Irish Finance Minister Michael Noonan promised to amend the country’s corporate tax laws, trying to calm a controversy over how U.S. companies use the nation to lower their tax bills.
“I will be bringing forward a change to ensure that Irish registered companies cannot be ‘stateless’ in terms of their place of tax residency,” Noonan said in Dublin as part of the 2014 budget Tuesday. “Ireland wants to be part of the solution to this global tax challenge, not part of the problem.”
U.S. senators John McCain and Carl Levin in hearings in March labeled Ireland a tax haven. Apple reduced its tax bill by setting up a unit in Cork, which didn’t declare tax residency in Ireland because it’s neither managed nor controlled in the country, according to Senate hearings. As the unit is incorporated in Ireland, it’s not a U.S. tax resident.
Investigations found that Apple avoided paying income tax on billions of dollars of profit during the past four years in part by moving patent rights to a web of offshore subsidiaries. The company said it doesn’t use “tax gimmicks.”
The proposed changes “will not impact on any Irish incorporated companies that may be tax resident in another low tax jurisdiction,” said Peter Vale, a tax partner with Grant Thornton in Dublin. “However, it sends out the right message in terms of Ireland’s desire to be part of the global initiative to resolve global tax inequities.”
Tax Residence
While some companies like Apple cut their tax bills using Irish subsidiaries that don’t declare tax residency anywhere in the world, others do so in zero-tax or low tax jurisdictions.
LinkedIn, for example, cuts its global tax bill by paying tens of millions of dollars a year in royalties to an Irish unit that declares its tax residence in the Isle of Man, corporate filings show.
Noonan said Ireland is “100% committed” to its 12.5% company tax rate.
Andrea Nahles, general secretary of Germany’s Social Democrats party, which is in talks with Chancellor Angela Merkel to form a coalition government, said Monday that Ireland’s corporate tax rate “is simply too low.”
Ireland’s company tax regime “is under siege,” said Michael McGrath, finance spokesman with Fianna Fail, the nation’s largest opposition party. “None of us should be complacent about the mutterings we are hearing from Germany.”
Image: Joan Carles Martorell
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This article originally published at Bloomberg here
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