Apple To ‘Think Different’ After Irish Move To Close Tax Loophole
Overnight the Irish Government moved to close one of the world’s most well-known corporate-tax loopholes, amid a broader tax crackdown on Companies such as Apple, Google and several European Companies who operate in Australia.
The Wall Street Journal is reporting that Ireland will change its tax code to require that all Irish-registered companies must also be tax residents in Ireland, ending a tax-optimization program known as the “Double Irish,” Finance Minister Michael Noonan said in a parliamentary address to announce the 2015 budget.
“Aggressive tax planning by the multinational companies has been criticized by governments across the globe and has damaged the reputation of many countries,” Mr. Noonan said in announcing the changes.
The rule change will take effect in January, but won’t be applied to companies currently using the structure until the end of 2020, Mr. Noonan said.
Apple, Microsoft, Google and other multinationals based in Ireland are to be given a four-year window before the phasing out of a scheme that has in the past allowed them to legally shift billions of dollars out of Australia into Irish Companies.
Pressured by the Liberal Coalition Government Treasurer Joe Hockey has lobbied the European Union to take action over the loophole that is being used by these Companies to avoid paying their fair share of tax in Australia.
During theG20 group meeting in Brisbane Hockey lobbied the Organisation for Economic Cooperation and Development to produce a package of tax reforms to rein in multinationals. This work is expected to be completed by summer 2015.
Recently an investigation by the EU found that Apple’s tax arrangements in Ireland were so generous that it amounted to state aid.
In the UK the Government announced a crackdown on technology firms’ tax strategies. UK Treasurer George Osborne said: “Some of the biggest technology companies in the world . go to extraordinary lengths to pay little or no tax here . We will put a stop to it.” Party officials briefed that he had companies using the double Irish scheme in his sights.
What the Irish Government is set to do is reward foreign firms that base their technological developments in the Irish state, a move that critics claim will lead to new tax minimisation schemes.
Currently he double Irish loophole allows US companies based in Australia to reduce their tax bill far below Ireland’s 12.5% corporate tax rate by shifting most of their taxable income from an operating company in Ireland to another Irish-registered firm in an offshore tax haven such as Bermuda.