Ireland and corporate tax avoidance

maninasia

srsly78 wrote: »

Learn to read the accounts properly.

(www.duedil.com - free reg, you can get any companies accounts from here)


Google Ireland Limited 2011:

Turnover 12,457,352,000 EUR
Cost Of Sales 3,382,094,000 EUR
Gross Profit 9,075,258,000 EUR
Operating Profit 20,852,000 EUR
Pre-Tax Profit 24,369,000 EUR
Post-Tax Profit 2,153,000 EUR

As you can see, "profit" can refer to lots of different stuff. That 9 billion gross profit is not what is taxable. You have made the same mistake with the other companies too.

The discrepancy is caused by transfer pricing rules, as allowed by the USA via tax treaties with various countries.

Right, transfer pricing is the multi billion dollar tax avoidance scheme which allows 'gross profits' to magically convert to minimal 'operating profits', while shifting the proceeds to their subsidiary in a tax haven. Ireland's 12.5% rate is just applied to the crust that's left which then becomes crumbs.

Of course transfer pricing wouldn't work without strange loopholes like Ireland allowing companies operating here to be tax non-resident everywhere else in the world!

In this case countries could tighten up and try to leverage tax on 'gross profits', but then 'cost of sales' will be their next playtoy.

There is a tax system called 'minimum applicable taxation' which may eventually have to come into effect. It's extremely unfair that employees and small contractors need to pay their taxes while multinational giants game the system.

Cody Pomeray

Duggys Housemate wrote: »

Look. Ireland will get a bad press because that is how dominant powers work. The UK is being exploited by Starbucks use of tranfer pricing , Ireland is exploiting Google ( who do the same to Ireland via the British dependency of Bermuda). Nobody talks of transfer pricing to Britain.

Maybe don't start a paragraph with "look" if the rest of that paragraph is reliant on emotions and no facts.

So lets stick to facts. US tax laws as they relate to federal tax obligations of overseas subsidiaries, their sub companies, and the ineractions between them are extensive. Some might use the word 'severe'. The US tax code provides only for very narrow movement within its strictures. It is difficult to imagine how much further the US tax authorities could go in calling in under their jurisdiction those activities and corporate persons which are 'rightfully' American, but who avail of such strange and wonderful mechanisms (such as Irish transfer pricing rules) as to render them impenetrable to all but brute force, it seems.

However, usually nobody has to resort to brute force; the international economies of the advanced world are usually fully co-operative with one another in working together to combat unfair or improper structures which seek to undermine corporations' tax obligations.

Under the Finance Act 2010, Irish tax law openly gave the two fingers to the arms length principle in international best practice as regards transfer pricing rules between subsidiaries or otherwise related firms. Deloitte themselves looked at these legal provisions and gave the equivalent of a shrug and a smile in their follow up report.
We are legal renegades in this regard, acting totally out of character both for ourselves and for the standards expected in the international community with whom we like to align ourselves.

To describe this as an international problem is a form of national myopia. Worse again, to cry 'bully' when we openly resort to such underhanded tactics gives a sad glimpse of this State's inability to assume a grown-up country's responsibility.

edanto

Cody Pomeray wrote: »

Under the Finance Act 2010, Irish tax law openly gave the two fingers to the arms length principle in international best practice as regards transfer pricing rules between subsidiaries or otherwise related firms. Deloitte themselves looked at these legal provisions and gave the equivalent of a shrug and a smile in their follow up report.
We are legal renegades in this regard, acting totally out of character both for ourselves and for the standards expected in the international community with whom we like to align ourselves.

That's fascinating. I don't know the area well, but would like to read more, something like an analysis of that legislation explaining which bits of the law have the effect you described and how other jurisdictions are different.

Would you know of any articles like that please?

Cody Pomeray

The integrity of the 'arms length' rule and counterparty documentation requirements are the issues which make the Irish transfer pricing rules easy to overcome and an aberration in international tax law; I don't know of any law firm who would explicitly state this, but you can read between the lines in reports like this from Arthur Cox, which gives a fairly good breakdown of the Finance Act 2010.

http://www.arthurcox.com/uploadedFiles/Publications/Publication_List/Arthur%20Cox%20-%20The%20New%20Irish%20Transfer%20Pricing%20Regime,%20April%202010.pdf

The Finance Act was an amazing creature. Although it claimed to 'tighten' Irish transfer pricing rules, as Arthur Cox point out, the rules were very much "light touch". But even more absurdly, the Act actually further relaxed irish provisions on dividends and royalties. In international tax law, our provisions on transfer pricing remain, therefore, exceptional.

gaius c

Duggys Housemate wrote: »

Both McCain and Levin - a total idiot - have made their minds up.

Maybe they are idiots but they are influential and small fry like us will get squashed as a result.

gaius c

maninasia wrote: »

I don't know about the actual figures pertaining to the final rate of tax, but it is clear we are a big peg in the global tax avoidance structure, and our days in this game are numbered.
They are numbered either by a leavening of the tax playing field in Europe (competition among nations) or by tightening up due to pressure from large countries such as US and Germany and even UK (which itself is also a major player in tax avoidance).

Don't think so. Some of the political blustering is because Apple don't contribute enough to campaign warchests. Other companies that contribute are not getting hit to the same level.

Once Apple play ball and grease some palms, they'll be off the hook and life will go on.

antoobrien

maninasia wrote: »

Of course transfer pricing wouldn't work without strange loopholes like Ireland allowing companies operating here to be tax non-resident everywhere else in the world!

Transfer pricing has nothing to do with that being tax resident/non tax resident in a country, it is to do with transfers to legal entities in different jurisdictions for the apportioning of taxation. The google and apple cases have been badly distorted by the senate committee because of the existence of "non-resident" companies, however it is the tax resident companies that that pay the transfer prices to entities in other countries that have loopholes that allow cheap repatriation of funds (which Ireland doesn't).

