An Irish parliamentary committee has voted against hauling in representatives from Google and Apple to answer for their tax affairs in the country, after the firms were accused of using Ireland as a base for their aggressive tax planning.
Sinn Féin’s Pearse Doherty attempted to get a motion passed by the Joint Committee on Finance, Public Expenditure and Reform that would have allowed the Subcommittee on Global Taxation to call on multinational corporations for evidence.
The subcommittee is already scheduled to hear from the OECD, the Department of Finance, tax authority the Revenue Commissioner and academics, but Doherty wanted the option to also call representatives from firms like Google and Apple, which have already been quizzed in Blighty and the US.
"Given the fact that multinational corporations have appeared at committees in Britain and the United States to give evidence about their tax affairs in Ireland, it is ridiculous that politicians here in Ireland would vote down a proposal for them to do the same here," he said in a statement after the vote went against him.
“If the committee is to do its job properly it is important that it is free to invite the relevant people and companies to provide all the relevant information.”
Both Doherty's motion and a similar motion from Teachta Dála (MP) Richard Boyd Barrett, the finance spokesperson for the People Before Profit Alliance, were defeated by committee members from the Fianna Fáil, Fine Gael and Labour parties.
Boyd Barrett had called on the inquiry to pull in people from "Apple, Google, Facebook and other such corporations".
"It's amazing how the entire political establishment - government parties and opposition parties - close ranks when it comes to protecting the super-profits of private companies from any scrutiny about their tax affairs," he said after the vote.
"It certainly says something about this government’s democratic revolution if we can’t even ask multinationals about their tax affairs here when ordinary people are being nailed to the wall with austerity, cuts and taxes that many are utterly unable to pay," he complained.
The Irish government promised to look into the tax affairs of major multinationals after a US Senate inquiry into Apple found that the fruity firm was funnelling most of its overseas profits through companies in Cork that appeared to be officially tax residents of nowhere. ®
Ireland has come under scrutiny more and more for tax avoidance schemes, particularly one called a "Double Irish". The strategy is a technically legal one, based on Ireland's territorial taxation system, which doesn't tax companies physically based in the country that are "resident" wherever their central management are located.
An international firm will set up two Irish companies to make it work - hence the "double". The first will own the intellectual property rights of the products for sale, but will be resident for tax purposes in a haven like the Bahamas or the Cayman Islands.
The second Irish subsidiary will take a licence for the rights from the first firm, in return for large fees. The second company gets the income from the sales of the products, but its actual "profit" is low because the fees to the first firm are deducted from it. The remaining profit is taxed at the lower Irish rate of 12.5 per cent, rather than the higher rates of the UK or US.
To further complicate matters, multinationals can add a Dutch sandwich. Because Ireland doesn't tax companies' income from certain EU states, like the Netherlands, firms can further reduce their taxes by sticking the income from the sales of products made by Irish companies over there.
The income goes to the shell company in the Netherlands, benefiting from its tax laws, and the money for production costs goes back to Ireland. Remaining profits go to the first Irish company, one being resident in a tax haven. The two Irish companies are the bread, the Dutch firm is the lovely filling and the multinational ends up paying little to no tax because no country sees the full revenues or profits.
(Confused yet? We are – Vulture Central's backroom gremlins)
Although the terms Double Irish and Dutch Sandwich are becoming synonymous with tax avoidance schemes, these two countries are by no means the only ones used in such elaborate tax planning. Luxembourgeois and Swiss sandwiches are also possible and those are just the strategies that we know of - there are, no doubt, many more.