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"Double Irish" Tax Loophole Used By US Companies To Be Closed 259

An anonymous reader writes: The Irish Finance Minister announced on Tuesday that Ireland will no longer allow companies to register in Ireland unless the companies are also tax resident. This will effectively close off the corporate tax avoidance scheme known as the "Double Irish" used by the likes of Google, Apple, and Facebook to route their earnings through their Irish holdings in order to garner an effective tax rate of, as in Google FY2013, 0.16%. Ireland's new policy will take effect in 2015 for new companies. "For existing companies, there will be provision for a transition period until the end of 2020."
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"Double Irish" Tax Loophole Used By US Companies To Be Closed

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  • Transition period? (Score:2, Interesting)

    by Anonymous Coward

    > "For existing companies, there will be provision for a transition period until the end of 2020

    Why? Isn't that just leaving the loophole open but closing?

    • by rsborg ( 111459 ) on Tuesday October 14, 2014 @11:05PM (#48146699) Homepage

      > "For existing companies, there will be provision for a transition period until the end of 2020

      Why? Isn't that just leaving the loophole open but closing?

      Also known in consumer circles as creating a sense of urgency. I mean, you have a few short months in order to setup your new company such that you can take advantage of the double Irish, or you'll be playing against an unlevel field for the next 5 years.

      Talk about land rush.

      • Playing against an unlevel playing field? I think you mean these companies will be playing against a LEVEL playing field, and that scares them.
        • If you set up your company before end of December, your company will be considered "existing" and thus you'll be able to use this loophole. If you set up your company on January 3rd, you won't have access to the loophole, like your competitors, and you'll be at a disadvantage, or an unlefel playing field.

  • Of course they're giving a 6-year transition period. It was the most they could get away with, after the pressure from other countries to either do something or they would unilaterally close these loopholes a lot quicker.
  • Hi-ho, Hi-ho, (Score:5, Insightful)

    by Anonymous Coward on Tuesday October 14, 2014 @10:09PM (#48146387)

    To a new tax haven we go!

    *whistles*

  • Why..... (Score:5, Funny)

    by thieh ( 3654731 ) on Tuesday October 14, 2014 @10:14PM (#48146415)
    Why wouldn't people just use the system of "where your customers pay you" for any multinational company to determine "where to tax is owed"? Much simpler and fairer between different nations.
    • Re: (Score:2, Insightful)

      by Anonymous Coward

      Why wouldn't people just use the system of "where your customers pay you" for any multinational company to determine "where to tax is owed"? Much simpler and fairer between different nations.

      Because they are not trying to be fair.

    • Re: (Score:2, Insightful)

      by sanosuke001 ( 640243 )
      Because taxes are used for paying for municipal/government protections, services, etc. If they have no physical entity then why should they pay for these things? It's not that simple, is all.
      • by Anonymous Coward

        Because taxes are used for paying for municipal/government protections, services, etc. If they have no physical entity then why should they pay for these things?

        If they have no physical entity in Ireland then they shouldn't fly an Irish flag. They damned well have a physical entity in the US, and are receiving its protections, services, etc. They should be paying taxes there, and I'm not talking 0.16%. I'm hardly saying 30% is fair either, but it's way past time these fucking loopholes get closed up.

        • Taxes on revenues? Because they are not making any profit; that's how it works you see.
          • If they're not making any profit, why the hell are they doing business there?

            • Here's a "for instance". Suppose a company like Google had a lot of IP, and decided to transfer the rights to that IP to a Swiss Google. Then the US Google may make an ass-ton of revenue, but the US Google has to pay the Swiss Google for the use of that IP, so the US Google has very little net profit to tax. Of course the Swiss Google is insanely profitable, but that's not something that the US can tax.

              This is just for instance and the names and locales I picked are of course arbitrary, merely for the purp
      • Because taxes are used for paying for municipal/government protections, services, etc. If they have no physical entity then why should they pay for these things? It's not that simple, is all.

        Okay, then they shouldn't get any government protections or services at all. That includes the courts, so if they don't pay taxes, they lose the ability to sue anyone for things like copyright infringement.

    • Re:Why..... (Score:5, Informative)

      by alexander_686 ( 957440 ) on Tuesday October 14, 2014 @10:25PM (#48146475)

      I will mostly agree on you point. It ignores some of the difficulties of transfer pricing but it is the right principle. The double Irish worked because the US is the only country that does not charge taxes on where the profit is earned, but charges US taxes no matter where it is earned.