The real problem, is not the Irish rates or even rules, but loopholes like the the Dutch rules allowing funds to wash into their overseas holdings (same as the british ones) with little/no taxation paid, with the side effect that they have to apply the same rules to places like Berumda, which have little/no tax paid.

Companies in the US must get agreement from the SEC for their transfer pricing schemes, so it's not like the Apple or Google schemes are secret in the first place.

Cody Pomeray

antoobrien wrote: »

Companies in the US must get agreement from the SEC for their transfer pricing schemes, so it's not like the Apple or Google schemes are secret in the first place.

What legal basis would the IRS have for coming after a subsidiary firm which is incorporated in Ireland, owned by a parent firm incorporated in Ireland, and managed and controlled outside of the US? Seriously.

That's just daft. We would be the first to be screaming blue murder if the US tax authorities began appropriating the profits from such structures, and rightly so.

Our transfer pricing rules are exceptional and out of keeping with our colleagues in the OECD. We need to stop blaming others for this, or at least have the balls to admit what we are facilitating.

antoobrien

Cody Pomeray wrote: »

What legal basis would the IRS have for coming after a subsidiary firm which is incorporated in Ireland, owned by a parent firm incorporated in Ireland, and managed and controlled outside of the US? Seriously.

That's just daft. We would be the first to be screaming blue murder if the US tax authorities began appropriating the profits from such structures, and rightly so.

Our transfer pricing rules are exceptional and out of keeping with our colleagues in the OECD. We need to stop blaming others for this, or at least have the balls to admit what we are facilitating.

Oh for the love of....

You do realise that the IRS levies taxes on worldwide earnings of us individuals (corporations are treated as individuals) right? This means that among other things every dual citizen has to file a tax return with the IRS as well as revenue. One of the the reason that TFAs exist is so that the likes of Apple & Google don't pay 12.5% on their operating profit here, then pay 30+% on the worldwide gross profit (which is what most US states use for calculating CT).

One of the Apple companies registered here pays taxes in the US because of the structure of the overseas tax laws in the US (the profits generated are counted as investment income, which is subject to US taxation, whereas sales activities outside of the US are not). This fact is at best helping to cause at worst intentionally being used to confuse the issue.

Cody Pomeray

antoobrien wrote: »

Oh for the love of....

You do realise that the IRS levies taxes on worldwide earnings of us individuals (corporations are treated as individuals) right?

I mentioned it in my previous post. I don't think you understand what I've just said.

Nobody is questioning federal tax obligations. I am questioning the extent to which the IRS can credibly bring foreign corporations and their subsidiary firms under US tax jurisdiction i.e. there is a limit to the scope of a country's anti-deferral and TP rules which is usually met by the co-operation of other tax jurisdictions in the advanced world.

So bearing that in mind, answer my question.

what legal basis would the IRS have for coming after a subsidiary firm which is incorporated in Ireland, owned by a parent firm incorporated in Ireland, and managed and controlled outside of the US?

antoobrien

Cody Pomeray wrote: »

what legal basis would the IRS have for coming after a subsidiary firm which is incorporated in Ireland, owned by a parent firm incorporated in Ireland, and managed and controlled outside of the US? Seriously.

Looks like you missed it, under US law the IRS has the power to levy taxes on all worldwide income of a company that is registered in the US including any subsidiaries.

djpbarry

Cody Pomeray wrote: »

Maybe don't start a paragraph with "look" if the rest of that paragraph is reliant on emotions and no facts.

Cody Pomeray wrote: »

The integrity of the 'arms length' rule and counterparty documentation requirements are the issues which make the Irish transfer pricing rules easy to overcome and an aberration in international tax law; I don't know of any law firm who would explicitly state this, but you can read between the lines in reports like this from Arthur Cox...

Maybe don’t accuse others of relying on “emotions and no facts” if the best you can do is to encourage us to “read between the lines”.

Cody Pomeray

djpbarry wrote: »

Maybe don’t accuse others of relying on “emotions and no facts” if the best you can do is to encourage us to “read between the lines”.

The poster was looking for specific information on the arms length provisions of the Finance Act and how it compares internationally. Short of telling him/her to buy a couple of kgs of a textbook on Tax Law, it's the best anyone can offer.

maninasia

gaius c wrote: »

Don't think so. Some of the political blustering is because Apple don't contribute enough to campaign warchests. Other companies that contribute are not getting hit to the same level.

Once Apple play ball and grease some palms, they'll be off the hook and life will go on.

One can be cynical given what happened after the recent financial crisis i.e. no major changes on Wall Street or prosecutions.

However I do detect a general cultural shift and society shift and a push back against corporations. Even some corporate executives have joined this side of the debate.

Cody Pomeray

antoobrien wrote: »

Looks like you missed it, under US law the IRS has the power to levy taxes on all worldwide income of a company that is registered in the US including any subsidiaries.

Nobody denies that the US could institute laws or regulations which would be grievous to commercial interests of US corporations and would unreasonably interfere with corporations incorporated and active in foreign jurisdictions, having any relationship at all to a US parent firm.

The point is, well, this would be excessive and damage trade.

That's why I said most advanced countries understand these limitations, and co-operate with one another. Most countries, that is, except Ireland and Holland. We are the guys who are outside the fold here, we need to stop presenting this as nothing to do with us.

kippy

20Cent wrote: »

Imagine a plumber in Dublin set up an off the shelf company in Switzerland, all his jobs were paid to that company and he gave himself minimum wage in order to pay as little tax as possible, house car etc owned by the offshore co. That loophole would be shut down quick smart.

Yeah I call the services you describe as tokenism or more like public relations/marketing, bet they get tax relief on them as well. A crack down on tax havens would probably be bad for Ireland though agree, still doesn't mean we have to pimp our country out to them. A Europe wide solution to the issue seems required. Isn't that on the agenda for the G8?

The plumber in Dublin is a lot different to the Googles and Amazons of this world on many levels and isn't a great comparison.

There's a tonne of creative accounting going on in the biggest companies in the world. They pay accountants, solicitors, specialist's, CFO's CEO's etc a lot of money to ensure they pay as little money as legally possible in taxes etc. They have the budgets and turnover to do it.

