Tax loophole may be phased out

Officials in the Department of Finance are considering phasing out a tax device used by multinational firms including Google, as the EU looks into the practice.

Tax loophole may be phased out

They are considering the elimination of a technique known as the “Double Irish,” which allow firms to avoid paying corporate tax on much of their income, or phasing the tax break out over four or five years, said a source..

Finance Minister Michael Noonan is under pressure from the European Commission to end incentives which sweeten the nation’s 12.5% corporate tax rate as he prepares his budget speech. The commission said yesterday it asked for information from Ireland on tax residency rules earlier this year.

“The commission has been gathering information on various tax practices in several member states,” said Antoine Colombani, a spokesman for EU competition commissioner Joaquin Almunia. “The fact that we ask for information does not mean this will lead to a formal investigation.”

In a separate probe, EU regulators criticised accords Apple reached with the country’s tax authorities, on suspicions “employment considerations” trumped compliance with international tax rules. Both Apple and finance officials deny any wrongdoing.

“The state-aid investigation currently under way relates to one company only,” the department said in an email response to questions.

“Ireland has and will continue to co-operate with this investigation. This involves exchange of information and face-to-face meetings to discuss details of the investigation. General discussions on taxation do not form part of these discussions.”

While Mr Noonan moved last year to scrap a measure allowing companies registered in the country to be “stateless” in terms of tax residency, he left the Double Irish structure unchanged.

In the case of Google, the company routes its European sales through a subsidiary in Dublin. The unit in turn pays royalties to another Irish company for the rights to Google’s various patents.

Because the second unit is managed in Bermuda, it isn’t tax resident in Ireland and doesn’t owe Irish taxes. This results in the majority of Google’s worldwide profits avoiding tax anywhere in the world. Google declined to comment.

- Bloomberg

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