      • Re:Why..... (Score:5, Interesting)

        by ShanghaiBill ( 739463 ) on Tuesday October 14, 2014 @10:39PM (#48146539)

        the US is the only country that does not charge taxes on where the profit is earned, but charges US taxes no matter where it is earned.

        But the taxes are not owed until the profits are repatriated. So the result of this idiotic policy is that little tax is collected, while companies are given a huge incentive to reinvest their profits outside America.

        • Re:Why..... (Score:5, Interesting)

          by Charliemopps ( 1157495 ) on Tuesday October 14, 2014 @11:09PM (#48146717)

          Which is why there should simply be a flat use tax. You sell anything to anyone, you're paying tax. Period.

          But the government doesn't want this because they use their current nightmare system to manipulate companies into doing their bidding. Hire more people, get a tax break. Lower your carbon footprint, get a tax break. All of it results in a multitude of pet projects by the government that fail, and corporations that eventually don't pay taxes at all. Not to mention that it gives those same companies huge incentives to medal in politics.

          Want to get the money out of politics? Get the government out of money.

          • Which is why there should simply be a flat use tax. You sell anything to anyone, you're paying tax. Period. But the government doesn't want this because...

            I don't want it either, primarily because it ends up with poor people paying a higher percentage of their income in tax. You can make adjustments for necessities, like food and gas, but that tends to make it so the middle class is paying the highest percentage of their income in tax. Also........

            ....because they use their current nightmare system to manipulate companies into doing their bidding.

            If you think it's bad now, wait until you have a group of unelected officials determining what items are 'necessities' and should be exempted. There's plenty of room for regulatory capture and manipulation there.

            • Mt theory seems like it may work, and at the same time not affect the poor people nearly as bad, while ensuring EVERYONE pays. Its similar to a flat tax, but its a transaction tax. Instead of taxing individual items, tax the transactions. And I mean every single one. There are some 300 million bank transactions a day (and this is not counting the stock market) Tax each transaction at 5 cents. doesnt matter what you buy or how much. I havent finished the math yet but if my numbers are as close as I think th
            • If you think it's bad now, wait until you have a group of unelected officials determining what items are 'necessities' and should be exempted. There's plenty of room for regulatory capture and manipulation there.

              You're not understanding. NO EXEMPTIONS.
              Food, hospital bills, baby stuff, agriculture, everything exchange of money should result in the same tax rate.
              Flat tax on all sales, period, end of story.

          • Not to mention that it gives those same companies huge incentives to medal in politics.

            Well that's unintentionally true - especially for assholes like the Kochs that are awarding gold medals to lapdog morons across the US.

        • ...while companies are given a huge incentive to reinvest their profits outside America.

          So true! Where did the 8 or 9 Billion dollars Microsoft used to buy Skype came from? Or the 3 billion Microsoft used to buy Nokia with? Or the 1.5 billion Google used to buy their London District HQ?

    • Re:Why..... (Score:4, Interesting)

      by drfred79 ( 2936643 ) on Tuesday October 14, 2014 @10:27PM (#48146489)
      A lot of countries do only tax on the revenues from their country. America is one of the few countries that tries to tax globally. That's why companies are leaving America.
      • A lot of countries do only tax on the revenues from their country. America is one of the few countries that tries to tax globally. That's why companies are leaving America.

        There are just so many reasons to leave the USA. National security letter shenanigans would mean that I wouldn't even have any management staff physically in the USA, there would be no staff in the USA to deliver a NSL to. Taxes? I'd probably prefer to hire non-US citizens, it makes banking with foreign banks a lot easier.

        Sell to the US consumer but have no presence in the country.

        • National security letter shenanigans would mean that I wouldn't even have any management staff physically in the USA, there would be no staff in the USA to deliver a NSL to.

          While NSA letters are bad, what make you think that the same (and worse) isn't already going on in most other countries?

        • Re:Why..... (Score:4, Interesting)

          by Marsala ( 4168 ) on Wednesday October 15, 2014 @12:36AM (#48147097) Homepage

          A lot of countries do only tax on the revenues from their country. America is one of the few countries that tries to tax globally. That's why companies are leaving America.