The "open market" and taxation policies across the globe have allowed them to become even more efficient in this area.
And of course for the likes of Google/Apple/Intel and the numerous medical and pharma organisations here, one does have to ask whether the jobs provided is a good enough pay off for the little corpo tax paid. There are many companies however who have very few staff here that funnel all their figures through here however.

The ONLY way to tackle the issue from a moral standpoint is to harmonise tax rates and eliminate and "offshore" havens. That is never going to happen however and just as well for us.

antoobrien

Cody Pomeray wrote: »

Most countries, that is, except Ireland and Holland. We are the guys who are outside the fold here, we need to stop presenting this as nothing to do with us.

And the UK & Berumuda.

And the US state of Delaware, where the a sizeable number of US companies are incorporated.

Cody Pomeray

antoobrien wrote: »

And the UK & Berumuda.

And the US state of Delaware, where the a sizeable number of US companies are incorporated.

Bermuda, absolutely.

Are you suggesting that the UK is a brassplate haven on the scale of Ireland for the avoidance of tax?

I'm still waiting for an answer to my question. You're suggesting that the US authorities take statutory or regulatory measures to call in foreign firms' tax obligations which the US understand to be substantively American.

Can you suggest how the US could do this without completely destroying legitimate cost sharing arrangements, tax treaties, and co-operation, especially between or within large international corporations where research and development activities are concerned?

It's just unbelievable. Nobody could seriously be proposing that level of intervention, but i'd like to see somebody attempt it. Do you have an answer?

maninasia

The way I see it is this has actually very little about avoiding US tax and is actually 99% related to avoiding EU taxes!

Therefore it is the EU laxity in this regard that is the problem. It is EU governments that are losing their tax revenue hand over fist, not the US.

Whether or not US multinational companies repatriate overseas earned profits is a separate matter. It's ironic that it is the US senate that is opening up this can of worms rather than other EU governments per se.

antoobrien

Cody Pomeray wrote: »

I'm still waiting for an answer to my question. You're suggesting that the US authorities take statutory or regulatory measures to call in foreign firms' tax obligations which the US understand to be substantively American.

Can you suggest how the US could do this without completely destroying legitimate cost sharing arrangements, tax treaties, and co-operation, especially between or within large international corporations where research and development activities are concerned?

All the US have to do is undo a couple of loopholes that the senate committee described as "tick box reporting" that allows them to vastly write down the amount of income that is attributable to US sources in favour of overseas sources, taking them out of the reach of the IRS. If you'd actually listened to the senate hearing recording and what those two idiots Levin & McCain said, instead of taking the torygraph and gurd'n as holy writ, you'd understand this.

As for the Transfer pricing agreements, every company (not just the US ones) that files with the SEC (anyone that sells shares on a US stock exchange) has to register the agreements with the SEC. They can fix a lot of their perceived problems if they wish by stopping the practice of treating patents held by a company(group) in the same fashion as patents held by third parties (this is part of what Apple & Google do).

Of course they'd be as nuts to do that as we and the dutch would be to do anything without an international treaty that is binding on all UN members.

Cody Pomeray

antoobrien wrote: »

All the US have to do is undo a couple of loopholes that the senate committee described as "tick box reporting" that allows them to vastly write down the amount of income that is attributable to US sources in favour of overseas sources, taking them out of the reach of the IRS. If you'd actually listened to the senate hearing recording and what those two idiots Levin & McCain said, instead of taking the torygraph and gurd'n as holy writ, you'd understand this.

I'm basing this on my knowledge of tax law, I didn't watch the Senate hearings and I don't read the Telegraph or the Guardian.

So be specific.

How do you suggest the US cracks down on Code 367 as it relates to firms' cost sharing arrangements as a way of "closing a loophole", without grievously damaging US firms ability to co-operate with worldwide firms including those MNC subsidiaries pursuing a legitimate business in research and development here in Ireland?

antoobrien

Cody Pomeray wrote: »

How do you suggest the US cracks down on Code 367 as it relates to firms' cost sharing arrangements as a way of "closing a loophole", without grievously damaging US firms ability to co-operate with worldwide firms including those MNC subsidiaries pursuing a legitimate business in research and development here in Ireland?

I've already given you that answer.

Cody Pomeray

antoobrien wrote: »

I've already given you that answer.

No you haven't. I'd like to be specific. Tell me how you would reform that code without grievously damaging Irish and American business interests.

This is important because you are painting this as a problem of US laws - show us where you would tighten the law then.

antoobrien

Cody Pomeray wrote: »

No you haven't. I'd like to be specific. Tell me how you would reform that code without grievously damaging Irish and American business interests.

Yes I have. The tax dodge that google do is nothing to do with R&D.

Cody Pomeray

antoobrien wrote: »

Yes I have. The tax dodge that google do is nothing to do with R&D.

I'm not interested in individual companies; I'm talking about the tax law of both jurisdictions. It's a simple question. The exceptions allowed under strict, but reasonable and necessary cost sharing rules allow US firms to co-operate, develop or otherwise collaborate with subsidiary or otherwise related firms outside of the federal tax jurisdiction; however, because of the rules on the Irish side, these exceptions can be abused.

Now, most people see the exceptions under Code 367 as reasonable and would view any tightening of these regulations as excessively damaging to commercial interests on both sides.

However, you and Eamon Gilmore are two of the unusual cases.

Please, tell us how you would tighten this code without damaging irish interests.

antoobrien

Cody Pomeray wrote: »

Now, most people see the exceptions under Code 367 as reasonable and would view any tightening of these regulations as excessively damaging to commercial interests on both sides.

That very much depends on which part of it you're nitpicking. If they tightened up on the abusive transfers of patents (IP transfers is covered under intangibles) it wouldn't cost Ireland much - because the TPAs on these is used to transfer income out of Ireland before they pay tax on it here.

