|A draft law allowing Swiss banks to pass data to the United States justice authorities won approval by the Swiss Senate on Wed, June 12, 2013. The lower chamber, the House of Representatives, is set to discuss the controversial issue next week. At least 14 Swiss financial institutions have been under investigation, suspected of helping US citizens evade taxes. Two financial firms have closed down over the past six months. Switzerland’s oldest private bank, Wegelin, was forced to shut its doors following a US indictment in January. It admitted to wrongdoing and paid $58m (CHF54m) in fines. In 2009, the country’s biggest bank UBS was forced to pay a fine of $780m and deliver the names of more than 4,500 clients to avoid indictment, handing information that allowed the US authorities to then pursue other Swiss banks. Image source: swissinfo.ch|
Taoiseach Enda Kenny on Wednesday again repeated a bogus Irish effective
tax corporate rate claim in defending the regime available for US
multinationals. Also on Wednesday, the European Commission issued proposals on reducing
the potential for tax evasion and today, a House of Commons committee published a
report on tax avoidance by Google in the UK.
Google generated US$18bn revenue from the UK
between 2006 and 2011. Information on the UK profits derived from this revenue
is not available but the company paid the equivalent of just $16m of UK
corporation taxes in the same period.
At an American Chamber of Commerce in Ireland event in Dublin
where a new Europe-wide report ‘The
Case for Investing in Europe' [pdf] was launched, the
Taoiseach again denied that Ireland is a tax haven and said the country "did
not operate a brass plate" system [the Chamber's report says gross output of American affiliates in Ireland represented roughly one-quarter of the nation’s gross domestic product in 2011
but note that this data has been massively distorted by tax avoidance].
He also said the Government had written to US senators stating the country had a 12.5%
Corporation Tax rate and an effective rate of 11.9% according to a World Bank
In this debate semantics has a big role and provides wide latitude for
economy with the truth.
Switzerland isn't a tax haven because it's a member of the OECD, a rich
country club, that effectively defines a tax haven as an entity that relies on
tax avoidance and evasion services for most of its income.
United States senators said Ireland meets the "common sense" definition of a
Irish Government's foolish tax letter to US senators
As for brass plate companies, laws were tightened in the late 1990s but in
practice, non-tax resident Irish companies are mainly used for tax avoidance, as
the revelations on Apple to a US Senate panel confirms.
The effective corporate tax rate is the actual tax paid as a ratio of
reported net earnings.
It is usually less than the headline rate because of various tax allowances
/credits on for example equipment purchases, R&D spending and maybe losses
In respect of big multinationals in Ireland, it is a meaningless metric as
the reported net income can be reduced to a very low level or a loss through
In 2011, Google Ireland paid €3m tax on trading profit resulting from €12.4bn
in revenues; Apple's rate ranged from a fraction of 1% to a ceiling of 2% and
Microsoft reported an effective 2011 tax rate of 5.69% in Ireland.
Kenny's cited 11.9% rate is from a report produced
for the World Bank, by PricewaterhouseCoopers (PwC), the Big 4 accounting firm.
Minister Richard Bruton has also quoted the rate. He at least should know that
it is not generally applicable in the multinational sector.
The template firm is a pottery maker with 60 staff that sells all of its
output domestically via a retail unit. It is in its second year of business and has
losses brought forward from its first year of operation.
Irish claims on French corporate tax are false
The European Commission proposed on Wednesday to extend its
previous plans to restrict the opportunities for tax evasion. It said additional revenues
should be covered in an envisaged automatic information sharing scheme.
EU member countries are already moving towards automatically
sharing details on employment revenues, company directors' fees, pensions,
life insurance and real estate income, with the corresponding information
system currently scheduled to be up and running by 2015.
Wednesday's proposal by the Commission extended the system to information on
dividends, capital gains and all other forms of financial income and account
Algirdas Šemeta, EU commissioner for Taxation, Customs, Statistics, Audit
said: " With today's proposal, member states will be better equipped to
assess and collect the taxes they are due, while the EU will be well positioned
to push for higher standards of tax good governance globally. It will be another
powerful weapon in our arsenal to lead a strong attack against tax evasion."
The measures first need to be approved by the national governments and the
The Public Accounts Committee of the House of Commons has published
[pdf] which charges Google with massive tax avoidance in the UK.
"To avoid UK corporation tax, Google relies on the deeply unconvincing
argument that its sales to UK clients take place in Ireland, despite clear
evidence that the vast majority of sales activity takes place in the UK. The big
accountancy firms sell tax advice which promotes artificial tax structures, such
as that used by Google and other multinationals, which serve to avoid UK taxes
rather than to reflect the substance of the way business is actually conducted.
HM Revenue & Customs (HMRC) is hampered by the complexity of existing laws,
which leave so much scope for aggressive exploitation of loopholes, but it has
not been sufficiently challenging of the manifestly artificial tax arrangements
of multinationals. HM Treasury needs to take a leading role in driving
international action to update tax laws and combat tax avoidance."
Margaret Hodge MP, chair of the committee,
“Google generates enormous profits in the UK.
But despite an $18bn turnover between 2006 and 2011 it paid the equivalent
of just $16m in taxes to the UK government.
“Google brazenly argued before this committee
that its tax arrangements in the UK are defensible and lawful. It claimed
that its advertising sales take place in Ireland, not in the UK.
“This argument is deeply unconvincing and has
been undermined by information from whistleblowers, including ex-employees
of Google, who told us that UK based staff are engaged in selling. The staff
in Ireland simply process the bills. Google also conceded at this second
hearing that its engineers in the UK are contributing to product
“The company’s highly contrived tax
arrangement has no purpose other than to enable the company to avoid UK
“Google’s reputation has been damaged by
these revelations of aggressive tax avoidance. That damage will not be
repaired until the company arranges to pay its fair share of tax in the
country where it earns the profits from the business it conducts.
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