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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:
“Insofar as the office’s activities regarding the former Anglo Irish Bank
concerned, 2012 was a year of two discrete elements. The first half of the year
files submitted to the Director of Public Prosecutions in respect of alleged
offences under both
section 60 of the Companies Act 1963 and
section 197 of the Companies Act 1990.
considered the material submitted by the ODCE, the DPP directed that a total of
be preferred against a number of individuals.
Following the bringing of charges, these matters moved into the realm of the
Courts. As a
consequence, during the second half of the year the Office’s Anglo related
largely in the nature of assisting and supporting the office of the DPP in
disclosure obligations to those persons against whom legal proceedings are
pending. This is
a major undertaking and, as such, is likely to be a significant and continuing
feature of the
Office’s work for some time to come."
The 1963 section covers a company's activities in supporting its share
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
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
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:
An Irish-incorporated company
which is resident in a treaty country (Ireland has Double Tax Treaties with
69 countries of which 64 are in effect) and which is not resident in Ireland will continue to be
regarded as non-resident in Ireland;
An Irish-incorporated company
which is under the ultimate control of a person or persons resident in an EU
member state or in a country with which Ireland has a double tax agreement,
or which is, or is related to, a company whose principal class of shares is
substantially and regularly traded on a stock exchange in an EU country or a
treaty country AND which carries on a trade in Ireland or is related to a
company which carries on a trade in Ireland will continue to be able to be
non-resident under the management and control test. ('Related to' means that
either one of the two companies owns at least 50% of the other, or that both
are owned at least 50% by a third company; 'Control' is interpreted within
Irish rules that attribute the rights of shareholders to related parties and
The Lowtax portal
"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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