Perhaps if Code 637 is tightened up we'll see more companies doing what Alkermes did when they merged with/bought out Elan and bring their corporate HQ here.

Cody Pomeray

antoobrien wrote: »

Perhaps if Code 637 is tightened up we'll see more companies doing what Alkermes did when they merged with/bought out Elan and bring their corporate HQ here.

Oh ha, good one! By that rationale, Holland and Ireland should be the ones taking an initiative of tightening/ creating and enforcing our anti deferral and TP rules, and watch all the US corporations just file in !

You're really over egging the pudding on this one.

antoobrien

Cody Pomeray wrote: »

Oh ha, good one! By that rationale, Holland and Ireland should be the ones taking an initiative of tightening/ creating and enforcing our anti deferral and TP rules, and watch all the US corporations just file in !

That's exactly the opposite of what I'm suggesting.

Cody Pomeray

I'm using your rationale. You're avoiding the ineascapable fact that tightening US tax rules for the obligations of subsidiaries or related firms incorporated in Ireland would damage Irish interests by implying that such tightening could actually be good for the Irish economy.

That's clearly BS. If it had any credibility, we would be closing down the loopholes we have carefully built in order to lure more corporations into our tax net. It's delusional stuff.

draiochtanois

This post has been deleted.

antoobrien

Cody Pomeray wrote: »

I'm using your rationale. You're avoiding the ineascapable fact that tightening US tax rules for the obligations of subsidiaries or related firms incorporated in Ireland would damage Irish interests by implying that such tightening could actually be good for the Irish economy.

It's only an inescapable fact if you buy into the belief that the only reason that US companies are here is for corporation tax, which is plainly not the case. The fact of the matter is that most US companies pay very little CT in Ireland, however many have substantial operations. Closing US tax loopholes will not change the significance of European operations centers to these companies.

Now I don't now what rationale you think I'm using, but I've given you one clear case of a US company relocating its corporate HQ to an Irish operation. Are you suggesting that companies that go to such lengths as to set up complex TPAs will not relocate their corporate operations to somewhere that is more tax beneficial, especially considering the US can not change double taxation rules without seriously damaging themselves?

Cody Pomeray

antoobrien wrote: »

I've given you one clear case of a US company relocating its corporate HQ to an Irish operation. Are you suggesting that companies that go to such lengths as to set up complex TPAs will not relocate their corporate operations to somewhere that is more tax beneficial

Relocate in the event of what? A North Korean style tax regime in the US? The abrogation of its tax treaties? Certainly, if the US corporations are taxed out of existence they will rise from the ashes in offshore tax havens and onshore tax havens in other corporate personages. This is not a very illuminating statement. Not least because nobody really considers that likely or reasonable.

In reality, the US authorities would first broaden the base by tightening rules on CFCs and deferral to an unreasonable extent, and in the process, lure US corporations back into the US tax jurisdiction. That is a result that is in danger of occurring due to (i) aggressive tax competition and (ii) offering an irresponsible profit manipulation mechanism in collaboration with tax havens. Ireland is guilty on both counts.

Nobody wants that to happen. Not even the greenest of the green jersey brigade. Tightening anti deferral, TP, and cost-sharing rules are a terrible idea for legit corporations pursuing business interests outside the US. Exceptions to US federal tax obligations exist for very good reason, but there is a good amount of wiggle room there for the US to make decisions that are completely against Irish interests, especially as it relates to intangible property and our vision of Ireland as an R&D hub.

And all for what? Losing innovative corporations that actually create employment in Ireland, who pay Irish taxes... to save brassplates paying very little?

I believe we will clean up our tax system and rid ourselves of a profit manipulation loophole that is of no serious benefit to the Irish economy. Hopefully we will start actually engaging in the promotion of genuinely productive enterprise around the same time. That might be helpful.

The Rooster

Cody Pomeray wrote: »

I'm not interested in individual companies; I'm talking about the tax law of both jurisdictions. It's a simple question. The exceptions allowed under strict, but reasonable and necessary cost sharing rules allow US firms to co-operate, develop or otherwise collaborate with subsidiary or otherwise related firms outside of the federal tax jurisdiction; however, because of the rules on the Irish side, these exceptions can be abused.

Now, most people see the exceptions under Code 367 as reasonable and would view any tightening of these regulations as excessively damaging to commercial interests on both sides.

However, you and Eamon Gilmore are two of the unusual cases.

Please, tell us how you would tighten this code without damaging irish interests.

Cody, you have a little bit of knowledge, which is a dangerous thing!

How do you expect Ireland to tax a company that is not tax resident in Ireland?

The United States is one of the very few territories who do not tax companies who are managed and controlled in that country.

In the example of nowhere resident Apple, if they were managed in UK, they'd be taxed in the Uk, managed in Ireland - taxed in Ireland, managed in Germany - taxed in Germany. Its not Ireland's fault that the US chooses to tax by incorporation.

The Apple model of "resident nowhere" is actually very rare, because for one thing it looks terrible.

The Google model of using companies managed and controlled in an offshore haven is much more common. But again this is completely facilitated by the US. The US company sells its IP to the Haven company. The IRS audit this and agree the valuation, and the amount is fully taxable in the US. The Haven resident company then licenses the IP to other territories, including Ireland, for amounts in accordance with OECD international tax rules and these are received tax-free.

If the IP was still located in the US, the Irish subisidary would have to pay royalties to the US, but because the IP is now in the haven, Ireland has to pay royalties to it instead. Its not Ireland's fault that the US allowed the IP to be transferred out of the US, and not Ireland's fault that the Haven territory chooses not to tax anyone.

We have our 12.5% rate, a legitimate, transparent tax rate. ALL profits earned by Irish resident companies are taxed at this rate.

