Ireland to shut Double-Irish tax loophole
Controversial tax-avoidance strategy to be phased-out over four year period
The "Double-Irish" tax loophole has been used by multinational corporations to lower corporate tax liabilities by shifting income from higher-tax countries to a lower-tax country.
The scheme required two Irish companies, one tax-resident in a tax haven like the Cayman Islands. Irish law provides that a company is tax-resident wherever its management's located, rather than where it's incorporated. The second Irish company then receives income from international sales, but its taxable profits are low because of tax-deductible royalties paid to the first company. Any remaining profits are taxed at the relatively low Irish rate of 12.5%.
The European commission is investigating these so-called "sweetheart" tax deals between the Irish state and Apple, and last month ruled the iPhone maker's tax arrangements in Ireland amounted to state aid. The Irish government has subsequently announced that companies would no longer be able to incorporate in Ireland without also being tax-resident there.
The scheme was arguably responsible for Ireland's "Celtic Tiger" economy, and the hope will be that its removal will not end the commitment and investment of the world's largest internet technology firms.