The Government has moved to play down comments by US president Barack Obama that American companies are using legal loopholes to save tax by setting up headquarters in Ireland.
Mr Obama mentioned Ireland as an example of a location where some companies are moving addresses to avoid US taxes, even though employee numbers here are far lower than in their own country. This ‘tax inversion’ mechanism is the subject of debate in the US, whose laws allow it, although industry figures here say only dozens of large corporations have used Ireland or other countries to do so.
Jobs Minister Richard Bruton said the Government does not promote investment based on ‘tax inversion’ mechanisms and does not encourage such investment.
The US president said on Thursday that American companies that change their mailing address to avoid paying taxes are not doing right by their country.
“What we’re trying to do is to say that, if you simply acquire a small company in Ireland or some other country to take advantage of the low tax rate, you start saying ‘we’re now magically an Irish company’, despite the fact that you may only have 100 employees there and you’ve got 10,000 employees in the United States — you’re just gaming the system,” said Mr Obama.
Mr Bruton told reporters it was not possible for Ireland to introduce any law that would impact on companies deciding to change headquarters for tax inversion purposes, as any changes need to be made to the US tax system.
“It is an issue that needs to be fixed, but it can only be fixed in the US,” he said.
Mr Bruton did not think that there would be any loss of investment in Ireland if the US government closed the loophole enabling tax inversions.
“Ireland provides an attractive environment for multinational companies who wish to invest substantively here, grow their businesses, and generate economic activity and jobs,” said Mr Bruton. “Maintaining and improving this environment has been a key part of our recovery strategy.
“This strategy has been successful over the past three years with over 18,000 additional jobs created in multinational companies here. That strong flow is continuing in the first half of this year with a more than 10% increase in job commitments over the same period in 2013.”
Mr Bruton said the Government is absolutely committed to our 12.5% corporate tax rate, which he said is a low, stable, transparent and statute-based corporation tax rate, and only part of the recovery strategy.
However, Sinn Féin finance spokesman Pearse Doherty said talk of Ireland being a channel for multinational tax planners has been growing for a while, with Apple telling a US probe two years ago that Ireland allowed it a special tax rate.
Latest accounts for Google Ireland revealed this week that it paid €27.7m in corporation tax here last year, based on turnover of €17bn, and recorded after-tax profits of €154.5m.
The multinational’s Europe, Middle East, and Africa regional headquarters in Dublin increased employment last year by 8% to almost 2,400, and the firm paid €65m for a site in the capital earlier this year.
Mr Doherty said that multinationals have made an invaluable contribution and it is vital that we keep their revenue and the jobs created.
“But also, that we are aware if any event or sequence of events has the potential to threaten investment in Ireland and that we cancel the threat, or plan for it. That’s good governance,” he said.
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