We recently heard that the EU regulators were looking into the tax treatment of a number of companies within the EU, one of these companies was Apple and their EU HQ in Ireland.
It looks like Apple and other companies who operate their European operations out of Ireland will either have to pay more tax, or move to another country, as the Irish government has announced that they are changing the rules.
The End of the ‘Double Irish’ Tax Arrangement
Apple and other companies now have until 2020 to decide what to do, as Ireland will remove the ‘double Irish’ tax arrangement from 2020 for existing companies and from next year for new companies. The ‘double Irish’ tax scheme has been a popular strategy for multinational corporations to reduce their tax liabilities by shifting profits to low or no-tax jurisdictions. This arrangement allowed companies to funnel profits through two Irish subsidiaries, effectively lowering their overall tax burden.
The news was announced by Ireland’s finance minister Michael Noonan who said that “These measures will enhance Ireland’s corporate tax regime and align it with best practice internationally. It will ensure that Ireland continues to be the home of the best and most successful companies in the world.” This move is seen as a significant step towards greater tax transparency and fairness within the EU.
Impact on Multinational Corporations
It will not just be Apple that is affected by the changes, but also companies like Google, Facebook, and Microsoft who run their EU business from Ireland. These tech giants have benefited immensely from the ‘double Irish’ arrangement, saving billions in taxes over the years. The abolition of this scheme will compel these companies to reassess their tax strategies and possibly relocate their operations to other jurisdictions with more favorable tax regimes.
For instance, Google has been known to use the ‘double Irish’ arrangement to significantly reduce its tax rate on non-U.S. profits. In 2013, it was reported that Google had shifted over $10 billion to Bermuda using this tax strategy. Similarly, Facebook has also utilized this arrangement to minimize its tax liabilities on international earnings.
The decision to abolish the ‘double Irish’ tax scheme comes amid increasing pressure from the EU and other international bodies to crack down on tax avoidance by multinational corporations. The Organisation for Economic Co-operation and Development (OECD) has been advocating for global tax reforms to address base erosion and profit shifting (BEPS), which are strategies used by companies to exploit gaps and mismatches in tax rules.
While the removal of the ‘double Irish’ arrangement is a step in the right direction, it also raises concerns about Ireland’s competitiveness as a hub for multinational corporations. The Irish government will need to strike a balance between maintaining its attractiveness to foreign investors and ensuring a fair and transparent tax system.
In response to these changes, some companies may consider relocating their European headquarters to other countries with more favorable tax regimes, such as the Netherlands or Luxembourg. However, Ireland’s well-established infrastructure, skilled workforce, and business-friendly environment may still make it an attractive destination for multinational corporations.
The broader implications of this move extend beyond Ireland and the tech industry. It signals a shift towards greater tax harmonization within the EU and a commitment to tackling tax avoidance on a global scale. As countries continue to collaborate on tax reforms, multinational corporations will need to adapt to a rapidly changing tax landscape.
Source The Guardian
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