Sunday 28 December 2014

Multinationals face crackdown on 'aggressive tax planning'

Roisin Burke

Published 16/10/2013 | 23:55

Apple CEO Tim Cook: A US Senate committee drew negative attention to Apple's activities in Ireland
Apple CEO Tim Cook: A US Senate committee drew negative attention to Apple's activities in Ireland

THE Government will crack down for the first time on aggressive tax planning by multinationals that are not tax resident in any country, Michael Noonan said amid mounting international concern about Ireland's tax affairs.

In tandem with Budget 2014, Mr Noonan's department released an International Tax Strategy mission statement that contains measures to clamp down on agile tax-planning moves like the notorious so-called "double Irish".

Companies registered in Ireland for tax reasons will no longer be allowed to be 'stateless' in terms of their residency, he warned during his Budget 2014 speech yesterday.

Although the 12.5pc corporation tax remained set in stone, "Aggressive tax planning by companies is a major issue for legislators across the world and it needs to be addressed," the new policy statement says. "Ireland is very much involved in the process of addressing this issue."

Ireland's commitment to tackling "harmful tax competition" is declared in an 'International Tax Charter' contained within the document.

"Some company structures have been criticised as examples of legal but aggressive tax-planning by multinational companies," the strategy document conceded, even though Ireland complied with international tax rules and only engaged in fair tax competition.

Earlier this year, a US senate committee on Apple's tax affairs drew fresh negative attention to the company's activities in Ireland.

'Double Irish'

The Finance department's document points to tax planning by companies that relies on "mismatches between the domestic rules that exist in different countries."

The "double Irish" could be considered one such tax strategy – an entirely legal but controversial means of using Irish tax law to pay tiny amounts of tax worldwide.

"The intention is to ensure that no company that is incorporated in Ireland can be stateless in terms of their tax residency," the Department of Finance said.

The forthcoming Finance Bill being prepared by the Government will include two measures that will combat "aggressive tax planning".

The new law will change Ireland's company residence rules with the aim of "eliminating mismatches that can exist between tax treaty partners in certain circumstances being used to allow companies to be 'stateless' in terms of their place of tax residence".

It will also ratify three new international tax agreements with Ukraine, Montserrat and Dominica providing for exchange of information between tax authorities.

Last week, an IMF report referred to "tricks of the trade" used by multinationals to pay super low tax, and highlighted the "Double Irish Dutch Sandwich" which it said was "popularly associated with Google", where Ireland and the Netherlands were tax conduits that channelled profits ultimately to tax haven Bermuda, reducing tax to tiny proportions.

Mr Noonan said that as part of its EU Presidency this year, Ireland had achieved significant progress in "countering tax fraud and aggressive tax planning".

Irish Independent

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