See Search Box
lower down this column for searches of Finfacts news pages. Where there may be
the odd special character missing from an older page, it's a problem that
developed when Interactive Tools upgraded to a new content management system.
Finfacts is Ireland's leading business information site and
you are in its business news section.
The director of the Centre for Tax Policy at the Organisation for Economic Co-operation and Development
(OECD) said today that Ireland must charge 12.5% tax and not 2% if it wants to
retain its tax regime.
Pascal Saint-Amans told a conference in Dublin that Ireland's tax regime was "low and
His reference to 2% relates to the US Senate Permanent Subcommittee on
Investigations May report on Apple's use of Irish companies to avoid paying any
tax or none on billions of dollars each year.
The G-20 (Group of Twenty: 19 leading advanced and
emerging countries) summit next month in St Petersburg, Russia, will receive
proposals from the OECD
for changes in international corporate taxation rules that have been in place
for decades and Saint-Amans is in charge of the project.
Responding to Pascal Saint-Aman’s comments at a Department of Finance
conference in Dublin today, Peter Vale, tax partner at Grant Thornton,
said: “The OECD is engaged in important work to coordinate global changes on
tax, and I am sure it is well aware that not only is Ireland’s headline tax rate
12.5%, but recent studies have shown that our effective rate is very close to
this too. Ireland does not have a 2% tax rate and no Irish tax resident company
pays tax at this rate.
A company may incorporate in Ireland but maintain its tax residence elsewhere.
It can be misleading to look at the effective tax rate of such companies as they
are not Irish tax resident. The profits attributable to their Irish operations
are taxable at 12.5%, with these profits typically subject to OECD arm’s length
Yes in Ireland we have a low corporate tax regime, but it is very transparent.”
1. As for "recent studies have shown that our effective rate is very close to
this too" -- this is a misleading claim as a PricewaterhouseCooper's
international comparison of the effective rates (tax paid as a ratio of net
earnings) putting the Irish rate at 11.9% is in respect of a small domestic firm.
Microsoft has said its fiscal 2011 Irish effective tax
rate was 5.69%; Google Ireland's was a fraction of 1%. It routes almost
half its global revenues through Ireland. Facebook is among others that use the
"Dutch-Irish sandwich" routine using resident Irish companies.
3. The Irish corporate tax system is not transparent
and the Revenue turns a blind eye to billions in overseas charges to minimise
reported income. It's a different standard for local companies.
Some of Microsoft's Irish companies are unlimited;
companies have unlimited status and it does not have to file accounts in
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." 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.
4. There isn't a 2% tax rate but it's naive to
assume that commitments were never made by an Irish Government to keep the tax
bill low. Besides, it's easily achieved by huge charges as filed accounts of the
big US giants show.
The OECD's rich country members have ensured that no member including
Switzerland can be termed a tax haven. However, it is either stupid or
self-serving to argue that countries such as Ireland and the Netherlands do not
facilitate tax haven activities.
"In the main, however, tax authorities have
preferred to cut deals with big corporations rather than pursue costly legal
action. They will not do the same for you and me.
A serious reform agenda would involve a principled
reappraisal of the basis for taxing corporations both nationally and globally,
and a strategy for effective enforcement of existing rules. Such a strategy
would make clear that executives of companies which present accounts to tax
authorities that are essentially false, and the accountants who support them,
will in future run serious risks. The door they hear closing behind them might
be the door of a prison cell rather than the door of 10 Downing Street."
Check out our
subscription service, Finfacts Premium
, at a low annual charge of €25
Pascal Saint-Amans, director for the Centre for Tax Policy and
Administration—OECD, discusses base erosion and profit shifting at KPMG
International's Asia-Pacific Tax Summit in Shanghai, April 24, 2013.