Google Inc., Facebook Inc. and LinkedIn Corp. wound up in Ireland because they could reduce their tax bills. Their success is leading European and US politicians to label the country a tax haven that must change its ways. Bloomberg's Jesse Drucker says Ireland's tax man for Silicon Valley, who is the grand architect of much of that success is "Feargal O’Rourke, the scion of a political dynasty who heads the tax practice at PricewaterhouseCoopers in Ireland. He advises both multinational companies and the government on tax policy and has emerged as his country’s leading defender."
“Under no circumstances is Ireland a tax haven,” O’Rourke said recently according to Drucker, at his corner office on the River Liffey in Dublin, a ritual stop for many tech companies in their Irish quest. “I’m a player in this game and we play by the rules.”
The rules of course are elastic and only a fool would claim that Switzerland doesn't engage in tax haven activities or in respect of corporate tax avoidance that Ireland, the Netheralands and Luxembourg are not involved in facilitating it.
Last month, Feargal O'Rourke made
the pitch about Ireland not being a tax haven in The Irish Times.
We said then:
The Dutch have 23,000 letter box companies to facilitate tax avoidance and evasion and Bono, the anti-poverty campaigner and his rock group U2 uses one of them.
While Bono is a hypocrite, O'Rourke, the son of Mary O'Rourke, former Fianna Fáil government minister and first cousin of the late Brian Lenihan, finance minister in 2008-2011, has no apologies for advising on massive tax avoidance.
“Why should Ireland be the policeman for the US?” he asks according to Bloomberg. “They can change the law” -- he snaps his fingers -- “like that! I could draft a bill for them in an hour.”
So when the European Union is expected to refund Ireland the €64bn cost of bailing banks following reckless misgovernance by Fianna Fáil-led governments, should solidarity be more than a one-way street?
So while corporate tax on the profits of a multinational's sales in Madrid or Athens, may be payable in Dublin or no tax is payable, it's OK for Ireland to expect help from European taxpayers?
We have yet to contribute a net cent to the EU budget in 40 years.
So in addition besides expecting financial support, it's OK for Ireland to facilitate tax avoidance and possibly in some cases evasion.
This issue is not about the headline corporate tax rate of 12.5%.
Google transferred all its 2012 foreign income of $8.1bn through Ireland. It paid $358m or 4.4% to foreign governments including $22m to Ireland.
So while Feargal O'Rourke has become rich by advising US companies on minimising their tax payments in Ireland and across the world, Steven Pearlstein of The Washington Post reported on Sunday that when Tim Cook, Apple CEO, gave testimony on Capitol Hill last May on Apple's tax strategies:
Aggressive tax avoidance became a common feature of US multinationals from
the late 1990s and the
Congressional Research Service says [pdf] a so-called "check-the-box"
provision had unintended consequences..
In Ireland, Finfacts warned that the massive growth in avoidance would trigger a backlash and in 2009, IDA Ireland, the Irish inward investment agency, hired a lobbying firm in Washington DC when the new Obama administration proposed anti-tax avoidance measures.
Gridlock in Washington and a veto on tax harmonisation in the European Union was an answer to official Ireland's prayers.
In the past year, the tide has decisively turned with the support of G-20 countries for an Organisation of Economic Cooperation and Development (OECD) project to propose new international business tax rules, for enactment by 2015.
Contrary to conventional wisdom, Finfacts did not believe that the free lunch had been invented during the property bubble and we predicted that the huge growth in tax avoidance would eventually rebound on Ireland's facilitation of it.
The Irish Government and people like Feargal O'Rourke are shocked by the momentum for change that accelerated in November 2012, when Margaret Hodge MP, chaired a Public Accounts Committee meeting of the House of Commons where European executives from Google, Amazon and Starbucks, struggled to defend their payments of low taxes or none on their operations in the big UK consumer market.
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