The Rooster

Cody Pomeray wrote: »

The integrity of the 'arms length' rule and counterparty documentation requirements are the issues which make the Irish transfer pricing rules easy to overcome and an aberration in international tax law; I don't know of any law firm who would explicitly state this, but you can read between the lines in reports like this from Arthur Cox, which gives a fairly good breakdown of the Finance Act 2010.

http://www.arthurcox.com/uploadedFiles/Publications/Publication_List/Arthur%20Cox%20-%20The%20New%20Irish%20Transfer%20Pricing%20Regime,%20April%202010.pdf

The Finance Act was an amazing creature. Although it claimed to 'tighten' Irish transfer pricing rules, as Arthur Cox point out, the rules were very much "light touch". But even more absurdly, the Act actually further relaxed irish provisions on dividends and royalties. In international tax law, our provisions on transfer pricing remain, therefore, exceptional.

Utter nonsense!!

As outlined in the Arthur Cox document, Ireland's transfer pricing legislation represents Ireland formally adopting both the OECD Transfer Pricing Guidelines and the “arm’s length” principle.

To say Ireland's TP rules are an "aberration in international tax law" is just simply a lie.

The "light touch" reference in Arthur Cox document is around the administrative requirements, not that it can be ignored! Companies have to spend a fortune in advisors fees in preparing transfer pricing studies and benchmarking analyses to support their intercompany pricing.

Ireland has two aspects which are lighter than other jurisdictions, which helps avoid companies incurring unnecessary expense. First of all, we accept TP studies performed in other countries, so long as Ireland is referenced in those studies (other countries require new full TP studies, regardless of the fact that a study has already been carried out, resulting in a duplication of work and fees).

Ireland also does not care if the Irish sub has underpaid (for example) a royalty expense - because this means Ireland is receiving additional tax. This would never happen with royalties paid to OECD countries, because their TP will ensure that Ireland does not underpay (thus again a duplication of studies/fees is eliminated).


You're also talking nonsense on Ireland's provisions re royalties and dividends. The likes of UK and Netherlands have a more favourable treatment of royalties and dividends and we are trying to bring ours more in line, but we're not there yet - for example foreign dividends received are completely exempt from tax in UK and NL, but that's not the case in Ireland.

Cody Pomeray

The Rooster wrote: »

Utter nonsense!!

The Rooster wrote: »

just simply a lie

The Rooster wrote: »

You're also talking nonsense

Okay first of all - sit down and spare us the affected indignation. Even for someone who is interested in taxation, this is hardly so impassioned a topic as your offence would suggest - lets deal calmly with whatever arguments you are trying to make.

As outlined in the Arthur Cox document, Ireland's transfer pricing legislation represents Ireland formally adopting both the OECD Transfer Pricing Guidelines and the “arm’s length” principle.

Well, everyone knows that the Finance Act 2010 (officially) introduced the arms length principle for the transactions under discussion, and that this is broadly correspondent with the OECD framework. What is at issue is the extent of monitoring and enforcement relative to other EU tax jurisdictions, you see.
One concern is lax documentation requirements compared to, say the UK. Another more important example is that provision whereby it may be made unduly burdensome to try and take a case against the companies operating suspect transfer pricing arrangements in this jurisdiction as a result of the grandfathering provision of the legislation.

A breakdown by Matheson Ormsby is available here
http://hb.betterregulation.com/external/How%20to%20be%20sure%20your%20transfer%20pricing%20arrangements%20in%20Ireland%20are%20grandfathered.pdf

This is in stark contrast to other EU countries also operating broadly in accordance with the OECD framework, where in fact the trend is toward tightening transfer pricing rules and aggressive tax avoidance mechanisms. Do you deny this? Are you aware of Germany, France, Belgium and Spain tightening their TP rules... are you aware of even the Netherlands doing so? This is what I say when I describe Ireland as aberration.

We created a half assed regulation and then stuck in a heap of other goodies for high paid CEOs to come here and pay less tax on their salaries to sweeten the deal. Like I said, two fingers.

The Rooster

Cody Pomeray wrote: »

Well, everyone knows that the Finance Act 2010 (officially) introduced the arms length principle for the transactions under discussion, and that this is broadly correspondent with the OECD framework. What is at issue is the extent of monitoring and enforcement relative to other EU tax jurisdictions, you see.
One concern is lax documentation requirements compared to, say the UK. Another more important example is that provision whereby it may be made unduly burdensome to try and take a case against the companies operating suspect transfer pricing arrangements in this jurisdiction as a result of the grandfathering provision of the legislation.

A breakdown by Matheson Ormsby is available here
http://hb.betterregulation.com/external/How%20to%20be%20sure%20your%20transfer%20pricing%20arrangements%20in%20Ireland%20are%20grandfathered.pdf

This is in stark contrast to other EU countries also operating broadly in accordance with the OECD framework, where in fact the trend is toward tightening transfer pricing rules and aggressive tax avoidance mechanisms. Do you deny this? Are you aware of Germany, France, Belgium and Spain tightening their TP rules... are you aware of even the Netherlands doing so? This is what I say when I describe Ireland as aberration.

We created a half assed regulation and then stuck in a heap of other goodies for high paid CEOs to come here and pay less tax on their salaries to sweeten the deal. Like I said, two fingers.

Our TP rules are in accordance with OECD principles. Any transactions relating to a trade with related parties must be for an arm's length amount. It can't be any tighter than that!

We are less burdensome in respect of paperwork, but only to the extent that there is existing paperwork in place that we can piggyback on. If there is not, then our requirements are very similar to the UK's.

The grandfathering is a transitional arrangment so there was no "big bang" for companies. But Revenue made it very clear in their statement of practice that it is short lived. For example a royalty agreement loses it grandfathered status when there is a change in products covered by the agreement (even if there has been no change to the agreement itself). So tech companies with ever evolving product ranges will benefit from grandfathering for at most a year or so.

Absolute nonsense to say Revenue are not monitoring it. Another statement you need to retract.

There is very little in the way of income tax incentives for high paid foreign CEOs, we're well behind our competitiors in that regard. I wish we did have a "heap of goodies" that would attract high paid foreign CEOs (and all the additional employment they would bring with them).

Cody Pomeray

The Rooster wrote: »

Our TP rules are in accordance with OECD principles.

