In my long article in the first issue of Irish Left Review on Ireland’s corporate tax regime I made the point that Ireland in effect sells its abilities to make tax laws to profit-hungry MNCs, in much the same way as it sells the rights to our natural resources to large oil companies. That is, they sell the considerable economic benefits of Ireland’s resources without gaining any particular benefit to the whole economy. Whether its cattle, natural resources or tax breaks, they are sold on, with the agent involved in the deal getting a relevantly modest but steady income.
Still, with all the attention being on Google for a while now, there was one fact about the Irish government’s arrangements with the search engine company that I had missed.
Recently these arrangements, known as the Double Irish with the Dutch Sandwich have been given a lot of attention and are often explained. For example, see this New York Times info graphic. However, while listening to Jim Stewart’s interview on Morning Ireland last Friday in a conversation about Google’s ‘grilling’ before the UK’s Public Accounts Committee on taxation, I found out that the ‘Dutch Sandwich’ is no longer used, and instead Google’s earnings from its EMEA market goes from Google Ireland to Google Ireland Holdings, which is registered in a solicitor’s office at 70 Sir John Rogerson’s Quay and also in Bermuda. So, by passing these to the Bermuda registered company, the earnings go straight to Bermuda. Google Ireland Holdings has no employees and is ‘owned’ by Google Bermuda which also has no employees. Both are unlimited companies, so under Irish law, they do not have to publish accounts.
The details of this move are described by Jess Drucker of Bloomberg below.
“Meanwhile, Ireland, already an attractive destination for multinational companies, is making it even easier for them to avoid taxes.
Last year, for example, Irish revenue authorities agreed to let Google make billions of dollars in royalty payments directly to a Bermuda subsidiary, helping to cut the company’s tax bill by at least $2 billion a year, according to U.S. and overseas securities filings. Previously, Google had routed those payments through a shell company in the Netherlands to avoid a 20 percent Irish withholding tax on payments destined for island havens. According to a person with knowledge of the arrangement, Ireland agreed to accept an additional tax well below 20 percent in exchange for the favorable treatment.”
Despite all the sound and fury from the OECD and European Commission those Irish agents using Irish tax laws to maintain a cosy relationship with companies like Google can rest easy.
As Drucker’s piece explains:
“In December, the European Commission, the governing body of the EU, declared war on tax evasion and avoidance, which it said costs the EU 1 trillion euros a year. It encouraged its members to create “blacklists” of tax havens.
Still, the commission instructed them to single out only non-EU countries as havens — even though member-nations such as Luxembourg, the Netherlands, and Ireland encourage multinational companies to legally dodge billions of dollars in taxes around the world.
Similarly, the Organization for Economic Cooperation and Development, an influential publicly funded think tank on international tax policy, used to cite potentially harmful tax behavior by member states, including Luxembourg, the Netherlands, Ireland, Belgium and others. It stopped issuing those reports in 2006 because of “a lack of political interest” from member nations, said Pascal Saint Amans, director of the OECD’s Center for Tax Policy and Administration.
“The Europeans say one thing and do another,” said H. David Rosenbloom, the head of the international tax program at New York University’s law school and an attorney at Caplin & Drysdale in Washington. “The EU can’t do anything as long as it’s got Luxembourg and the Netherlands and Ireland” within the union.”
Photo: Image from wikipedia of Ireland Island, which is the northwesternmost island in the chain which comprises Bermuda.
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