Taxation and multinationals
Sir, – The article (Business Today, January 2nd) on the establishment of yet another Facebook subsidiary in Ireland demonstrates yet again the redundancy of much argument surrounding the sanctity of Ireland’s corporation tax rate. Fears that raising the rate a couple of percentage points might cause a flight of American companies is patently foolish when these companies are not paying the existing rate on most or all of their profits.
They avoid doing so by establishing other subsidiaries in the Seychelles which “own” the intellectual property the Irish subsidiary trades in.
The Irish subsidiary pays over most or all of its profit in royalty payments (via Holland, whose government creams off some on the way) to the Seychelles subsidiary, in some cases enabling them to declare before-tax losses in Ireland on profitable sales in the hundreds of millions.
The phenomenon of tax avoidance schemes based on the payment of royalties to offshore subsidiaries applies not only to Facebook but to everyone from the pop music act U2, to Apple, to the pharmaceutical sector.
I suggest we increase corporation tax the next time one of our European partners demands it as a demonstration of solidarity and goodwill – the amount of money raised would be no threat to the shareholders of the American companies using us as a tax avoidance haven and the act of raising the tax would at least allow our French and German political partners demonstrate to their respective polities that they appear to be obtaining concessions from us for the bailout billions.
In addition, we should destroy the charade that any of these American companies are contributing anything other than employee salaries to our economy by introducing a tax on royalty transfers and actually making such firms contribute properly to the social cohesion we need to sustain in this country in order to enable them to continue trading profitably from here. – Yours, etc,