          There are just so many reasons to leave the USA. National security letter shenanigans would mean that I wouldn't even have any management staff physically in the USA, there would be no staff in the USA to deliver a NSL to. Taxes? I'd probably prefer to hire non-US citizens, it makes banking with foreign banks a lot easier.

          Sell to the US consumer but have no presence in the country.

          But.... you don't have to leave the USA. There aren't really any downsides to being an illegal alien here right now. They have the "right" to taxpayer sponsored health care, education, and welfare programs. You can even score a driver's license and vote in some places, too. Other than getting elected President and smoothing over security clearances (which most of us aren't going to ever do/need anyway), there aren't a whole lot of benefits to remaining classified as an Ugly American any more. I've been half waiting for some smaller country to figure out they can score some easy income by simply offering free citizenship to ex-USAans and a reasonable income tax rate of like, oh, say, 10%.

          Just pay your renunciation tax, open up a new checking account at Bank of Mozambique so you can get paid directly by your company's Irish office, and shine on you crazy diamond. You don't even have to learn to drive on the wrong side of the road or get involved with that Communist metric conspiracy crap, either!

    • Re: Why..... (Score:2, Informative)

      by Anonymous Coward

      Is not that simple. This is not about the "sales tax" (VAT in EU) which is typically assessed and paid in a defined jurisdiction where the sale occurs.

      This is about much more complicated corporate income tax. "Google" is not a company, but a brand. Under this brand there is a conglomerate of separate companies that are setup under different jurisdictions with different accounting rules.

      Different Google companies ("legal entities" in corporate speak) provide services to each other under internal contracts. E

      • I personally know families in which the wife does not work and is stay-home mom because is "cheaper" vs. two working parents and kids in day care. This is because two spouses working would put them in a higher taxable income bracket which will also make them receive less or none of some tax deductions. Plus they will have to pay for day care. With the wife staying home, taxable income of just one working spouse is lower, there are higher tax deductions, and no day care costs. Tax evasion? No, simply a personal example of tax optimization.

        Very bad example. even if they're in a higher tax bracket they'l probably still have more money. And I doubt that the reasoning goes like the way you described it. Most of the time it's because daycare is so expensive that the stay at home is the better choice (economically).

        • Not really. This is more like the mom is a citizen of a country that only taxes here 3% on income while she lives in the U.S. and she charges the husband's small business $120,000 a year for "housekeeping and babysitting services".

          As a result, the husband has no net income and pays no taxes. It is set up with here as a foreign national, legally hired in the foreign country but only working on site temporarily so she pays no taxes here. Net result- a total of 3% taxes paid elsewhere while she lives and pe

          • You now know why some of us become independent consultants instead of full-time workers. Company vehicle (tax deduction), company meal plan (tax deduction), employee housing as a benefit (tax deduction), write off 90% of your income and pay 10% taxes on the last 10%. Pay 1% taxes.
        • Yes, more money, but when divided across the extra hours worked (plus the extra expenses like babysitters, daycare) you'll be earning $3 per hour. Is that worth it for you? To get up in the morning, be away from your kid, suffer through a dreadful commute and deal with a boss?

          That was a situation for my mom. Working extra hours meant she was paying more in taxes from just crossing the bracket threshold, making it not worth it for her.

      • P.S. Many US families do the same thing as Google, at a smaller scale. I personally know families in which the wife does not work and is stay-home mom because is "cheaper" vs. two working parents and kids in day care. This is because two spouses working would put them in a higher taxable income bracket which will also make them receive less or none of some tax deductions. Plus they will have to pay for day care. With the wife staying home, taxable income of just one working spouse is lower, there are higher tax deductions, and no day care costs. Tax evasion? No, simply a personal example of tax optimization.

        The IRS would probably see that as tax avoidance.

        • Which they would then do absolutely nothing about, because it's completely legal and rational. In fact, it's the mechanism the government relies on when they use tax policy to manipulate you towards their various economic and social behavioral goals.

        • The IRS would probably see that as tax avoidance.

          Which is legal, so that's not an issue.

          Note that what all these companies everyone here loves to hate are doing is also legal....

          And when Ireland changes its rules so it's no longer advantageous to be based out of Ireland, they'll move HQ to elsewhere, and Ireland will be out some tax dollars that won't be much by US standards, but might be a lot by Irish standards (or not)....