This is becoming something of a mantra.

The OECD principles can be described as a broad framework - it would be incorrect to portray it as a harmonised regulatory structure; within that OECD framwork, Ireland delivers more lax environment than the countries I mentioned, whereby in those countries the trend is toward tighening TP rules to an extent not yet envisaged in Ireland.

Absolute nonsense to say Revenue are not monitoring it. Another statement you need to retract.

No, because that is my understanding of how things operate.

There is very little in the way of income tax incentives for high paid foreign CEOs, we're well behind our competitiors in that regard. I wish we did have a "heap of goodies" that would attract high paid foreign CEOs (and all the additional employment they would bring with them).

Oh please, a 30% reduction in income tax for the relevant income, to put that into context, someone on €500,000 is automatically *entitled* to an income tax relief disregard of €130,000, and that's before you start to apply additional write-offs for sending his kids to private schools abroad and holidays home... meanwhile in the real world...

How many EU countries are more generous than this?

Worztron

srsly78 wrote: »

Learn to read the accounts properly.

(www.duedil.com - free reg, you can get any companies accounts from here)


Google Ireland Limited 2011:

Turnover 12,457,352,000 EUR
Cost Of Sales 3,382,094,000 EUR
Gross Profit 9,075,258,000 EUR
Operating Profit 20,852,000 EUR
Pre-Tax Profit 24,369,000 EUR
Post-Tax Profit 2,153,000 EUR

As you can see, "profit" can refer to lots of different stuff. That 9 billion gross profit is not what is taxable. You have made the same mistake with the other companies too.

The discrepancy is caused by transfer pricing rules, as allowed by the USA via tax treaties with various countries.

They are still immoral.

Please post the full figures for all your favorite tax dodging companies.

The Rooster

Cody Pomeray wrote: »

The OECD principles can be described as a broad framework - it would be incorrect to portray it as a harmonised regulatory structure; within that OECD framwork, Ireland delivers more lax environment than the countries I mentioned, whereby in those countries the trend is toward tighening TP rules to an extent not yet envisaged in Ireland.

Care to explain how any country can tighten the rules re arm's length?

The rules are indentical in most countries, i.e. they all follow the OECD principles. Ireland allows companies to piggy back on other countries documentation. That's the main difference, along with the temporary grandfathering difference.

Cody Pomeray wrote: »

No, because that is my understanding of how things operate.

Well your understanding is 100% wrong. Revenue have been active in hiring and training staff over the last 2 years to perform TP audits.

Cody Pomeray wrote: »

Oh please, a 30% reduction in income tax for the relevant income, to put that into context, someone on €500,000 is automatically *entitled* to an income tax relief disregard of €130,000

We have a Special Assignee Relief Program, which was brought in by FG/Lab at the request of the IDA in order to make Ireland more attractive for foreign direct investment, and so we can compete against the incentives offered by the likes of Switzerland, Netherlands, Luxembourg. Its not automatic, there are a number of onerous conditions to be met.

But if we did attract a foreign CEO over who was on €500,000, and who did meet all the conditions for the SARP, then he would "only" contrbute €180,000 to the Irish Exchequer. Which is €180,000 more than we'd get if he chose to move to Switzerland instead. Plus these guys don't come and sit in an office by themselves, they hire people - which means more revenue for the Irish exchequer and less money paid out in social welfare.

Its beyond ridiculous how anyone could criticise this. The IDA are one government agency who consistently (under all colours of goverment) perform great work in attracting multi nationals to Ireland and all the jobs that come with that.

The Rooster

Worztron wrote: »

They are still immoral.

Please post the full figures for all your favorite tax dodging companies.

Whether Google (or any other company) earning profits in offshore havens, who choose not to tax such profits, is immoral is a question for shareholders and customers of said company.

But its nothing to do with Ireland.

If Google had picked UK, Netherlands, Switzerland as their HQ in Europe, that country would pay the exact same royalties out to the tax haven.

If the US tax rules had not allowed Google to transfer its IP from US to the haven, the HQ company would still have to pay royalties to the US instead of to the haven.

Ireland is doing absolutely nothing wrong, so the criticism it get is ridiculous. I can understand the US and UK politicians as they are playing to their electorate, but for Irish people to be critical of our tax policies that attract the MNCs is pure gombeenism.

Google employs over 2,000 people in Ireland, and contributes north of €70M a year in corporate tax and payroll taxes to the Irish exchequer.

We have a 12.5% tax rate that applies to all profits properly attributable to Irish operations, in accordance with international tax law. Completely transparent, and we don't do under the table deals like they do in Lux and Switzerland.

antoobrien

Worztron wrote: »

They are still immoral.

Please post the full figures for all your favorite tax dodging companies.

I've never bought the morality argument on paying taxes, it stinks of the attitude that "a fair tax is one that I don't have to pay".

Bill Gates recently gave an interview where he was asked about this, his response was interesting:

Gates added: “It is not incumbent on those companies to take shareholder money and pay huge amounts that are not required.”

On whether it is ethical to use schemes that may not align with the intent or spirit of local laws, Gates said he feels “in a system of laws it is very important that if you follow the laws you do not have some second standard”.

“This is not a morality thing, this is about the law,” he said. If nations set new tax levels “companies will be happy to comply”.

The highlighted comment is the core to this issue, there are a lot of people with axes to grind who are being plainly hypocritical (McCain pushed for tax breaks for oil companies when running for the white house).

Cody Pomeray

The Rooster wrote: »

We have a Special Assignee Relief Program

I know what it is alright, this is why I just raised it to begin with.

What I'm asking you is what you meant when you said "there's very little" and more specifically, I'd like to know which competitors we are well behind in the EU in this regard?

onerous conditions to be met.

Onerous? Are you kidding? You must think the only people who read this forum are people sitting at home feeding their gerbils.

Please tell me which of the six conditions set out in the revenue note are "onerous".

