Ireland. The Tax Haven. And are lies being told?

Today Apple is in the US dock about tax avoidance through Ireland, referred to as a "tax haven", which it clearly is. And lies are being told.

Channel 4 are reporting that the Irish government have done special tax deals with multinationals below the 12.5% corporate tax rate. 

Reuters tonight, via The Irish Independent, reports that 

"According to the congressional report, Ireland had also agreed a special 2pc rate for Apple's Irish taxable profits instead of the normal 12.5pc."
http://www.independent.ie/irish-news/apple-pays-tax-rate-of-less-than-2pc-in-ireland-29285246.html

The Prime Minister Enda Kenny denies this. So too Eamon Gilmore his deputy. RTE News tonight said Revenue have also confirmed that there's "no special deals". 

They'd better be truthful because it looks like they're not. There's too many reports that a special low rate deal was done with multinationals. And if The Prime Minister has misled the House tonight, by saying no deal was done, there will be trouble. 

Because someone here is wrong by definition. The US Congress or The Irish Government.

Where the Irish politicans "dodge" in words may be, by saying that the 12.5% rates does apply on profits "generated in Ireland only".

But that's a dodge. Authoritative sources say a deal was done, they're saying it wasn't. 

Either way too, those profits are deliberately manipulated downwards through licence fees paid offshore by multinationals to places like Bermuda. And we facilitate that.

Secondly, if a profit is brought into Ireland, it's either Irish revenue or it's not. If it's not, as the Government will say, then the tax should have been paid elsewhere - and it hasn't been. 

Because clearly, multinationals are paying even less than 12.5% Irish tax haven rate - nearer 1% - without prosecution in Ireland so if deals aren't done, why then are they not pursued?

And clearly too, if they were paying the 12.5% tax on what we're told is their "Irish revenue", then Ireland would not be in a financial mess. 

US Tax for Apple according to the well regarded Channel 4 News, is 35%. But by transferring their profits to Ireland, they avoid paying that. 

Apple Operations International, between 2009-12, put 30 billion into Ireland as income...but paid no tax on it. No 12.5%.

Apple Sales International similarly transferred a further 22 billion profits to Ireland in 2011 but paid only 10 million in taxes (so not 12.5% either).  

US Senator John McCain today said Apple's 3 Irish operations hold 60% of the companies profits. He also said they negotiated (with the Irish government) a rate of less than 2%.

Now either he's wrong with everyone else - or Enda Kenny has lied. Did Apple do a deal Enda or not?

If Apple alone had paid 12.5% on their "Irish income", this country would not have a budget deficit.

I do get a bit tired blogging about multinational tax "avoidance" and the role of Ireland in facilitating it.

You can search some of my previous tax blogs mainly from last year.

And of course, this week we saw Google defend a regime that their sales are not in the UK, but in Ireland. Here's what I said about them on December 3rd

"Google, with a staff in the UK of 1,300 books most of its revenue to surprise, surprise, Ireland. So it earns money in the UK but funnels it through Ireland. That's Ireland's great tax regime I mean that attracts companies like these in the first place. Actually Google's "Irish" revenue is recorded as 12.4 billion. How ridiculous is that? Gross profit in Ireland in 2011 was recorded at 9 billion!! It's truly ridiculous."

And everytime I blog about tax, I take a hit. Irish people think you're being disloyal, unpatriotic and generally live in fear of google/facebook/zynga/dropbox/microsoft and others, jobs.

What's so wrong about all of this is that the Irish government pursues its own citizens for tax through the courts and cause undue hardship. But they let big corporations (and I was the CEO of one), avoid tax.

Shameful.

This is a dreadful charade and furthermore, if there is lying going on (and I believe there is), it will cause the collapse of the Irish government.

If you're interested here are my previous blogs to search in the search bar:

January 3rd Blog. Facebook and the cayman islands via Ireland. And Zynga.

Google 

Microsoft

Dropbox

Starbucks

Facebook, Zynga, The Cayman Islands and Ireland. Another great day for ethics.

On foot of my blog about the ongoing tax avoidance issues yesterday (which follows below), I was amazed to read the very brilliant Colm Keena's story in today's Irish Times newspaper - http://www.irishtimes.com/newspaper/finance/2013/0102/1224328327411.html

I'm actually getting tired of blogging about what has become a tax avoidance issue but for some reason, the information just keeps coming to me. There's that much of it about. Shocking.

So it was interesting to see changes at Facebook and Zynga's Irish operation. I'm sure they're completely unrelated to the tax avoidance issue.....

