Thursday 19 October 2017

Ireland in spotlight as US firms claimed to hold $1.6trn offshore

Sean Duffy

The top 50 US companies have a total of $1.6 trillion (€1.5 trillion) stashed offshore and are depriving governments around the world of much needed tax revenues, according to a new report from charity Oxfam.

The issue of taxation for major corporations has become a live one for politicians of every hue in recent years as the aftermath of the financial crisis put a squeeze on the middle classes around the world.

National governments have been beset by dwindling tax revenues while some of the wealthiest companies on earth continue to extract large profits from consumers buying their products in the real economy.

The use of complex and opaque tax structures is now widely viewed as an unacceptable strand of globalisation. Communal action has been taken; more than 100 tax jurisdictions, including Ireland, have committed to the OECD's Base Erosion and Profit Shifting (Beps) guidelines that require companies to be more transparent about their tax affairs. But can this work?

The Beps guidelines centre around 15 actions aimed at substantially increasing the global tax take from the multinational sector, while simultaneously making it much more difficult for companies to shift profits around.

Of course, such tax reforms are vigorously opposed by lobbyist groups who represent the companies. The Oxfam report states that the top 50 US companies spent around $2.5bn on lobbying activities between 2009 and 2015. US President Donald Trump has proposed tax reforms for these companies that would see them repatriate the offshore funds back to the US.

Ireland has been one of the countries that has come under greatest scrutiny for the facilitation of tax avoidance for the multinational sector. The European Commission (EC) ruling last year - which said Apple owed Irish authorities €13bn in back taxes - triggered incredulous reactions from the Government and Apple.

Both have appealed the verdict to the European Court of Justice.

Nonetheless, the latest Oxfam report shows that Apple currently has $200bn held offshore.

Ireland and the EC also clashed recently over the Commission's Common Consolidated Corporation Tax Base (CCCTB). This would see companies declare their income on a country-by-country basis, something already agreed with the OECD.

However, the EC is advocating that the information be made public. The Government has said that this approach runs contrary to what was previously agreed.

In a speech back in February, Mr Noonan criticised the CCCTB proposals, saying: "I can't work to two masters who've given me different sets of instructions, and I can't dance to two different tunes.

"The Commission is departing from what was agreed internationally at OECD level and I think that's bad practice," he added.

The spat shows just how difficult it has become to tie down a specific set of agreed tax standards that country's across the globe are willing to adhere to.

With many countries using tax policy to bolster economic performance, it remains to be seen if the existing loopholes can be closed sufficiently to ensure a higher tax take from global corporations.

It remains to be seen whether some countries would benefit at the expense of others from a wider shift in tax practices.

Irish Independent

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