But if we did attract a foreign CEO over who was on €500,000, and who did meet all the conditions for the SARP, then he would "only" contrbute €180,000 to the Irish Exchequer. Which is €180,000 more than we'd get if he chose to move to Switzerland instead.

1. Doesn't have to be a CEO, this applies to other employees

2. There are inadequate provisions to ensure that the job was not coming here regardless of SARP

3. *especially* those who were coming here to operate companies solely for the purposes of transfer pricing and profit manipulation, whilst contributing little in the way of taxation.

Joe 90

Cody Pomeray wrote: »

I know what it is alright, this is why I just raised it to begin with.

What I'm asking you is what you meant when you said "there's very little" and more specifically, I'd like to know which competitors we are well behind in the EU in this regard?

Onerous? Are you kidding? You must think the only people who read this forum are people sitting at home feeding their gerbils.

Please tell me which of the six conditions set out in the revenue note are "onerous".



1. Doesn't have to be a CEO, this applies to other employees

2. There are inadequate provisions to ensure that the job was not coming here regardless of SARP

3. *especially* those who were coming here to operate companies solely for the purposes of transfer pricing and profit manipulation, whilst contributing little in the way of taxation.

You don't reckon that someone who is grossing 500,000 and paying 180,000 in payroll taxes is paying enough tax in any case. That is 36%. It should not matter whether his job is relocated from abroad, it is a helluva lot in absolute terms.

Cody Pomeray

Joe 90 wrote: »

You don't reckon that someone who is grossing 500,000 and paying 180,000 in payroll taxes is paying enough tax in any case. That is 36%. It should not matter whether his job is relocated from abroad, it is a helluva lot in absolute terms.

Joe, there are not many idiots on €500k per year, and only a complete idiot would pay that 36% effective on a salary of €500,000. In reality, such an employee's salary would be structured to avoid as much tax as possible via pension incentives and other perfectly legitimate avoidance methods.

And no, I don't believe we should stop taxing employees' salaries once their tax contribution reaches "a helluva lot".

I don't believe in that level of entitlement for any citizen.

What I really have a problem with, however, is this notion that anything involving tax incentives of this order can be justified where it **might** bring employment, and where only very flimsy rules are applied,and no conditionality attached to new employment at all, apart from this well paid exec on €500k or whatever.

The Rooster

Cody Pomeray wrote: »

I'd like to know which competitors we are well behind in the EU in this regard?

Onerous? Are you kidding? You must think the only people who read this forum are people sitting at home feeding their gerbils.

Please tell me which of the six conditions set out in the revenue note are "onerous".

1. Doesn't have to be a CEO, this applies to other employees

2. There are inadequate provisions to ensure that the job was not coming here regardless of SARP

3. *especially* those who were coming here to operate companies solely for the purposes of transfer pricing and profit manipulation, whilst contributing little in the way of taxation.

"Onerous" can be debated but its certainly not automatic as you described, and a lot of people won't qualify.

It does not apply to the first €75,000 of earnings - the first €75k has to be taxed as per normal rules. Therefore, its going to be high level people it applies to. You need to have worked for the group for at least 12 months prior to coming to Ireland. The benefit only lasts for 5 years.

These conditions are certainly more onerous than, for example, the Netherlands. Netherlands has a 30% exemption for foreign employees. It has no 12 month rule, the salary limit is between €38k and €50k (depending on type of employee) and I beleive the exemption applies to all earnings. In NL the exemption lasts for 8 years.

So there's no doubt the Irish rules are more onerous than the Netherlands. Luxembourg and Switzerland also offer very good tax answers for foreign executives.

Ireland has a number of positive factors that attract foreign companies, but our tax policy is a big part of it, and we need to be competitive with NL, Lux, Switz in particular to keep and attract MNCs to this country. To think they'd all come anyway if our tax rates were higher is naive in the extreme.

What I really have a problem with, however, is this notion that anything involving tax incentives of this order can be justified where it **might** bring employment, and where only very flimsy rules are applied,and no conditionality attached to new employment at all, apart from this well paid exec on €500k or whatever.

How many well paid execs, having been with their company for more than 1 year, have travelled to Ireland to set up operations over here, committing to live here for a minimum of 12 months, are over here working on their own? Seriously?
The nature of it is that if a company sends a top exec over, he needs plenty of people around him. No other European country has conditions as part of their incentives. The IDA tries to create an environment that encourages companies to move here and then encourages them to grow.
And again with your lies about "flimsy rules". What has you so bitter to make all these false claims?

Cody Pomeray

The Rooster wrote: »

"Onerous" can be debated

Well if you want to persist in suggesting that the conditions are onerous, lets debate it then.

Show us how it is onerous beyond those unremarkable Revenue conditions i mention, where the conditions for eligibility revolve around the employee being well-paid and not having had worked in Ireland for a few years...

So, no conditions attached to what kind of industry he works in? no conditionality attached to how important his role is in the company? zero conditionality attached to bringing any extra employment?

Or am I missing something? I hope I am, it might mean you are not merely trying to exaggerate for effect again.

The benefit only lasts for 5 years.

Only five years? So what, someone on a massive salary can get, hmmm what, €250,000 written off in income tax, with no conditions about creating employment, even where he's only running a which exists for profit manipulation and may pay very little tax - and you're implying that it's not enough?

Netherlands has a 30% exemption for foreign employees.

No, the Dutch rule only applies to people in certain industries where there is a scarcity of Dutch workers. The Irish rule applies to all industries.

I beleive the exemption applies to all earnings.

No, the exemption does not apply to the first €35,000 of earnings, and in cases where the salary is less than €50,000, the fully 30% rate will not apply to employees who have won some exemptions

What you're neglecting to point out is far more important than these minor issues.

The Dutch higher rate of tax is 52%. Therefore, high earners can be taxed an effective marginal rate of 0.7 x 52% = 36%.

The Irish higher rate is 41%; this can give an effective higher rate of 28.7% at the income above €75,000.

