
The 1963 section covers a company's activities in supporting its share price while the 1990 section covers statements made to auditors.
It is alleged that Seán FitzPatrick, former chairman and chief executive of Anglo Irish Bank, Willie McAteer, former finance director, and Pat Whelan, former managing director of lending, were in breach of company law while they were employed at the bank.
The Apple revelations reveal a big black hole in Irish company law compliance.
The Irish Department of Finance said in a 1998 paper: "An Irish registered non-resident (IRNR) company is one which is incorporated in Ireland under Irish company law but is not resident here for tax purposes because the company is controlled and managed abroad. Under existing tax law, a company is resident in the State for tax purposes if its effective management is located in the State...IRNR companies have posed a threat to Ireland's international image and its reputation as a well-regulated jurisdiction for conducting business. These companies are regularly advertised 'for sale' in international magazines, often alongside companies which are incorporated in tax havens and jurisdictions with relaxed regulatory regimes. Many IRNR companies have little or no connection with the country and some may be used for tax evasion, money laundering and fraud. A number of fraud cases involving IRNR's have been covered recently in the press. On the other hand, IRNR companies are used by several multinationals for legitimate international tax purposes."
In the Finance Act, 1999, under pressure from the EU, all Irish-incorporated companies became resident; however, there are a number of exceptions to the rule, some of them to accommodate the situation of multinational companies (many American) who have established themselves in Ireland. The most important exceptions are:
The Lowtax portal says: "As can probably be seen, these rules taken together are far from restrictive, and in most cases it was possible for companies either to continue non-residence as they are currently structured, or else to make reasonably straightforward adjustments to fall within the new rules."
Apple's Irish companies have unlimited status and it does not have to file accounts in Ireland.
In an unlimited company there is no upper limit on the personal liability of shareholders for the company’s debts upon the company’s insolvency. William Fry, a law firm, says: "Although one might expect this type of company to be rare, 2% of all Irish companies are unlimited, and Ireland has more than twice as many unlimited companies as it has PLCs."
Grant Thornton, an accountancy firm, says: "an unlimited company is generally not required to file a copy of its annual accounts with the Registrar of Companies provided at least one of its members does not have a limit on its liability."
However, LK Shields, another Dublin law firm, says it is possible to use a structure, using non-EU companies as holding companies, where an unlimited company can avail of the non-filing exemption while also providing the original shareholders with limited liability.
Apple Operations International, the lead Apple holding company in Cork, booked profits of almost $30bn in four years but there can be no external monitoring of compliance.
So an Irish unlimited company can be limited in practice and operate with limited or no risk of regulatory compliance.
It's a handy status that not only gives opportunities for corporate tax avoidance but also for income tax avoidance or evasion.
Meanwhile, sing the mantras: Ireland's tax regime is "very clear, very transparent" - - Taoiseach Enda Kenny or "We don't depend on tax gimmicks" - - Tim Cook, Apple CEO.
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The Guardian's Simon Bowers visits Cork:
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