Tax avoidance in Europe
The Irish Government claims that it has, for many years, had a 12.5% corporate tax rate for all corporations, including international firms. This compares well with the average for the European Union average of 21.34%. But Apple pays only 2% or less.
However, the following countries offer 0% corporate tax:
The highest world rate is 55% in The United Arab Emirates. The rate in the USA is 40%. Other European rates are;
United Kingdom 21%
The Luxembourg and Netherlands figures are most interesting because they are also being investigated by the EU for “State Aid”; as is Ireland. So, if Ireland can offer 2% or less to Apple and others, then it seems likely that Luxembourg and Netherlands are also offering less than their official rates. How does this work?
Under Irish law one can incorporate a company in Ireland, but have a “tax residency” in another country. Only countries charging 0% would be more attractive than Ireland offering less than 2%. However Ireland’s official 12.5% is still below the above EU rates: and if Apple can negotiate 2% or less, then Ireland must be one of the most attractive countries in the world for low tax.
The only other attraction of the 0% rate is that it makes companies “stateless” for tax purposes. So, only small amounts of American and British profits are taxed in the countries in which they do business. This produces a massive overall tax saving for the companies. A USA Senate report called this the “Double Irish”. You pay one small amount of tax in America, and another small amount in Ireland.
What is to be done?
The EU wants all it’s 34 countries to be more transparent about tax payments. All large companies will be asked to publish their annual profits on country by country basis. This should reveal profits in the countries in which they operate; and in the countries in which they have a “tax residency”.
If this exercise is limited to EU countries only, then international tax havens will not become transparent. This is not just an EU problem but a world problem. But the EU is a good place to start. There may well be sharp increases in unemployment in Ireland, and a few other EU countries. Finally, there will be a short increase in employment in all the above countries offering 0%.