Both Europe and the United States have been pressing countries on tax haven abuse in recent months. The latest target is Ireland, where tax deals of dubious legality helped propel the growth of the “Celtic Tiger” through the heady days of the 1990s and the early 2000s. Reuters reports:
Ireland is set to announce legal changes next week to phase out the “Double Irish” tax arrangement that has let firms such as Google save billions of dollars, two sources familiar with the matter said.Ireland has come under sustained attack from Europe and the United States over the past 18 months for its tax rules that allow multinational companies such as Google and Apple to cut their overseas tax rates to single digits.Among the most criticized parts of the Irish tax code is the complex corporate structure whereby a multinational can channel untaxed revenues to an Irish subsidiary, which then pays the money to another company registered in Ireland that is tax resident elsewhere—usually in a tax haven such as Bermuda.
(This graphic from Wikipedia illustrates how the loophole works).Ireland’s actions fit into a pattern of increased state pressure on tax havens. In the U.S., a Treasury action (linked by the BBC) has made it harder for companies to claim foreign residency and avoid American taxes. Obama also criticized Burger King’s declaration of Canadian residency, made with the intention of avoiding a domestic corporate tax.Europe has been taking action too. The much-publicized probe against Apple’s alleged tax deals with the Irish government, announced at the end of September, preceded a European Commission investigation into Luxembourg’s lucrative arrangements with Amazon and Fiat. The French government has even joined the Commission’s struggle. The Prime Minister recently pressured Google to pay its share of taxes as a way of bolstering France’s depleted public purse.Nils Gilman’s cover story in last’s June’s TAI discussed tax avoidance as a part of the “twin insurgency” of criminals and plutocrats challenging the modern administrative state.