US Multinationals and Tax in Ireland

J

jimmeboy

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Hi all,

With the recent news coverage of the taxes being paid by big US multinationals operating in Ireland (Google, Apple, Amazon etc) I thought it might be an interesting topic to discuss here (apologies if I am in the wrong section of the forum).

A question in the back of my mind is how are these companies paying such low amounts of tax (between 1 and 5%) on their profits where we on the other hand (Irish businesses) are paying Corporate Taxes at a rate of 12.5% ?

It just doesn't seem fair to me but I may be missing some key points.

Appreciate any discussion and thoughts on this.


NB: there is an article in the Independent today in relation to Apple however I can't post a link as I have less than 15 posts...
 
I would guess that the rate that they are paying are after legal deductions for R&D, losses, etc. so that the final figure of profit on which CT is payable ends up as 12.5 of the remaining figure which is 1-5% of the original profit before these legitimate deductions.

I think for me the whole issue is one of politicians in many countries now now seeking to create pariahs and scapegoats of individuals and companies that create wealth to take the spotlight from their failures. Failures to monitor a reckless financial system, failure to manage the fallout, failure to tackle government spending and failure to generate climate for growth.
There is of course a moral obligation to pay a fair share and many small companies are being hounded for tax revenue and being wrapped up in extra red tape which is not fair. Large company employ large number so they get preferential treatment from government, plus they make good photo opps for the re-election campaigns.
It is my opinion that taxing more stifles innovation and simply wastes the energy of individuals and companies in seeking ways not to pay or in the case of individuals who end up paying 50% plus for generating extra income generates the reaction - why bother. The fact that this revenue is going to prop up systems that remain incompetent and resistant to innovation is frustrating.
I am fully convinced if you removed 80% of politicians and leave those qualified to make laws and remove huge sections of pen pushing parts of the public service (including EU) it would not make a blind bit of difference to the running of the country.
So tax efficiently, tax lower and use the receipts wisely and all would be happier and better served not having to listen to infernal drivel of politicians. Put the resources in the productive end of the civil service front end.
 
To be honest if the US is so concerned about global tax avoidance, they should start at home by examining Delaware company law before sullying the name of other nations.
 
It's all to do with dividend pooling. Too complex to explain here except to say that subsidiaries dividends are all 'pooled' here in Ireland with a higher foreign effective tax rate than Ireland thereby sheltering the profits 'generated' in Ireland. Transfer pricing would operate to ensure profits aren't artificially routed to Ireland. So there must be a genuine operation in Ireland to create profits here.

It's nothing to do with R&D as other regions have far more generous R&D packages. For instance, the UK has released a package of R&D measures called the 'patent box' which is far more generous than what we have.
 
The only sure way to understand the ins and outs of a company's tax liability is to to be able to read and understand the corporation tax return of that company (Form CT1) in connection with a set of audited financial statements. A CT1 is confidential between the company/auditors/taxation advisers and the Rev Comm, that won't ever enter the public domain, anymore than any individual's Form 11 income tax return would.
 
International tax is indeed complex. My understanding is that Apple Operations International Ltd is registered in Ireland but Ireland has a management test to decide where a company is resident for tax purposes, the company is managed in the States. The US has a place of formation test for tax residence.

So neither Ireland or the US consider the company resident for tax in their country and the US Senate recon its Irelands fault.
 
Joe_90 said:
International tax is indeed complex. My understanding is that Apple Operations International Ltd is registered in Ireland but Ireland has a management test to decide where a company is resident for tax purposes, the company is managed in the States. The US has a place of formation test for tax residence.

So neither Ireland or the US consider the company resident for tax in their country and the US Senate recon its Irelands fault.
Click to expand...

And a few other key points; US only taxes remittances. Which is why large MNEs keep huge bank balances out of the States - and why another large wellknown company (Microsoft? Google? Apple?) is borrowing money stateside instead of spending some of its gigantic cashpiles.
 
What's becoming very annoying about this story is that once again it is going back to the 12.5% corporation tax rate in Ireland. My understanding of the Apple situation is that it has absolutely nothing to do with the tax rate in Ireland but has everything to do with the taxable amount of their profits - i.e. only the profits achieved in Ireland are taxable at 12.5% whilst the other profits are not taxable in Ireland. Is this not the real issue here and the corporation tax rate is a complete red herring in this story?
 
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