‘The law will be changed if multinationals have a problem’

Occupying a single floor of a three-storey building in a suburban Dublin office park, Western Union’s offices are notably modest for the international headquarters of the world’s largest money transfer firm.

The set-up is typical of swathes of US companies using Ireland to cut their tax bill. An analysis of Irish and US filings shows that more than 40% of the S&P 500 have registered subsidiaries in the country.

That nexus, which has created over 100,000 jobs for Ireland, was laid bare when the US senate revealed that Apple had paid little or no tax on billions of dollars in profits channelled through the country.

Ireland rejects the claims it is a tax haven, but the case has damaged its reputation.

Company documents in Ireland and filings in the US show many firms have multiple units in Ireland, where corporate tax is 12.5% — a third of the top US federal tax rate of 35%.

In many cases, several subsidiaries are registered at the offices of Dublin-based law firms.

In Western Union’s case, Unit 9, Richview Office Park, houses 11 of its 12 Irish subsidiaries. The company made 92% of its pretax income outside the US last year, although a fifth of its staff work in the country. That allowed the Colorado-based company to cut its effective tax rate to 12.2% — average for a large US company.

Companies, investors, and politicians argue it is a firm’s duty to keep its tax bill as low as possible so it can invest to grow and return money to shareholders.

“The (Irish) tax rate is not that relevant, because nobody pays 12.5%,” said Jim Stewart, a professor at Trinity College Dublin, specialising in taxation.

“It’s about the ease of incorporation, the ability of Irish corporate law and tax law to fit in with IRS (Internal Revenue Service) requirements, and the flexibility shown by the Department of Finance and Revenue to any of the multinationals’ needs. If they have a problem, the law will be changed.”

A spokesman for the Department of Finance said it did not change laws to suit multinational companies and its focus was on the local economy.

The Revenue Commissioners said it did not do special deals on tax rates for any company.

Apple’s ability to pay tax of just 2% on its $74bn (€56bn) in overseas income over the past three years hinged on an unusual loophole in the Irish tax code that allowed it to channel profits into Irish-incorporated subsidiaries that had no declared tax residency anywhere in the world. US rules that allow companies incorporated abroad not to pay US taxes complemented the arrangement.

Apple, which employs about 4,000 people here, is one of many firms that route money through Ireland to cut taxes on company profits and fund investments.

PepsiCo Global Investment Holdings Ltd, which provides financing to other companies in the drinks group and is one of 14 Irish subsidiaries, made a profit of almost $6m in 2011 and paid tax of $215 to Curacao, giving it a rate of 0.004%, records show.

A spokeswoman for PepsiCo said it fully complies with the tax laws where it operates.

Records show an Irish holding company of Boston Scientific, one of the country’s top multinational employers, paid $60m tax on profits of $1.4bn in 2011, or about 4%.

At least 206 of America’s largest 500 companies by market capitalisation have one or more subsidiary in Ireland.

Pfizer leads the way with 32 Irish-registered companies. Pfizer makes some of it drugs in Ireland, employs 3,200, and has invested $7bn here in the last 45 years.

It’s not clear to what extent the Irish units of S&P 500 companies contributed to reducing their tax bills. Companies can opt to declare only “significant subsidiaries” to the SEC, and some have names unrelated to their parent, making it hard to pin down exactly which ones have an Irish presence.

The 14 members of the S&P 500 that have 10 or more companies incorporated in Ireland have between 77 and — in the case of Pfizer — 655 declared subsidiaries worldwide.

Irish politicians are reluctant to dig any deeper. They opted earlier this month not to interview multinationals at tax hearings, a move critics said was protecting companies that don’t pay their fair share of tax.

“I think politicians are afraid of the multinationals, said Sinn Féin TD Pearse Doherty, who led calls for multinational bosses to face parliamentary grillings similar to those in the US and Britain.

“They’re afraid... that they will pull out of Ireland. It seems as if they are on bended knee. It reminds me of the Celtic Tiger era when the bankers ruled the roost.”