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.
Bloomberg:
Man Making Ireland Tax Avoidance Hub Proves Local Hero
Last month, Feargal O'Rourke made
the pitch about Ireland not being a tax haven in The Irish Times.
We said then:
All the developed countries are members of the OECD and among them, neither
Ireland, Netherlands, Luxembourg, Switzerland, the UK (with responsibility for
10 island tax havens, known as Crown Dependencies and Overseas Territories) and
the US (in Delaware it’s easy to set up shell companies with no questions asked
and 1209 N. Orange Street, Wilmington, Delaware is the legal address of
companies such as Apple, Bank of America, General Electric, Google, among up
about 285,000 other corporations), meet their definition of tax haven -- and for
good reason.
All view it as a pejorative term and in 2009 when President Obama termed the
Netherlands a tax haven, the Dutch government protested and the Treasury
Department adjusted documentation to please them."
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.
Finfacts:
Bono's hypocrisy on Africa, corporate tax avoidance in Ireland
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 reported in Ireland a net income as a ratio of sales of 0.8% in 2012 compared
with Google Inc's net income ratio of 30%.
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.
Finfacts:
US company profits per Irish employee at $970,000; Tax paid in Ireland at
$25,000
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:
A few miles away in Arlington, a 55-year-old economist named Marty Sullivan
sat on a folding metal chair at a card table in the garage of his modest brick
home and watched the hearing unfold on his laptop computer. Sullivan is one of
those unheralded members of the permanent Washington establishment who make
things work, at least when the politicians let them. And for two decades, from
the same home office, Sullivan has been exposing the tax-dodging schemes of
multinational corporations in the columns of Tax Notes, a must-read publication
for tax lawyers, accountants and policy wonks.
It was Sullivan who shined an early light on how companies had finagled
“transfer prices” — the price one division charges another for parts or services
— to shift profits to low-tax jurisdictions.
It was Sullivan who had called out the big drug and tech companies for
transferring ownership of their patents and trademarks — the source of much of
their profits — to subsidiaries in Ireland and other low-tax jurisdictions."
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..
We reported in 2004:
Ireland is the world's most profitable country for US
corporations, according to analysis by US tax journal Tax Notes. In a study by
the journal's Martin Sullivan, it was found that profits made by US companies in
Ireland doubled between 1999 and 2002 from $13.4bn to $26.8bn, while profits in
most of the rest of Europe fell. In his analysis Sullivan termed Ireland a
'semi-tax haven' for US firms, because firms are involved in real productivity
in contrast with locations such as Bermuda.
Between 1999 to 2002, US multinational corporations increased profits in
countries with no taxes or low rates by 68% while sharply reducing profits
recorded in countries where they engage in substantial business activity, a
study published in the journal Tax Notes shows.
According to the New York Times, Commerce Department data, not referred to in
the study, suggest that US companies took 17 cents of each dollar of worldwide
profits in tax havens in 2002, up from 10 cents in 1999.
Tax Notes shows that for each dollar of profit taken in Luxembourg in 1999, US
corporations took $4.56 of profit in 2002. The result for Bermuda was $2.96; for
Ireland $2.01; and for Singapore $1.72. These countries are viewed as tax havens
or partial tax havens. For UK, each dollar of profit taken in 1999 was equal to
67 cents in 2002; for Germany, it was 46 cents."
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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