          • And hopefully such havens will be closed down everywhere and companies will pay a non-ridiculous tax rate.

      • The mom that stays home has no revenue. Corporation X, that is doing what you described has overall has revenue (and fucking big one to boot). It is legal, but still a tax evasion, may not the legal definition of it, but the dictionary one: avoid paying taxes (in full or partially) on revenue. the mom staying at home does pay taxes (on X% of $0 is still $0).
        • by raymorris ( 2726007 ) on Tuesday October 14, 2014 @11:59PM (#48146973) Journal

          Let's say childcare for X kids in this city costs $1000.
          If mom works, perhaps in a childcare center, she pays FICA and income tax of $250 in order to bring home $1000. She spends the $1000 on childcare and is left with $0. Her net gain for month is that her kids were taken care of. To get that benefit, she did $1,250 worth of work.

          Suppose mom stays home and does the $1,000 worth of childcare herself. She doesn't get a check or write a check, and pays no taxes. Her net benefit at the end of the month is that her kids were taken care of. To get that benefit, she did $1,000 worth of work.

          Mom saves $250 in taxes by "working for her family " instead of doing the exact same work in a childcare center. There's a big tax difference based on which organizations are involved, even though the work done and the benefit received are identical.

        • the mom staying at home does pay taxes (on X% of $0 is still $0).

          Well, since we're being technical, I wouldn't call it paying them as there's no actual transaction. Satisfy the tax code, sure.

        • I picture economists reading your comment and cringing in pain.

      • This is not about the "sales tax" (VAT in EU) which is typically assessed and paid in a defined jurisdiction where the sale occurs.

        ..... until January. It appears our glorious leaders in the EU have decided that they weren't getting enough VAT because people sell things out of low tax jurisdictions (how dare they), so now VAT on various types of digital products and services e.g. online software sales or e-books get to pay tax based on the jurisdiction of the buyer, not the seller. So if you sell software

        • Whats so important about January in that situation? Safari Books Online started doing this (charging EU VAT on EU customers) back in 2004/2005 due to changes in EU tax regulations for non-EU companies selling products to EU customers.

    • by Burdell ( 228580 )

      The biggest issue with that is that most of these taxes are on profit, and profit can be shifted around pretty much at will. For example, Google(Ireland) could buy all the equipment needed for google.com, and "sell" it to Google(US), for an amount that just happens to resemble the profits of Google(US). So, Google(US) has no profit to tax, while Google(Ireland) has much profit (and little tax on it).

      That's one reason some people favor sales/use/value-add taxes instead; it is harder to shift that around (a

    • "Much simpler and fairer between different nations."

      1. In almost all cases the company exists in fewer countries than all of their customers. This would require a company not trying to game the system to maintain income tax accounting for vastly more countries.
      2. What does "where your customers pay you" mean for an international purchase? (See the parallel arguments concerning sales tax an interstate commerce.)
      3. Why shouldn't sovereign nations be allowed to have their own laws?

      • It simply can't work. While you are trying to force a tax on income and that income crosses national borders it will be almost impossible to decided which tax system it should fall under.

        If I purchase something from Amazon, while in New Zealand, with my UK credit card, shipped to my Aussie address. Who pays what tax where?

        Realistically we need some kind of transaction layer tax system that captures at point of sale. Think VAT or GST style but on every transaction. This should be implemented and income a

        • Realistically we need some kind of transaction layer tax system that captures at point of sale.

          So, in your example (If I purchase something from Amazon, while in New Zealand, with my UK credit card, shipped to my Aussie address.), where, exactly, is the "point of sale"? New Zealand? Australia? Wherever the Amazon billing department processes your credit card? Wherever the product was packaged up for shipping to you?

          And why?

    • by silfen ( 3720385 )

      Why wouldn't people just use the system of "where your customers pay you" for any multinational company to determine "where to tax is owed"? Much simpler and fairer between different nations.

      That system is already being used: it's the sales tax.

      But countries like taxing multiple times, so they also tax corporate profits, and finally tax the profits again as either capital gains or dividends (corporations also pay other taxes, like real estate taxes).

      This multiple taxation means that the US has one of the hi

      • That's the reason why corporations are leaving. And they are going to continue to leave unless we bring our corporate tax rates in line with other countries, meaning lower them significantly.

