THE AMERICAN CHAMBER (ACC) of Commerce has said that the changes to tax residency rules for “stateless” companies announced in yesterday’s Budget “should not adversely affect the existing operation of multinational companies in Ireland”.
Yesterday, Finance Minister Michael Noonan said that companies registered in Ireland for tax reasons will no longer be allowed to be ‘stateless’ in terms of their residency.
This means the tax loophole which has allowed some of the biggest companies in the world to make use of Ireland’s tax laws in a legal way to ensure that they paid lower levels of tax than otherwise will be closed.
The loophole has been blamed for enabling Apple to save tax on $44 billon in offshore income, something which has angered US politicians such as Senators John McCain and Carl Levin who labelled Ireland a “tax haven”.
Foreign Direct Investment
In reaction to the announcement, the ACC said it would not prevent or hinder “the continuing competitiveness of Ireland as a location for foreign direct investment”.
Anna Scally, Chair of the American Chamber Taxation Group said that transparency of Ireland’s International Tax Strategy is to be welcomed as it “provides a clear and accurate picture of our corporate tax regime”.
Ireland’s corporate tax regime is open and transparent and the Irish Government has reaffirmed its commitment to maintaining a competitive corporate tax regime.
We welcome that Ireland will continue to engage constructively and purposefully in discussion relating to international tax matters.
The IDA said Ireland’s tax offering continues to be highly attractive to overseas companies, adding, “we believe that the changes to the residency rules will not impact on our overall competitive position”.
IDA Ireland’s main aim is to ensure that Ireland’s offering, be it through talent, infrastructure or taxation, is continuously enhanced and remains competitive internationally.
For IDA Ireland, the stability of the 12.5 per cent corporate tax rate is a vital part of Ireland’s offering to our foreign investors.
Meanwhile, there has been worldwide reaction to the announcement. The Finance Times reports that this is “Ireland’s first step against tax avoidance”.
Dick Harvey, professor at the Villanova School of Law, told The Financial Times: “I will believe it when I see it. One doubts businesses like Apple will be paying the 12.5 per cent Irish tax rate on approximately two-thirds of their global income.”
Reuters says however, that experts have warned that the changes would leave open a bigger loophole meaning companies such as Apple were unlikely to pay any more tax.
Chas Roy-Chowdhury, head of taxation at the London-based global accountancy body ACCA, told Reuters that companies could still nominate any country they liked as their tax residence, including zero tax jurisdictions such as Bermuda. “It won’t make that much difference,” he said.
A spokesman for the Department of Finance declined to explain the change to The Telegraph, but denied it was due to US pressure.