Ondrej Holzman Ireland's Finance Minister Michael Noonan announced changes to the tax law this week that will prevent the use of the so-called "double Irish" system from 2020, thanks to which large multinational companies such as Apple and Google save billions of dollars in taxes.
Over the past 18 months, Ireland's tax system has come under fire from American and European lawmakers, who are unhappy with the Irish government's benevolent approach, which makes Ireland one of the tax havens where Apple, Google and other big tech companies funnel all their non-US profits.
What the United States and the European Union do not like the most is that multinational companies can transfer untaxed income to Irish subsidiaries, which, however, pay the money to another company registered in Ireland, but with tax residence in one of the real tax havens, where taxes are minimal. This is how Google operates with Bermuda.
In the end, a minimum tax has to be paid in Ireland, and since both companies in the aforementioned system are Irish, it is referred to as "Double Irish". Both Apple and Google are taxed in Ireland only within units of one percent. However, the advantageous system is now ending, for newly arrived companies as of next year, and will then completely cease to function by 2020. According to Finance Minister Michael Noonan, this means that every company registered in Ireland will also have to be a tax resident here.
However, Ireland should continue to remain an interesting destination for giant multinational companies, where they should stay and store their money in the future. The second of the much-discussed parts of the Irish system – the amount of corporate income tax – remains unchanged. The Irish corporate tax of 12,5%, which has been the building block of the Irish economy for many years, does not intend to give up the Minister of Finance.
“This 12,5% tax rate has never been and will never be a subject of discussion. It's an established thing and it's never going to change,” Noonan stated plainly. In Ireland, more than a thousand foreign companies taking advantage of the low tax rate create 160 jobs, i.e. almost every tenth job.
The changes to the corporate tax system will be the biggest in Ireland since the late 90s, when the tax rate was cut to just 12,5 percent. Although the Minister of Finance already last year prohibited companies registered in Ireland from having any tax residence listed, the possibility still remained to list any other country with a minimal tax burden as tax residence.
The move was made by Ireland following an investigation by US senators, which found that Apple was saving billions of dollars by not having any tax residency at its Irish-registered subsidiaries. After the change in the laws, similar to Google Bermuda, it will have to choose at least one of the tax havens, but by 2020 at the latest after the current tax reform, it will be obliged to pay taxes directly in Ireland.
In addition to Apple or Google, it seems that other American companies Adobe Systems, Amazon and Yahoo also used the system of tax residences in other countries. It is not yet entirely clear how much the tax reform will cost these companies, but as part of it, Ireland has also announced changes to its intellectual property tax system that should keep the island country attractive to large companies.
When VAT rates, tax bands or insurance advances for the common plebs - i.e. employees, self-employed persons and small companies - change, it will be announced from the next quarter, at the latest from the new year.
But when mega-corporations with a turnover of tens of billions of dollars and armies of lawyers want them to fill in the box "Ireland" instead of their tax residency "Bermuda" and pay 12,5 percent tax, then a five and a half year transition period must be announced to during that time the poor women found some other escape advantage elsewhere in the world. How much do you think the lobbyists of these companies contributed to the Minister of Finance? (please consider what the sum of the international profits of companies like Google, Starbucks, Apple, etc. will be in the next five years - probably in the hundreds of billions - of course not taxed anywhere)
What is permitted to God,…
Agreement. I was also surprised that after such a long time. They will have plenty of time to find a loophole.
However, every finance minister would be very happy to have a brutal drop in income starting next year. Only the lobbying deprived him of that joy...