        Yes, and this will be a conservative vs. radical argument as always, with conservatives who want to take it in small increments, and radicals who want to slash it all and implement a 9-9-9 plan. Of course we have very few conservatives in our countries; in truth, we have radical liberals who want to slash welfare and corporate taxes haphazardly, and other radical liberals who want to raise taxes and boost welfare haphazardly.

        Today, radical liberals have the public ear: the Democrats are in favor now, b

    • by kinko ( 82040 )

      That's generally what each country does to the companies operating inside it.

      But here's the problem. Lets say an iPhone costs $400 to make, and sells retail for $1000. One Apple-related company pays $400 to get the phone made in china, and then sells the phone to Apple Ireland. Apple Ireland pays $450 to get the phone, then sells the phone for $995 to Apple Australia or Apple USA or whatever. Australia/USA can tax the profits of the local company, but the local company only made $5 per phone, and then used

    • by gnupun ( 752725 )

      Why wouldn't people just use the system of "where your customers pay you" for any multinational company to determine "where to tax is owed"? Much simpler and fairer between different nations.

      Not fair. You should also take into account where the employees work, the raw materials (if any) come from, factories (if any) exist, managers work, middle managers and upper management exist to make a clear assessment.

    • With physical products, it's tricky, but understandable. I buy a pair of headphones made in the UK and have them shipped to me in the US. The taxes I pay are numerous, local, state, national, international. Is sales tax the responsibility of the buyer or the seller? It should be obvious, until you get into the topic of use tax. If I buy a car in Delaware, there is 0% sales tax, but Pennsylvania will want me to pay a use tax (that just happens to be exactly the same as PA sales tax). I leased a car i

    • I think that's how it works, and the companies just move their HQ to somewhere with lower income tax to save money on the second round of taxation.
  • Within that time frame another country will step forward to fill the need, don't worry corporate revenues won't decline :-)
  • by 50000BTU_barbecue ( 588132 ) on Tuesday October 14, 2014 @10:21PM (#48146443) Journal

    You know, like how IKEA is organized? Google could set itself up as a charity dedicated to the preservation of web sites.

  • by Anonymous Coward

    Of course give them until 2020. They can all squeeze a few hundred billion in that time.

    You wonder why US economy suffers? It is because of schemes like this to save a buck and starve a worker/citizen/parent/homeowner/mentor.

    Come on....... Which avenue will they hit for the next tax evasion scheme?

  • When a politician's promises something that is not even in his next term of office then he is basically saying that they aren't doing it. In 2020 (assuming their hand isn't forced before then) they will grant "extensions' and "waivers" and magical beans that will allow this practice to carry on.

    This could easily be implemented in 2015 or at most 2016. Taxes change all the time and often by huge amounts so drastically changing this wildly unfair situation would be nothing out of the ordinary.

    But I will
  • "Tax evasion" is a crime. "Tax avoidance" is what is being done here.

    • by Etherwalk ( 681268 ) on Tuesday October 14, 2014 @10:49PM (#48146619)

      "Tax evasion" is a crime. "Tax avoidance" is what is being done here.

      "Tax evasion" has one legal meaning and another colloquial one. Colloquially speaking, "tax evasion" includes tax avoidance of this character.

      Source: talking to people who aren't tax lawyers.

      • by LordLucless ( 582312 ) on Tuesday October 14, 2014 @11:04PM (#48146693)

        "Tax evasion" has one legal meaning and another colloquial one. Colloquially speaking, "tax evasion" includes tax avoidance of this character.

        In other words, tax evasion is what other people do when I don't like it.

      • by khallow ( 566160 )

        Source: talking to people who don't know shit.

        FIFY. I suggest using better sources. Tax evasion has a specific legal meaning. It truly doesn't matter what the ignorant think it means.

        • Public opinion always matters. Now I don't mean our little tech-y corner of the internet, but once you start to get like 70% of america on the same page about something- there is real power behind that non-legal opinion. After all- laws can be changed
        • You know, it's like how when more than half of the population uses a word wrong, the meaning changes.

      • Colloquially speaking, "hacking" means malicious exploitation of computer vulnerabilities for personal gain or other nefarious purposes.
        Colloquially speaking, a megabyte consists of one million bytes.
        Colloquially speaking, "virii" is a fake word made up by computer nerds who didn't understand Latin.

        Should I be expecting Slashdot to get on board with these colloquialisms as well?

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