Ireland's Tax Change may Cost US Multinationals Billions of Dollars
Ireland’s announcement that it was closing the tax loophole that allowed companies from the US and other countries to seek tax shelters in the Emerald Isle may have come as welcome news for administrators, but it will not be easy on US companies like Apple and Google. It will not be too good for those administrators when their economy suffers because of this new policy.
Corporate tax attorneys estimate that the loss of Ireland as a tax domicile will cost these companies billions of dollars. However, despite the change in tax laws no one is expecting the MNCs to decamp soon.
Bureaucrats wanted even More
Financial analysts and tax attorneys predict that MNCs that need access to the 500 million consumers in the European world will ultimately figure that it will be hard for them to set up a new base somewhere else. EU member countries, including Brussels, have started their own investigations to look into corporate arrangements that allow companies to pay minimal taxes. Apparently these socialist countries in Europe have not experienced enough terrible economies. Well, according to business leaders, apparently they want the pitiful times to continue.
The million dollar question that is facing all the big corporations right now is that where can they go after Ireland. Every place in the EU is getting “too hot” when it comes to supporting low corporate tax arrangements.
Ireland was the perfect base for US multinationals; the tax system which was often referred to as the ‘Double Irish’ allowed companies to set up channels to ferry profits made in major markets throughout the continent. Corporations had to pay little tax this way; much lesser than what they would have had to pay if they had remained in the US only. The US has the high corporate tax on planet earth.
However, as the government in Dublin sees a resurgence of sorts, it has decided to do away with a tax system that upset the anti-business political leaders that run many of the European countries. The largest companies in Europe and many tax attorneys wondered why these countries did not lower their taxes to compete with Ireland rather than just complain but that is what they did―criticize Ireland for having a winning tax model.
Ireland Still has High Hopes
The Irish government has given those companies which already have headquarters in Ireland up till 2020 to find alternative tax shelters. Along with the decision to close down the Double Irish tax savings, Irish Finance Minister Michael Noonan also announced changes in the intellectual property tax laws in the country, hoping that the decision will keep Ireland a lucrative business destination for companies in the years to come. But they already were and they decided to change because they were affected by a little criticism.
Ireland Succumbed to the Pressure
There has been growing anger by socialists and central planners about tax avoidance. The Group of 20 biggest economies (many of them who are in a recession right now) has had to rethink international tax rules because they were not happy the private sector was outsmarting them and trying to keep more money to pay its own employees and to hire more. So they verbally chastised Ireland for allowing this to happen and they eventually got their way.
Information not Known
Analysts say that with the focus shifting to low-tax jurisdictions around the world, multinationals like Google, Apple, Amazon, and others of their ilk will probably face the risk of rising consolidated tax rates in the near future. Though this may not have an effect on operational decisions, it will surely impact valuations across the globe. Since Ireland does not publish a public list of companies which are registered in the country but are not tax-residents of Ireland but who employ thousands of Irish citizens, it is hard to exactly estimate how much income will be affected.
Companies can always look at the Caribbean, New Zealand, Puerto Rico, Turkey, or Eastern Europe perhaps. Tax lawyers can work anywhere.