Colm reports that Facebook are moving all its non-US revenues to a new Irish subsidiary. 

Facebook Payments International Limited, a new Irish company, will now take on the billing from Facebook Ireland Limited, which showed revenue of 1 billion euro in 2011 - up from 229 million in 2010.

What's interesting too is that it lost 18.7 million on that revenue of 1 billion and why you might ask?  Because largely, of payments it made to its parent Facebook Ireland Holdings Limited owned by Facebook entities in the Cayman Islands.

These are exactly the same type of controversial charges by parent companies to create losses (and thereby, meaning they pay little or no tax) and are very similar to the devices used by Starbucks and others - so highly criticised. 

What's also stunning is that Facebook has a registered company in The Cayman Islands ultimately - one of the great tax shelters of our time after Ireland. Interesting still, is that it's an unlimited company, meaning it can avoid prying eyes from journalists and not be subject to the usual company rigours.

Which is really quite shocking for a PLc.
In fact the whole thing just stinks.

One of the ways Facebook generates these revenues is by way of "game credits" from gaming company Zynga.

And it would seem, Znyga is another Irish company success! 

Zynga Game Ireland Limited (I kid you not) reported a pre-tax profit of a meagre 4.8 million on revenues of 369 million. This small, poor profit is because of.... yes you've guessed it.... payments to other Zynga companies.

Exactly as Facebook/Starbucks and them all, are accused of, in order to avoid tax. By making payments to parent companies elsewhere, they avoid tax when those payments either exceed the income or practically wipe out any profit.

So for example, of that 369 million revenue, a stunning 191 million for example, was paid in "royalties" to another Zynga company with registered offices at Solicitors in Dublin. 

That very company in turn, despite revenues of 191 million and no employees, reported a loss of 35 million! Get the pattern? Because....wait for it....it paid 50 million to its parent company in "royalties" and a further contribution of 174 million in R&D which is 224 million paid out after only generating 191 million.

Funny too that only in November, Znyga's finance chief, David Wehner, left to join...Facebook as vice-president of corporate finance. Doesn't surprise me anyway....

Avoiding tax isn't illegal, just immoral.

And it seems it's widespread. In fact with Google, Facebook, Zynga, Amazon, Starbucks, Microsoft all getting a mention already and so many previously "respected" names, it's hard to imagine that it's just not common practice.

However, it would seem that a lot of other companies with a lot of advisers, are involved in this style of doing business despite being sheltered by an appearance of integrity. On the scale of billions, which these activities are, would require the active involvement of a myriad of professionals.

And yet again, they all have one thing in common, one thing that's bringing these stories to light.

Ireland.

Starbucks. Are we seeing the death of a brand?

Starbucks is really beginning to lose its gloss as a brand. And it's their own fault.

Under scrutiny recently about paying low tax (alongside Google, Amazon et al) it made a publicity moment by saying that it was prepared to enter talks with the UK Government in order to actually pay more tax. Good move...perhaps.

They've paid relatively little UK tax and route their profits to that transparent tax country, Switzerland.  Clever maybe, immoral definitely, but from a brand perspective....disaster.

At the same time, on almost the same day, it started a process to reduce staff benefits and by implication, is getting its staff to pay the increased tax. Faced with massive protests this Saturday by UK Uncut (http://www.ukuncut.org.uk/), it paid 8.6 million in tax over 14 years on sales of over 3 billion. Its tax practices have been branded "immoral" by The House of Commons's Public Accounts committee.

Starbucks has now decided to cut the lunch breaks of its 7,000 staff, sick leave and maternity benefits. It has also removed managers cash incentives (they now get a plaque instead - Yippee!) and workers have to sign their new employment agreement. In a real mealy-mouthed way it has done away with giving new mums on its staff a hamper and instead they get, a card with a Starbucks bib (!). I'm sure they're thrilled! Congratulation and Birthday staff cards are gone too. I'm not kidding you.

Starbucks say the two matters - tax and employee benefits - are totally unrelated, although they told staff not to discuss the new terms. But those staff are of course Social Media savvy and strong Bloggers so they've unleashed an insider Social Media army against themselves.

If you're in any doubt, you'll find them here, courtesy of The Guardian.
http://www.guardian.co.uk/business/interactive/2012/dec/03/starbucks-uk-employees-new-contracts?intcmp=239

Started in Seattle 1971, it is the largest coffeehouse in the world, present in 61 countries. 


This was a brand that had everything.
Innovation, coolness, music, store hipness and in a matter of weeks is in danger of losing it all.

The tax issue may claim more big brands, yet.