US sets sights on ‘Irish tax haven’: ThePost.ie


TCH Archives > Sunday Business Post > 2005/11/27 > US sets sights on ‘Irish tax haven’

US sets sights on ‘Irish tax haven’
Sunday, November 27, 2005 - By Gavin Daly
Business and political leaders may reject claims that Ireland's 12.5 per cent corporation tax rate makes the Republic a tax haven, but filings by US companies show that they are using their Irish operations to pay minimal tax.

Companies are saving hundreds of millions of dollars, and some accounts mention Ireland alongside the Cayman Islands, Isle of Man and British Virgin Islands. Now the US Internal Revenue Service (IRS) and other tax authorities are turning their attention to the issue.

Documents filed at the Companies Registration Office in Dublin show that more household names are joining Microsoft and Google in routing money through Ireland.

Apple Computer Inc Limited, an Irish subsidiary of the iPod maker, had revenue of $2.6 billion in its last filed accounts.

The company owns “manufacturing subsidiaries in Europe and Asia and its sales and distribution subsidiaries in Europe, Australia, Asia, Canada and South America'‘.

It made a pre-tax profit of $214.1 million in the financial year to September 27, 2003, but paid just $8 million in tax. The company paid the equivalent of just 3.7 per cent tax by taking advantage of tax adjustments relating to previous periods. The Apple accounts do not break out revenue per region, because “disclosure of this information would be seriously prejudicial to the interests of the company'‘.

US sources argue that the technology originated in the US and sales should be taxed at its rate of 35 per cent. In a report filed with the US Securities & Exchange Commission (SEC) in August, Apple warned of the impact of “changes in tax laws or their interpretation'‘.

It said it was “subject to the continuous examination of its income tax returns by the Internal Revenue Service and other tax authorities.

“There can be no assurance that the outcomes from these continuous examinations will not have an adverse affect on the company's net income and financial condition.”

Symantec, a US company that makes security software, has also routed significant revenue and profits through an Irish firm, Symantec Limited. It made a pre-tax profit of €253.7 million on turnover of €679.6million in the year to April 2, 2004.

The company has subsidiaries in the Netherlands, China, the United Arab Emirates and Russia, but the breakdown of turnover and profit by region is not provided.

“We receive significant tax benefits from sales to our non-US customers,” Symantec said in a recent filing with the SEC.

“These benefits are contingent upon existing tax regulations in the US and in the countries in which our international operations are located. Future changes in domestic or international tax regulations could adversely affect our ability to continue to realise these tax benefits.’' Accounts filed by an Irish subsidiary of Salesforce.com, a US online software company, also offer an insight into the structures companies use to limit their tax exposure. SFDC International Limited was set up to “hold and license intellectual property rights to other group companies'‘.

In a move to cut its tax bill, however, the company changed its tax residence from the Cayman Islands to the Isle of Man on July 1, 2003, according to its latest accounts.

“Under current legislation, the company is exempt from paying corporation tax in the Isle of Man.”

Online auction company eBay has incorporated a company in Dublin called PayPal International Limited, which handles the online payment services for goods bought and sold on eBay. It has subsidiaries in England, Germany, France, Italy, China and Canada, according to its accounts.

The company had net fee income of €59.75 million in the 18 months from June 2003 to December 2004 and made a loss of €14.6 million, so was not liable for tax. It can use the losses to offset the tax on future profits. Software firm Oracle is making considerable savings using an Irish company called Oracle EMEA Limited. It had turnover of €2 billion in the year to the end of May 2004 and made a pre-tax profit of €553 million. It paid tax of €60.85million, including €9million in “foreign tax'‘.

Other firms have less clear structures. Xilinx Ireland Limited, a unit of a US chip design firm, made a pre-tax profit of $385.2 million in the year to April 3, 2004.

It paid almost $35.6 million in tax, and paid a dividend of $363.1 million to a company called Xilinx Holding Two. The accounts for Xilinx Holding Two describe it as “an investment holding company'‘, which in turn owns 100 per cent of Xilinx Ireland.

Xilinx Holding Two made a profit of almost $320 million in the year to April 3, 2004, and paid no tax. In the previous financial year, it paid no tax on a profit of $67.9 million.

Xilinx Holding Two is owned by Xilinx Holding Six, which is registered in the British Virgin Islands.

Another company, Xilinx Holding One, was wound up earlier this year, while Xilinx Holding Five is non-trading, according to filings at the Companies Registration Office.

Xilinx recently won a case in a US tax court against the IRS, relating to taxes between 1996 and 1999.

Last week, it was reported that the IRS was seeking $476.8 million from a US firm, Synopsys, which has operations in Ireland. The IRS claims that the payment is due because of transfer pricing transactions between the US parent and the Irish subsidiary. Finance minister Brian Cowen last week said the government would not raise the 12.5 per cent corporation tax rate.

Eoin O'Driscoll, president of the American Chamber of Commerce in Ireland, warned that any changes “could negatively impact on our ability to generate and sustain wealth'‘.