The Irish government aims to eliminate the “Double Irish” tax loophole that the European Commission and US Senators have repeatedly mentioned when referring to Apple’s tax practices. The move seems to reflect growing pressure from multiple parties — regulators, international organizations, and consumers — to end the tax provision multinationals have been exploiting (via the New York Times).
As of 2015, new companies registered in Ireland will have to comply with new legislation that requires the company to be tax resident as well. The current legislation allows companies to be registered in Ireland but not be resident there for tax purposes. Google, for example, used this loophole to register another subsidiary in Bermuda because corporate income taxes are more favourable there.
Apple was said to be using this scheme as well: It has headquarters in Ireland employing more than 4,000 workers. However, filings and comments from the company apparently show that it isn’t tax resident in the country, according to Reuters.
Both Apple and the Irish government have defended their previous position: The iPhone maker said that it has paid its taxes, while the Irish government emphasized that it had no sweetheart deals with the company.
But things are changing: International pressure is forcing Ireland to change its legislation, starting next year. This applies only to new companies; existing ones have time to make the move — until 2020.
“Aggressive tax planning by the multinational companies has been criticized by governments across the globe and has damaged the reputation of many countries,” Michael Noonan, Ireland’s finance minister, told the Irish Parliament on Tuesday.
“I am abolishing the ability of companies to use the ‘double Irish’ by changing our residency rules to require all companies registered in Ireland to also be tax resident,” he added in a budget speech.
The bill will be hefty, though: Analysts estimate that Ireland’s new legislation will cost US companies such as Apple and Google billions of dollars.