One Of The Most Famous Irish Tax Loopholes Is About To Die
The Irish finance minister, Michael Noonan, is set to unveil the 2015 budget next Tuesday and it is expected to include a closure of the popular Irish tax loophole referred to as the Double Irish used by big international companies like Apple, Google, and Facebook to reduced their tax rates on foreign profits.
The NYT made a good graphic explainer a few years ago on how this works. Basically, companies in Ireland are allowed to pay royalties that amount to most of their foreign profits to nominally Irish shell corporations in tax havens like the Cayman Islands. The profits often also pass through the Netherlands, which is called a Dutch Sandwich.
Loopholes like these are understandably unpopular internationally, and the OECD is putting pressure on its member states to start closing them. In a paper titled "Neutralizing the Effects of Hybrid Mismatch Arrangements" published last month, the OECD laid out a plan to start neutralizing tax loopholes around the world.. The OECD would like to "ensure that profits are taxed where economic activities generating the profits are performed and where value is created," according to the report.
Lorcan Roche Kelly at Agenda Research thinks that, for Ireland, it's a matter of "jumping before they are pushed," he says. Here's why:
With nowhere else to go, global corporations might have to - gasp - start paying taxes where they are, which could ultimately be good for the Irish economy.