All in all, taking into consideration the lax rules about industry eligibility and the overall income tax rates it is reasonable to say that the Irish and Dutch are only about similar in our incentives.

But you said something quite different. You said "we're well behind our competitiors".

Presumably you think Holland is not our only competitor. It's been established that we're not "well behind" Holland. How many of our neighbours are we actually "well behind"?

I'm not expecting that you're an expert on European taxation systems, so I wouldn't usually be expecting a detailed answer. Nevertheless, you've made a claim about "our competitors", presumably you didn't just invent it....

The Rooster

Cody Pomeray wrote: »

What you're neglecting to point out is far more important than these minor issues.

The Dutch higher rate of tax is 52%. Therefore, high earners can be taxed an effective marginal rate of 0.7 x 52% = 36%.

The Irish higher rate is 41%; this can give an effective higher rate of 28.7% at the income above €75,000.

Forgetting the USC in Ireland?
And what about PRSI?
Marginal rate in Ireland is higher than in NL and kicks in much earlier. Reliefs kick in later in Ireland.
The NL exemptions rules have been relaxed such that very few industries don't qualify now.
It would be a very rare case that someone would be better of in the Irish income tax system than in the Dutch one. And most of the time execs would be signficantly better off under the Dutch rules.

Marginal rate in Switzerland can be as low as 20%, and usually is around that for foreign execs.

Only five years? So what, someone on a massive salary can get, hmmm what, €250,000 written off in income tax, with no conditions about creating employment, even where he's only running a which exists for profit manipulation and may pay very little tax - and you're implying that it's not enough?

Its unbelieveable nonsense that you think a company sends over a top exec, having been with their company for more than 1 year, has travelled to Ireland to set up operations over here, committed to live here for a minimum of 12 months, and he'll be on his own in some back office!
Why all this bullshít scaremongering? Why so bitter about these incentives the IDA put in place to encourage foregin companies to set up and grow in Ireland? Why ignore all the corporate taxes, payroll taxes, VAT these companies give to the Irish exchequer?

Cody Pomeray

Before I start this point I still want to know what other conditions make the Irish requirements onerous?

You can't seriously be calling the requirement not to have worked in the State recently, or the requirement to be quite well paid "onerous", I don't believe that's credible, so if you wish to stand by your claim of onerous conditions, please tell us what extra conditions you are referring to.

If you want to drop that claim, simply say so.

The Rooster wrote: »

Forgetting the USC in Ireland?
And what about PRSI?
Marginal rate in Ireland is higher than in NL

Er, this is really clutching at straws. Come on, you're ignoring the higher rate of 52% that kicks in at €56,000 in the Netherlands.

Social security contributions can be significant in The Netherlands. Because of this, and because of the overall higher rate of tax in the Netherlands, and because of the restrictions on availability to avail of employment incentives for foreign workers, I think it is at generous or reasonable to compare them as equal or thereabouts.

You said "we're well behind our competitors". There are about 30 EEA member states, and so far you've established that our foreign employee incentives similar to the Dutch incentives. To my mind, this ranks our foreign employee incentives joint 1st.

Personally, I have no idea if there 28 other EEA members who offer better incentive packages for "special" employees to arrive on their shores. But you seem to know, you claim we're "well behind them".

For a country that is well behind, you seem to be having an awful lot of trouble establishing evidence. Why is it so hard for you to demonstrate your claim> is it because you made it up, assuming nobody would ask?

The Rooster

Cody Pomeray wrote: »

Er, this is really clutching at straws. Come on, you're ignoring the higher rate of 52% that kicks in at €56,000 in the Netherlands.

Social security contributions can be significant in The Netherlands. Because of this, and because of the overall higher rate of tax in the Netherlands, and because of the restrictions on availability to avail of employment incentives for foreign workers, I think it is at generous or reasonable to compare them as equal or thereabouts.

Clutching at straw? By stating facts you omitted?
Our higher rates kick in well before €56k.
There is no PRSI in NL when you hit the top rate of tax - 52% is the top marginal rate including everything.

As I've said already, Ireland's system is more onerous than the Netherlands, especially since they lifted most of their restrictions.
They can hire new employees rather than it being restricted to current employees, and the relief kicks in much earlier.

Switzerland and Lux both also offer materially better income tax answers than Ireland. Belgium a bit better too. Cyprus and Malta and other smallers states also.

But its doesnt actually matter who's is better or worse. What matters is Ireland needs to be competivite. Our incentives are not unfair and go some way to encouraging companies to locate here. But we could improve it a lot by reducing the income levels to the Dutch levels and allowing new hires to qualify. I wouldnt agree with taking it to Swiss levels where they can get significant tax reductions by living in cantons like Zug. Thankfully the high cost of living there offsets some of their individual tax benefits.

The key point is Ireland offers a fair and transparent system, no special deals, all companies pay tax on their taxable profits at 12.5%, and we should be all the side of encouraging the IDA and Ireland Inc, rather than the begrudging nonsense you're repeating ad nauseaum

Cody Pomeray

The Rooster wrote: »

Switzerland and Lux both also offer materially better income tax answers than Ireland. Belgium a bit better too. Cyprus and Malta and other smallers states also.

Nope, this hasn't suddenly become a discussion about income tax, it's about income tax incentives for foreign employees; see the bottom of this page.

The distinction is particularly important because we don't distinguish between those employees who are locating to Ireland from another location as a consequence of SARP and those who would have had to come here anyway, not least to manipulate their balance sheets and avoid tax on corporate profits.

To remind you, this is the quote you made.

The Rooster wrote: »

There is very little in the way of income tax incentives for high paid foreign CEOs, we're well behind our competitiors in that regard. I wish we did have a "heap of goodies" that would attract high paid foreign CEOs

All I'm asking for is evidence?

All of the suggestions so far indicate we are around the top of the table in terms of incentives.

When you provide the evidence, maybe you can finally tell us how Ireland's SARP requirements are onerous.

The pattern here throughout your posting is that you are very loose on rhetoric and hyperbole, and very slow to back anything up with fact.